[goofygrin]

Looking at an E92 or E90.

Currently have a paid off Lexo-van, worth say $28k. Say $49k MSRP, $46k price.

Scenario 1 (no trade, sell current car and invest the money):
46000 financed
49980 total out of pocket over 60 months
15180 value after 5 years (using BMW's 33% 60 month residual)
35065 CD value (28000 invested in 4.5% CD (4.6% APR))

Yields $265 "profit" at the end of 5 years ignoring taxes on the CD (unless HopeChange raises taxes likely to be ~$1200 over the 5 years) and assuming 33% residual
~ -$1000 after taxes on the CD

Scenario 2 (trade in)
18000 financed (46000-28000)
21300 total out of pocket over 60 months
15180 value after 5 years (again, 33% residual)

yields a net "loss" of $6120 for the 5 years. Ouch!

Scenario 3 (lease):
36 month lease using .00141 MF (using the MSD method*)
667.1 monthly payment
24016 total payments
31503 (28000 at 3.93%/4.01% APR CD for 36 months)
= $7487 net after 3 years
taxes on the CD ~$750
* have to outlay ~$5000 in MSD, but get it back at the end of the lease [or use on the next lease]
Only issue is that I think there is a personal property tax on leased vehicles in my city (maybe another $1000 in taxes over 36 months?)

Scenario 4 (buy, no trade, get rid of car after 36 months [this is simply to compare lease vs. buy for Scenario 3])
46000 financed at 0.9%
29988 outlay over 36 months
18650 payoff of the loan
27440 value of the car (using 56% residual)
31503 (28000 at 3.93%/4.01% APR CD for 36 months)
=$10,305 net after 3 years
taxes on the CD ~$750
huge assumption that the car is worth $31500


Considerations:
- We cycle cars every 3-4 years
- We log our miles and are pretty consistent 10-12k miles/year
- I'm self employed so cash flow can be important
- I personally think the used car market is headed for a downturn and the 33% residual over 60 months is likely to be optimistic (IMO) 56% residual over 36 months is *very* optimistic IMO for an '08 E90.


Personally I've never leased a car before (heard plenty of horror stories) but I am leaning toward scenario #3 simply because it appears to be the safest...

Any comments on my thinking? What am I missing here? GAP insurance is included in BMWNA leases...

[methodtim]

I'm probably the only Asian in the world who's bad at math, so I just glanced at your numbers. Someone else will have to chime in on that aspect. The thing which I'd like to comment on is that when you lease and are self-employed (or consult without a base office), I think you can pretty much write off your whole lease payment (or at least a lot of it) from your taxes. That alone would be worth a lease in my book, provided I was in your situation.

Then again (skipping past the math again ), if cash flow is that important to you, you may want to go with scenario 1, where you invest the money or go for a lower-priced car. I don't mean that in an insulting way, I just don't know what other cars you have and whether this BMW is "just another car every 3-4 years" or a departure from your normal buying habits and makes you nervous.

[goofygrin]

The self employed write off thing is a delicate proposition.

Since the car is for my wife, and she doesn't do a lot in the business, we wouldn't be able to write off that much. When I do use her car for business, I just log the mileage and use the mileage deduction.

From a cash flow perspective, Option 2 provides the lowest monthly outlay, but seriously kills on emergency fund. Option 1 provides the worst monthly cash flow (since the payment is the highest) but provides flexibility from a emegency fund perspective since there's the CD to tap into and the car can be sold outright (minus anything due).

My emergency funds aren't tied up in any of my cars though so I'm fine there. We just pull money from the business of $x every month and wouldn't really like to break our budget for household expenses unless there's a good financial reason to do so.

As far as the cars we drive, over the last 10 years we've had everything from a $50k+ Lexus to a $14k Civic. Currently she's driving the Lexus (RX400h) and I'm driving a Mitsubishi Lancer Evo. Because I drive the "boy racer" car we need to have at least one professional type car in the household so that I have some butt weight when I go visit with clients.

We aren't the typical credit card thousandaires like there are around here . We live comfortably a bit below our means, but if I wanted to live like a miser driving a 98 Civic then I'd certainly have an easier job! (less hours, etc.).

[methodtim]

Ah, I see.

If I was you, I would go with either option 1 or something in between option 1 and option 2. If you sell the Lexus to a private party, you'll definitely get a lot more for it than if you trade it in (although you pay for this in time and energy). Then you can put in a bigger down payment, which will lower your monthly payments, but yet still enable you to put the remaining money from the sale into an investment account. That seems like the best play for your peace of mind. You'd still come out "behind", but that's to be expected with anything other than a straight option 1.

Just for reference, my wife and I have a philosophy that we'd rather be cash heavy with predictable and sustainable debt than the reverse. You never know what's going to come around the corner that might require an influx of immediate cash (medical, kids, stupid wind blows your fence down, etc.).

By the way, I couldn't help myself and checked the math. I still don't understand half of it.

Anyways, I hope this helps.

[goofygrin]

methodtim: that's a good strategy and one that we basically follow, except that we tend to favor no debt rather than carry any debt -- unless the debt is free (0% financing offers for instance).

As far as the math, I'm probably broken somewhere

[Aces_High]

dude lease it......any large sum you invest as a down payment on a purchase or a lease is a dangerous move..........DON'T convince yourself that it's a good idea......take your $x,xxx and put it into a CD like you said......put your 28k in a 4%ish yielding CD, and take the 5K that you're going to put to drop your MF by .00049 and put it into a money market account which will pay you around 3% interest......This way at least you've got 5k worth of liquid to play with.....No offense.....but its retarded to tie up any amount of money, esp 5k worth into something just to drop the interest by 1%..........

save your 5k and your marriage, this economy is about to go through some sort of violent mid-life crisis type shit.........

I say it with a smile so I hope you take it productively......if your lease payment is almost 700 monthly......skip an option or two......I've always been more than ready to part with an option if I've known its going to make to purchase and lease term more comfortable.... or better yet go with a nicely loaded 328 sedan and you'll be in the low 500 range on a 36month lease.....with 500 down........you sacrifice a little but look at the end result, you've still got yourself a bimmer =)

Good Luck!

[goofygrin]

My crystal ball is pretty cloudy right now re: the economy. I'm somewhat trying to "roll with the punches" right now.

My numbers above for lease are high. I had the residual wrong by 2% and the MFs all dropped by .0004 earlier this month.

The MSD program nets you like 8-9%. I only have one investment that's averaged that sort of return over 3 years and it's tied to the oil market (and actually has averaged much more over the last year). I'd rather have the guaranteed 8% (tax free) than 3.5% in a MM that's taxed.

I was just looking at the 09 IDrive. Way nicer and more like the Audi MMI and my Mitsu MMCS. I'm thinking as a lease buyer, waiting 6 months might not be a bad choice...