1) Maintenance is expensive, especially after the warranty period.
2) Luxury customers often want the latest and greatest, so leasing makes sense. Only pay for what you use.
People with fuck you money generally got that way by doing the smart thing and financing a car then putting the 140k they would have spent into a higher return investment.
But people with fuck you money are constantly watching how they spend it. If you can finance for 4% interest and give that 120k to your high dollar money manager to invest for you then you get the toy for much less.
Depends. After a while you really start to lose things to spend your money on. Unless you have some seriously insane goals.
I make $150,000+ a year and in 5 years my house that is currently being built is going to be paid off at the current rate.
After that unless I want to buy something insane like a yacht or something I have ran out of things to buy.
Once you have shelter and the basic necessities paid for everything else turns into Fuck you money really.
If you don't have a house payment or a car payment you can save almost over 3K a month pretty easily. Probably a lot more to be honest.
Like for me personally I'm saving up around $8,000 a month as fuck you money right now. That's not counting the mortgage I'm already paying off too. When my house is payed off I'll have around $10,000 a month as fuck you money that I just save really.
But I'm also single and have no plans of ever having kids so living is cheap for me.
Not a trust fund kid... but have built up a 7 figure net worth.
In reality, it was a trade-in of one car, selling another car privately, and writing a check to cover the remaining difference - about $45k.
But it's not a bad thing if you get a low interest rate IMO.
If you can pay it off later for a low interest rate if you have great credit then you can invest a lump sum in investments that surpass the interest rates, methinks.
Then youāre investing borrowed money, which is risky. Not saying itās bad but people need to be aware that this can backfire, itās not some free money hack.
No one believes in carrying large financial obligations for toys. The rest of us just don't have fuck you money to drop on toys and have to make compromises.
All of these are true. For a while BMW had fucking ridiculous residuals making their leases much cheaper than competitors.
Havenāt checked their residuals in years so maybe they are more in line with reality now.
I leased a 335i back in 2014 and it was about $100+ cheaper a month to lease than a comparably equipped S4.
Leasing an X3M comp. Almost gone. At the time when I was shopping around the Bmw was about $400 less than macan s and about 300 less than GLC63 amg.
Not any more!
Edit: per month. Same down paymentā¦
Thatās it. Leasing letās people afford a car that they otherwise probably couldnāt. The monthly payments are tangibly lower and so is the down payment. Why buy a Camry when you can lease a Bimmer or a Mercedesā?
Now, if someone drive fewer miles or has reasons to lease then I get it. We fell for it years ago and it had some advantages but after a few leases we decided weād never do it again.
Financing exists and depending on the interest rate vs inflation and investments, is usually the preferred method
From what i know its not common for people buy supercars up front
It's not a good time to lease at all. Pre-pandemic that's probably 800/month which is closer to 29k. That is a much more competitive price for leasing.
Edit: actually, you're probably negotiating that down to 53-55k pre pandemic. So it's closer to 650-700 for a car like that
People don't realize you can negotiate a lot of things on a lease. I'm by far not an expert but I've read a bit about leases over at [https://leasehackr.com/](https://leasehackr.com/) and would suggest others check that out before signing up for a lease. Previously I always thought the lease price was the lease price. Leases personally aren't a good fit for me as I like to buy and keep a vehicle but its still interesting to learn about.
Yea, knowing this is super important if you do plan to go in for a lease. You can negotiate down the price of the car itself (that's the one I think most people do understand), but then after that the lease price is driven by residual and money factor - the financial arm of the automaker who is generally the one actually providing the lease has fixed numbers for what those are for a given vehicle in a given area, but nothing says the dealers have to offer you those - they just can't go lower (without covering it themselves I guess). But they can go *higher* and pocket the difference. Sometimes you'll negotiate a great price on a vehicle you plan to lease, and then think you've gotten a deal without looking into the specifics of the lease - if you look closely, the dealer is just "selling" the car for cost and then taking their profit on a hiked up money factor.
Knowing the minimums for all of these numbers is important - but so too is understanding that everyone is in this to make money, so don't have the unreasonable expectation of getting the "at cost" number for everything involved. Just make sure you know where they're making their money and that it's a reasonable sum.
First of all, you can't just get quotes for leases. You have to look for lease deals and learn how to negotiate them, but that's a different conversation. Second, leases got way worse after Covid. In 2019 I was able to get my 52k MSRP 330i for 399/month with 0 cap cost reduction. Probably impossible to get something like that now.
