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lease vs purchase + options reasoning
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01-13-2013, 02:38 PM | #45 | ||
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01-13-2013, 05:40 PM | #46 | |
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You try so hard to come off as financially smart but you sound like a idiot. If your loan is only 1% and you can make 4% investing that $25000 then it is a no brainer to take the loan. You would have gained an extra 3% over the time of the loan.$25000 in principal appreciatcates a whole lot more that socking away $500 a month over 3-4yrs stupid ass. |
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01-13-2013, 06:28 PM | #47 |
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All I've learned from this thread is 99% of the population be driving 1990's Hondas. That's the only problems with this forum, very differing financial situations. I'd shoot myself now if I had to suffer most of my life to "maybe" pay for a BMW cash on day. Live life and be happy as long as you aren't in danger of losing everything.
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01-13-2013, 06:57 PM | #48 | |
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Money is basically free right now, but how much a person wants to borrow is up to them. Conventional wisdom says that borrowing less is more favorable than borrowing more. Somewhere along the line people have learned to embrace $0/$0/$0/$0. |
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01-13-2013, 09:43 PM | #49 | |
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01-13-2013, 10:22 PM | #50 | |
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to reliability compared to the Japanese. My G35 had 0 issues didnt goto the dealer 1 time in the 50k miles I owned it and I beat the hell outta it.
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01-13-2013, 11:36 PM | #51 | |
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Idiot? Stupid ass? Really? Reread what you wrote please. You forgot to mention the fact that you acquired a pile of debt in this scenario on a depreciating asset that is eating up all of your interest and then some. And you have to pay for it every month out of your income which is preventing it from working for you. Your net worth is the total of your assets minus your liabilities. Focus on the big picture of your personal finances and not the point spreads on car loans. If you're really a high roller then just pay cash for it and move on. |
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01-14-2013, 01:46 AM | #52 | |
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01-14-2013, 05:19 AM | #53 | |
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If it doesn't make sense for a house then it doesn't make sense on a disposable item. Last edited by jacobsed; 01-14-2013 at 05:29 AM.. |
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01-14-2013, 08:01 AM | #54 |
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I paid cash for my 2011 328, but this year I'm financing because I value the liquidity more than a couple hundred bucks in interest.
That liquidity will allow me to pounce on a rental condo if a good deal comes by. Furthermore, in case of a job loss or illness, the lump sum of cash I have will be a great help. Try raising 20k for 3.9pct in a hurry! |
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01-14-2013, 08:16 AM | #55 | |
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01-14-2013, 08:21 AM | #56 |
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I'm not saying that really but had I done my research I would have know going in that all of these problems were going to happen...pretty much guaranteed....and thats ridiculous. For this reason, leasing a BMW is the right thing to do imo. I leased a Saab (open ended...mistake #1) years ago and determined that closed ended lease on a Saab was the only way to drive one of those things. Well about 5 years ago they (GM) were offering ridiculous purchase opportunities. 0% for 5 years.....didnt listen to my own advice and now own a Saab that nobody will ever want.
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01-14-2013, 08:27 AM | #57 |
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Paying cash upfront is pretty dumb when BMW is offering 0.9%(Pretty much interest Free). This is why everyone needs to take Finance 101
For example. Loan= $50,000, term 5 years 1) Interest paid through out 5 years if financed = $1,152.18 2) Cumulative earning at Triple AAA stocks 5% yield = $13,814 (does not reflect tax). Pretty much, for the 50k you paid up front cash.. you could earn $13k from safe investment throught out 5 years and paid 25% of the car value just from interest rate. This is a just a simple calculation since real life involves more factors like federal tax rate and blah blah.. but seriously.. take advantage of the 0% PEOPLE |
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01-14-2013, 09:22 AM | #58 |
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Pay now or pay later scenario. Your money might make some interest if you keep it but that new car's depreciation wipes it out. And you have a lien on the car and monthly payments on it. You could have 0% interest and its still a bad deal to finance. Simple net worth calcs.
Those convinced against their will are of the same opinion still. There is no such thing as good debt in any scenario. People have a hard time with that concept because it means they can't have what they want which really means they can't afford it. |
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01-14-2013, 05:04 PM | #60 | |
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P.s. do you folks really believe that captive financing offers the same out the door cost as cash? |
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01-14-2013, 05:07 PM | #61 |
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01-15-2013, 07:40 AM | #62 |
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01-15-2013, 02:07 PM | #64 |
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I'm leasing for the first time and it's freaking me out I don't even want to think about it.