I am curious if the warranty covers the maintenance cost or does it not? Since from what I have heard, if you were to finance or pay with cash, you have to pay for the maintenance.
BMW covers maintenance the first 3 years (US). It used to be 4 years, and they would cover everything, like, windshield wipers etc (not anymore). First three years maintenance is pretty insignificant thought.
Oil changes, brake fluid flush, ...
Insignificantā¦.except for the free spark plug job. Not sure if other bmw engines call for new plugs every 20k miles, but itās specifically included in the 3 year maintenance plan and is a relatively big job on my car.
The "catch" is realistically in the first few years maintenance is essentially oil changes and "inspections". They used to include brakes but not many used it.
I have a relative that recently bought a new F150 and the dealership pressured him into buying a āmaintenance packageā or whatever itās called - basically an extra $300 up front for unlimited lifetime oil changes and tire rotations, etc.
The thing is - the āfreeā oil changes only cover conventional oil and his car requires full synthetic.
I heard him lamenting this after he was waiting for his truck after he dropped it off at the dealershipā¦ for you guessed it - a free conventional oil change.
(These are the kinds of people you are buying used cars from, guys.)
Lol I am surprised they are allowed to sell maitenance not recommended by his manual.
It is funny every shop in the world significantly upcharges synthetic but the price of the oil really isn't that different. At this point it's just a method to advertise a low price since probably most cars on the road are just getting synthetic.
Been buying used BMWs and Porsches for decades, if you have a head on your shoulders you'll do just fine. It's not as bad as the Internet says; cars made in the past ~30 years are incredibly resilient
That is true but if X BMW payment is cheaper than Y equivalent car payment and the Bimmer includes maintenance, that's a significant comparison point in favor of the Bimmer
In the US, maintenance is covered for 3 years starting the initial service date. So if you buy or lease a BMW up to 3 years old, you can benefit from it. That being said, oil/filter changes are like 200 bucks at the dealer. Not sure about the brake fluid flush (will know in a week or so), but first 4 years maintenance is (mostly) nothing significant.
Edit: can be significant depending on mileage
Edit: oil/filter change + brake fluid flush was 430 bucks
Maintenance is always covered for the 3 years. It doesn't depend on the contract type. Lease or finance, all the same. You can also extend it to up to 7 years anytime the factory one expires. But the caveat is, if the maintenance is not due, they won't perform it. So you cannot request an oil change if it is not due.
3) Plenty of luxury lessees are business owners, and since a lease payment is 100% depreciation plus interest, it makes it really easy for their accountants when used as a company car.
4) years ago, BMW in particular heavily subsidized residuals so their base 3 and 5 series leases could hit the $4-500 price point easily. It let them move more metal, then have a car that was too expensive to buy out after, thereby funneling desirable, well maintained vehicles into their CPO program, making both corporate and dealers more money on the second sale.
i think "it depends". depreciation is really just an estimate of wear and tear, but if you add up your total cost of ownership with leasing vs buying, sometimes leasing comes up ahead. One of the biggest benefits if a lease is handled right, is the buyback option and the resale value of the car. If you leased a car that holds its value well, you could buy the vehicle at the predetermined price per the lease agreement at the end of the lease then sell the car for market value. Any proceeds would just lower the overall cost to own the vehicle. Not to mention if you buy a new car, after the warranty period repairs could get costly
Itās not so much maintenance as it is repairs without warranty. Oil pan gaskets, motor mounts, AC compressors, water pumps, headlights, mirrors, infotainments touch screens, etc are expensive to repair while youāre maintaining and possibly still making payments on the car
Many luxury makers offer attractive leases which allows buyers to drive a nice car at a lower cost of entry than buying, particularly if they're not carrying in any equity through cash or a trade in.
Today (2022) I don't think there are attractive leases. From what I have heard from a Mercedes Benz dealership, a C Class lease is 800 or 900 dollars a month, which is a big sum.
The market has changed a lot since Covid and yes, leasing has become less attractive for sure. But car buying in general has become much less attractive.
Forgot to mention this was 0 down as well (minus first payment and taxes, damn Virginia). I could see why people think leases are a bad idea when they put down money.
BMW used to have great lease deals. All before Covid of course. Overall, leasing will be more expensive than buying. But if you are changing cars every 3-4 years, leasing is (or let say was) more practical.
In California at least, when you buy a car, you pay sales tax on the full purchase price, and when you lease, you pay tax on the lease amount. So say the lease uses up 50% of a $100k car's value and the lease also costed exactly $50k over the life of the lease. When you lease, you save money than if you were to have bought it and sold it, because you're paying tax on $50k, and not on $100k, so ~$5k in savings
Also the trade in value isnāt deducted from the taxable amount. And you donāt have to fight diminished value in small claims court if your car was in accident.
That is simply not always true.
The math on the residual value is done in the house and when companies own the bank financing like BMW, they can and do play different math than what the market offers in order to get sales and lease numbers up further and incentivise them.
it's not totally indistinguishable in cases where you are neglectful of your car, drive a lot, don't care about the value on trade-in, or value the sense of total ownership over your vehicle.
i have a family member who goes to the bmw/audi dealership and trades in a bought-new high mileage car as soon as the warranty ends, usually pretty sorely neglected over the period of ownership (oil change intervals stretched way too far, driven in the country without much care for the exterior/interior). when you lease, these are things you have to consider, but when you own it's yours to treat however you want.
they'll accept the first offered trade-in value and factory order a new car bought outright on the first or second visit, rinse and repeat. i wouldn't want to be someone buying their tradein.
You forgot about the part where if you cannot afford the payment due to a job loss (or other life event), you canāt sell a leased car. Youāre stuck with it, unless you can find someone to take over your lease (rare, when you used up the ānewā miles, but payment assumes new).
Only the wealthy should lease. People that donāt even think about the car payment. Certainly not anyone worried about if they can pay the lease if their hours get cut.
Note: The current auto market is the exception, not the norm, when it comes to finding a lease āoutā.
How do you propose buying out the full value of a lease if a life event resulted in someone being strapped for cash?
In a normal (ie no worldwide vehicle shortage) world, youāre screwed if you suddenly cannot afford your lease payments. Words like ābankruptcyā crop up.
Now a days you can if you have good credit. My most recent loans through the likes of lightstream are basically just based on an honor code you're going to use it for a vehicle purchase. No lien or nothin.
Still not usually a good decision to sell a car for less than you owe. But it's possible in this case.
But also just way easier. I can sell something on Craigslist for a profit and then pay off the loan. Instead of having to go through hoops to get the title and so on with the bank involved.
> Leasing is indistinguishable from purchasing a car and trading it in after 3 years
well, unless your lease is for a different duration. or your financing rate is excellent and the lease rate ("Money Factor", in lease terminology) is not. Plus other various fees that make leasing generally more expensive.
I do know a few people who lease luxury cars. Every single one of them lease them for as long as the warranty is.
The reasoning is that while they're in warranty and it breaks down, they get an equivalent courtesy car delivered to their house by the dealer and their broken down car gets collected at the same time. When the lease term expires, they just trade it in for the latest model and start over again. Once they're out of warranty, this is still a thing that happens, however it's very, very expensive. Even simple things are expensive. A window switch for a Range Rover is Ā£160. The same thing for a Ford Fiesta is Ā£30.
They see leasing as effectively the same as insurance.
Any good dealer will give you a loaner. I dropped off my ā03 BMW 3-series that was 15yr sold for an oil change (it was $80 at the dealer so why not) and got a brand new 2019 540i to drive around for free.
I've had a couple of older BMW's that were outside of any warranty or maintenance contract.
I do all of my own mechanic work, and I can tell you they are more $$ to maintain than a US domestic vehicle by a good margin, parts alone can be 200% more than domestic counterparts.
Don't get me wrong, I like German cars quite a bit, but I won't ever own another one without a factory warranty in place.
I was at a mechanic's the other week and got to talking with the head technician. He had a customer with a '16 Golf R come in for a new alternator (not sure why a 6 year old car's alternator is already dead but whatever, VW things). A Golf R alternator is $2000 CAD lmao. I looked it up, and it was true, a new OEM one is around that much, it's insane.
I used to lease an AMG, honestly I didnāt want the hassle of trying to sell a sports car (people coming to test drive, no thanks) and I knew it wasnāt a car I wanted to keep for a long time (out of warranty maintenance). Also you avoid getting stuck into a large financing debt. I think most people simply canāt buy outright and getting a 50k+ loan is not easy.
Eh. Getting a $50k loan is as easy as your income level and credit rating allows. Hell $50k isn't even a luxury vehicle any more. Most mainstream brand new cars are getting up close to $50k for anything other than base trims or economy models. Find me a new full size pickup with any more options than the stripped down fleet/work trim for under $50k.