I don't think payments are neccessarily a bad thing. They permit you to keep your money longer. Whether it is just for holding on to it longer, investing it, getting something else etc... When you pay an expensive car right off, a lot of money is gone, you don't have easy access to it anymore. So payments allows you to slowly pay for it and still be able to use the money for something else. Big problem occurs when you start to stretch out that money, if you even really had it in the first place, and it wasn't just money that was going to be coming in the future as paychecks. What is freaking me out with my first time lease is that at the end of the term, I will have nothing to show for it, but I paid lots of money already, for a car that would otherwise still be a great car after 4 years. And if I want another car, I would need to pay more money. When that lease is over, once again I pay again. A car is not an investment. It depreciates and needs maintenance. But when I buy it, if I pay it right off, I don't need to worry about payments. Anything can happen finacially and I still own the car. No bank can come and take my car back, a car for which I may have already put a lot of money towards in downpayment and monthly payments. I can choose to keep it, sell, drive it, unregister it and store it the garage until I can afford to get it back on the road. With a lease or payments you can't do that. If you don't pay it off right away, at leas with finance payments,at the end of the financing, you have something. That something depreciated in value. But now you own a car. You don't need to make payments anymore. and it still has a value, or serves a valuable functions of you being able to drive it around. It now in fact serves the valuable function of allowing you to save those monthly payments for how ever long until you get another car. Now you are actually making and saving money. a lease doesn't save money, it wastes money. A 400$ lease payment saves you 200$ over a 600$ purchase payment, but you keep paying 400$ into your next lease, so you will end up paying more. It also then gives the stealership some nice, used cars to sell as higher cost certified used cars. Dam stealerships...!!! It's for these reasons that leasing expensive cars just don't make sense for me. You pay so much, for the use of it, but you lose it at the end, and have to give it back, only to start over again. But leasing small inexpensive cars like a civic or corrolla, that makes more sense. They for sure do not have the same handling or prestige, but from the perspective of having simple transportation it makes more sense. |
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01-15-2013, 03:07 PM | #65 | |
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Last edited by brocklanders; 01-15-2013 at 03:13 PM.. |
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01-15-2013, 03:09 PM | #66 |
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Wow, it looks like the majority of this thread has been wasted arguing, not about the topic inquired upon, but whether financing makes any sense at all. I'd like set that aside for a moment, because really, there's no sense in debating it. Jacobsed is right about a lot of things. If you want to put rational finance decisions above all else, then follow his advice. For my part, I want to balance rational financial decisions with some degree of enjoyment. Fortunately, this is a free country, so we can all squander our income if we choose. Yay!
On to the matter of lease versus finance. The first thing to understand is that leasing and buying are actually very similar. When you buy a car, you're financing the entire cost of the car. If you decide to sell the car part of the way through the finance term, you get to collect the money for the sale, which may -- or may not -- be more than the remainder of your principal owed. What you "paid" for the car is actually the sum of the payments, less the amount you recovered from the sale, plus any maintenance you paid for. When leasing you are pre-negotiating two additional factors: when you are going to "sell" it back to the finance company, and for how much. It's that simple. Everything else about leasing is the same (more or less). There are other things to look out for though. The finance deals offered on lease and purchase are often separate. So when you go to the dealer, don't just ask for the final payment amount (which is really common with lease negotiation). Ask what your finance rate is. Have the finance department run the numbers for both lease and purchase. Most dealers will give you a term sheet that outlines the specific terms like finance rate, term, and principal amount. If you don't understand the numbers on these sheets, then talk to someone who does before you make the purchase. So, with that in mind, we have to raise the question: how does leasing often result in a lower payment? The answer has to do with the way lease financing is structured. Remember that with a lease, you're negotiating the future amount of the car at the same time you're buying it. This is called the residual value. Roughly speaking, you're financing the difference in the purchase price and the residual over the term of your lease; the depreciation. The finance company publishes a list of residual values for each model over a varying set of terms (measured in months). When I financed (lease) my 135i, the residual for my car was 62% (if I recall correctly) at three years. If I were to purchase the car under typical terms (60 month financing), I would be financing 100% cost of the car over 5 years. Because I leased, I was only financing 38% of the cost of the car over 3 years. So... less than half the principle financed over more than half the original term. Spreading a smaller amount over a longer term results in a lower payment. The thing is, you could do the same with purchase financing, assuming that you were able to sell the car for the same amount that you could negotiate as a residual. In this case, you would have paid more in payments, so you'd pocket some on the back end. I find that residual amounts are on the generous side though, and selling a car privately is a pain in the ass. In short, it's never worked out very well for me, so I don't want to deal with it. The main drawbacks of leasing are that you have to agree to the terms up front, which means you need some degree of predictability in your life. Going over on your miles with a BMW is not nearly as big a deal as it is with other makes. If you finance through BMW, you can buy additional miles later (there are some restrictions near the end of term) at the same buy rate as the day you bought the car. It's also ill-advised to mod the car. If you void your warranty and break something, you're really screwed. I hope this helps you understand leasing a little better. Leasing appears to be some kind of voodoo magic to a lot of people, so be sure that whoever you're seeking advice from really understands what's going on.
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