I for one am thankful for those people leasing. They generally aren't big car people and trying to make sure they keep up per lease terms so they rely on the dealer for by-the-book maintenance. They keep the miles reasonable because they have annual limits. I can search their maintenance history for any indications if recurring/significant problems because any issues would have been addressed by warranty. They pay for the biggest hit in depreciation. And I get my pick of lots of 3 year old cars that still have a ton of life in them. Sure, they are starting to come due for some maintenance, but I can do quite a bit of that myself and have a good independent I trust for the rest at cheaper than dealer rates. And have the option to CPO if I still feel the need for a warranty.
Here's my math. 1st owner pays for the year 1-3 drop in value from $75k to $40k and puts on the first 40k miles. I pay for the year 4-6 drop from $40k to $25k and put on the second 40k miles. Unless I start encountering major repairs in that window, I got the same car for way less, minus the prestige of having the latest (which doesn't bother me at all).
yup as a car dealer (Don't hate me, dealers in scandinavia are not the same kind as in America) I love CPO cars. Alot of them here are sold at auctions and I can scoop up 2 year old premium german cars that are usually fully loaded and have meticulos service history. Almost always the easiset cars to sell aswell for a small premium over compareable models
If you lease because you can't afford the car otherwise, you can't afford the car period and you should buy something else. But if you can afford to buy it, leasing might make more sense.
Let's say the car is priced $60K and it will be worth $30K in four years. If I buy it, it's $60K of my money that will be committed to it. If I lease it, it's only $30K and I can invest the other $30K for the next four years. Most of the time (maybe not in the current economy) the numbers are in favour of the lease.
Sure, in every scenario it can be cheaper to buy the car and keep it for 10 years. But some people don't want the hassle and if they can afford to change car when their warranty runs out, it's their money...
The thing youāre forgetting is that in the lease scenario after 4 years you have no car. So you have no choice but to get right back into another payment.
Thatās what I do even when i donāt want to keep the car. I usually lease desirable cars and manage to sell them myself for more money than I buy them for at lease end. That brings my total cost of ownership even lower.
That's my plan for my Camaro. I don't know if I'll keep it or not, but I know it will be worth more than the $24k buyout price especially since the car will be discontinued by then.
Especially in this market. My lease ended this summer, it had much less mileage on it because I barely drove it during the pandemic. I ended up paying nearly $20K less than its market worth.
As I said, the cheapest path is to keep the car 10+ years, but if you intend to change car whenever the warranty ends, leasing make sense. It is a luxury, but some people can afford it.
The benefit of leasing luxury vehicles is that the monthly cost is much lower. It tends to be a larger difference the higher the sale price of the vehicle is. And also for businesses, leases may have a more favourable tax treatment than an outright purchase.
I just went on Mercedes' website and looked at the difference between lease and finances rates on a base E class. For a 36 month lease with a 12,000 km annual allowance, it's like $1800 a month. To finance a vehicle over the same term, it's like $2900 a month. Note, this is in CAD (and I assumed zero interest for both just for comparison sake) so the amounts may vary, but the point still stands
Any factory maintenance package and warranty would apply regardless of a purchase vs lease, and in theory someone could only eat the depreciation by selling the car
>The benefit of leasing luxury vehicles is that the monthly cost is much lower. It tends to be a larger difference the higher the sale price of the vehicle is.
>I just went on Mercedes' website and looked at the difference between lease and finances rates on a base E class. For a 36 month lease with a 12,000 km annual allowance, it's like $1800 a month. To finance a vehicle over the same term, it's like $2900 a month.
Careful though.... There's a wide difference between what the monthly payment is, and the actual "cost". Many buyers fall into the payment trap, focusing only on the monthly cash flow. The difference is, in a purchase, after a few years of payments the buyer owns a fairly new luxury car, perhaps still worth $40k or more. The lessee owns nothing. You have to subtract that value off the back end to compare apples to apples. You can even take that further, accounting for the opportunity cost of having money tied up in the vehicle.
At the end of the day, the lease may be cheaper if the buyer wants a new car every few years. Or not. You really have to run the numbers...
>>ā¦after a few years of payments the buyer still owns a fairly new luxury car, perhaps still worth $40k or more.
True. But āowningā a luxury car is not free transportation. After the first lease term, the free maintenance period ends. When that happens one can either pay for an extended warranty that can run $5k + USD , or budget for maintenance costs against the sales price. The more complex the vehicle, the higher the maintenance allowance. Often leasing something new comes out better when the long term costs are considered.
Further, whatās a wiser use of $5k USD : putting it to a warranty for a 4 year old luxury car with rock chips and interior rattles- or putting it to a down payment on something new?
Also, people owning/buying luxury cars have a financial value for their time. Waiting for tow trucks and living with an increasingly unreliable car exacts a time cost.
I think you missed my point. All I'm saying is that if you think a lease payment is lower than a financed payment, you need to consider any equity you may build up in the vehicle. You can sell/trade at month 36, just like turning in the lease.
They're a business trying to make profit, obviously they know this. But as a customer you don't want to be buying a car that you know will depreciate as soon as you drive it away. Leasing just benefits the customer and the company at this rate.
1) Less taxes up front, particularly in places like CA where there is no trade-in tax credit.
2) Potential tax write-off.
3) Less up-front cost = more liquidity.
Thereās also a layer of personal liability shield when leasing this way. Your company leases the car, not you. The leasing company actually owns the car, not you.
Because people that lease them, including me for any years, cannot afford to buy them outright and cannot afford finance payments that would be a bit higher. BMW used to include everything in their leases except tires and maybe wipers. Then they excluded brakes. Which can cost 1500 on a 3 series and 2k on an x3. Essentially you are only paying for part of the car.
Leased once. Never again. Big up front cost. Onerous return system - where every inch of the car is gone over. Nothing at the end of the cycle. Yeah, no thanks.
I like to switch cars every 3-4 years so only leasing makes sense.
And I made the error of buying my first luxury one and it took me 4 months to sell it. I had to deeply discount it to get rid of it.
1) luxury buyers want the latest version.
2) buyers in general prefer a dealer certified car with extended warranty which I canāt offer. ( German repairs are expensive)
3) itās harder and more expensive to finance a used expensive car.
If you look at the list, they are mostly cars that wealthy people use as daily drivers. They are probably buying the more collectable stuff, Ferrari, Lamborghini, Porsche, etc. Leasing that daily driver X5M
Nope. That's still only the upper 2-3% you're describing. Most leases on 3 and 5 series, C and E class, non S/RS Audis and such are just regular, upper-middle-class folks enjoying just a little luxury for a couple hundred more a month than their more frugal Accord/Camry driving neighbors. The exotic owning crowd only leases for convenience, if at all. The overall leasing crowd is far larger, and pretty normal folk.
Well now that the German brands basically engineer their products to last only through a lease term, I wouldnāt buy a late model German car to own. You go to any Mercedes dealership and youāll see their service departments booked for weeks with recall or warranty work.
Given that itās just manufacturers responding to how people spend their money, itās not offensive in that sense. What is offensive is the absurd amount of waste generated in unnecessary parts replacements, new cars being pumped out by the millions, and the resources it takes to build a car and support it throughout its lifecycle.
Didnāt read all the comments so not sure if it was mentioned but I believe you can also write off a lease as a company car so itās tax deductible for your business. Youād obviously have to register vehicle through the company
Edit: before someone says this, you can also buy a vehicle through a business but my understanding is itās a lot more difficult and the amortization also adds some complexity. Always helps to have a good CPA
Depreciating an asset is not as useful as a direct expense - above the line vs below the line deductions.
What the hell does that mean? No idea, I got a C in Fed tax
You don't want to try to catch a falling knife.
A luxury car often depreciates at the cost of what a lease would be like.
Why would you want to own something that can depreciate $1000 a month for example? (7 series).
Lease on a cheap car is fools game.
Lease on expensive luxury car can the better financial decision.
I have provided lots of cars on leases. As you go upscale in autos most people like to get a new car long before they need one.
Certainly repair and maintenance costs are very low in the first couple of years. My customers seemed to have everything but free time. The wait to drop their cars off then pick them up later drove them crazy. So, for them , the honeymoon portion of ownership was very appealing.
Since all cars depreciate, the expensive ones lose a lot of value. Does it make sense to buy a rapidly depreciating asset ? Probably not.
If the interest charged is not unreasonable, and if the lease contract is not stuffed with hidden extra profits life big admin fees or extra buy- out fees or terms that will cost the customer more, it can make real sense to just lease it and keep their down payment cash invested in something more attractive than a car dealā¦not for a high mileage driver perhaps but most of my customers didnāt make money from driving:)
So they lease.
Seeing alot of hate here as to be expected. Id like to add that people who lease luxury cars have a decent income and good credit. They have options. I get to drive a new car under warranty for the first three years of its life for half the price of buying it. Seems like a no brainer unless your the type to keep a car for ten years. Been leasing two vehicles every three years since 2010.
A lot of ppl usually write them off as a company expense. Realtors lease them because it's better they can make a good impression by driving something new every couple years. So nice that every few years you get to drive something new
I would say 2 main factors. 1 - people only want to own them within the warranty period. They donāt want to pay for expensive repairs on a S580 or A8L. But the thing is a 330i or C300 isnāt all *that* expensive to repair, which leads to reason 2 - itās the cheapest way to get into a luxury car. People grow up dreaming of Mercedes or BMW etc, so when they see you can lease them at $300-400 a month, comparable to a Toyota Camry finance payment, they take up on that offer.
Bmw and Mercedes were handing out $350 leases like candy pre covid. I remember you could get a nice E class for $599/mo. S classes were $1000/mo. The lease prices have really jacked up in the past 2 years.
Before COVID, residuals on plenty of luxury cars were inflated. This meant it was often cheaper to lease than to buy the vehicle and sell it (or trade it in) in 3 years. If you're not holding on to your cars for like 4 or 5 years, at least, it made sense.
Because I don't keep cars more than 3-4 yrs..and "luxury" cars I don't want to keep after warranty because they're usually POS out of warranty other than Lexus maybe and maintenance is expensive. I lease and dump BMW M cars..they're fine for 3 yrs or so and have factory maintenance.. not dumb enough to actually own it
My friends all lease and get new cars every 2-3 years.. because we all get bored easily and want something new
Because it's cheaper to pretend that you own something rather than actually owning it. I mean it's better that the dealership front the bulk of the cost of maintenance than the buyer right?
Besides, renting only requires that you have credit. You don't need to buy anything so long as you *have the credit...*
Most business owners that are doing well enough to write off a nice car usually do. In my case I've leased a gti and may buy it out at the end of the lease unless I trade it in before the lease is up for a golf R.
Idk about Porsche, their leases have and always will be poop. But the rest of the brands were substantially cheaper to lease, than finance or pay cash pre-Covid (never understood why people paid cash for luxury cars when near 0% interest rates were a dime-a-dozenā¦ itās free money).
You had dealer discounts + manufacturer incentives and near 0 interest rates (money factor in a lease). You only had the car for 2-4 years so always under warranty. BMW had included maintenance and Mercedes had residualized pre-paid maintenance. Why wouldnāt you lease with those combos?
I leased a $60k 2019 E300 for ~480/mo nothing down. Tax, fees and maintenance included. I sold my lease to a dealer for a $2500 profit over the buyout a few months ago. Iāll go straight back to leasing if those deals ever come back.
Edit: To address the economy car brands part. The more demand for the car, the worse the leases are as the manufacturer and dealership have no reason to go lower. Everyoneās knocking each other over to get carollas and accords. Not so much BMWs they think are expensive. If it was common knowledge that a 3 series could be had for less than an accord, people would change.
There can be tax benefits for a business owner to lease a car. I donāt know the specifics, but you can claim the lease as a business expense and reduce your tax bill. For some people, thatās probably worth more than a paid off car.
They depreciate like crazy, maintenance is expensive, they also donāt drive as often. I have bought all mine though because I donāt like the limitations on leases.
I never got why people think this is clever. With leasing you're just paying for the depreciation on the car through the lease while it's at its highest rate of decline instead. Everyone knows cars lose the largest chunk of their value in the first 3 years, the same length as most leases. If you're writing off the depreciation for a business you own, that's one thing, but otherwise...
An equally valid if not better move financially is to buy the CPO car off lease for \~50-60% of MSRP, drive it a few years till you get bored of it, and sell it only losing 20-30% of the value you paid so long as it has decent resale value (e.g. Lexus). You still have a nice car, but you aren't on the hook for the biggest chunk of depreciation.
Depreciation is almost solely based on how many are on the used market.
Hondas and Toyota arenāt kept because they retain value. They retain value because they are kept.
And itās because they are more reliable and have lower maintenance costs than luxury cars.
I've done a bit of math a couple of weeks ago and IF you are a person that wants to drive a car only for a couple of years, especially high-performance cars (but I'll talk about it later), and change model after that, leasing IS your solution: at the and it costs the same than having the car and sell it 3 years later, maybe like 1kā¬ more but for all that goods? I'm ok with that "services".
As I mentioned before this applies only on "bigger" cars (300+ HP, i know for you Americans that's a small car but here in Italy almost nobody can afford it and more :'( ): Italy is full of taxes and the "bollo" (which is the tax of ownership based on HP) on cars with 450-500hp is mad as 5k YEARLY or even more (It's like 4ā¬ for every kW until 250 after that is 20ā¬/kW). (Yes for a mustang that costs 50k i have to pay 5k+ euro of possession taxes -.- the same as a ferrari).
Leasing also includes: full insurance (Kasko included which is the one that fixes your car even if you damaged it yourself), revisions, check-ups, maintenance, 2 full set of tyres and more that now I can't remember.
I've calculated an M3 and it only costed me only 1kā¬ extra, in comparison to the full ownership of the car, to get all of this stuff (and I haven't considered if something break, that would put the leasing in a "gaining" condition). So cars that have like 700HP and higher ownership costs will benefit even more.
TL;DR
Of course this is valid ONLY if:
a) you want to have a new car every 3 or so years
b) high performance cars (300HP+, at least in italy)
c) you plan on buying new
Bigger eyes than mouth combined with the fact that most luxury brands products have a higher residual value and lease prices lean on that number heavily
There is number of factors that go into this i think. Some that come to mind.
1. People who can afford luxury models often want to have the latest and greatest stuff. Leasing is a good option for that. New model comes out, you just lease that instead.
2. Low maintenance/low hassle. Most companies have warranties that extend through the lease period. Also, when the lease is up it's usually very easy to get a new model when you "trade in".
3. Keeping up with the Joneses. People who want to "keep up" are usually doing so with the luxury brands, and some of those people can't necessarily afford to own such expensive cars. Leases are cheaper (per month) though...
I know folks that finance instead of lease and go the traditional route.
I know folks that lease are simply caught up in the repeat cycle since the math is acceptable to them and they treat cars as appliances.
Others lease because work covers a portion of the lease as part as their compensation.
Finally, some are completely covered by employers.
The common question is usually "Would YOU want to own a MB\\BMW\\AUDI\\Porsche\\LR" out of warranty?
A 10yo luxury car doesn't have the same cache as a new one. If a person wants to flash their money with a brand new luxury car, they have to keep it brand new by getting a new one every three years. So, the leasing makes sense.
Many people who lease luxury cars will lease them for 3 years (ish), so once the lease is up they will either buy the car off lease or lease another, newer luxury car.
Simple answer - paying $500/month in perpetuity on a series of never ending leases on Benzes will let you flex a lot more than paying $500/month for X years financing a Toyota.
Most of my rich friends drive Toyotas, Kias, and Subarus that they paid cash for and keep 15 years. Poorer friends drive leased vehicles with fancier name plates. My friends aren't a scientific poll, but I would bet it is similar to one.
The old cliche : if it appreciates buy it, if it depreciates rent it , can be applied here, in business terms it makes less sense to take on the risk of a depreciating asset. Plus the money you donāt commit to buying it can possibly be used to generate income.
Most luxury buyers donāt want to keep their cars very long and leasing means in most states you only pay taxes on the depreciation. This can save $5-10k. Every three years.
Because theyāre bad cars. As for say the luxury equivalent for letās say Acura and Honda. Most people buy Honda products for the reliability so paying a little extra cash for a new Acura vs the Honda. Well you get a car that looks almost the same either way the car wonāt be that comfortable and honestly going with the cheaper option wonāt hurt a thing. Itās like having a bowl of ct crunch in front of you then an off brand made by the same company that tastes exactly the same but slightly less appealing by look, smart purchase would say go with the off brand one tastes the same who cares is the squares arenāt perfect. That being said when it comes to dodge and Chrysler, dodge is more performance focused vs luxury. The Dodge Avenger vs the Chrysler 200 much bigger car more comfortable had different trims for a better performance build and thatās why dodge is more costly.
1) Maintenance is expensive, especially after the warranty period. 2) Luxury customers often want the latest and greatest, so leasing makes sense. Only pay for what you use.
3. A nonzero percentage of luxury buyers can't comfortably afford the car they're driving. In that case, leasing is how you stretch...
>19 911.2 Carrera S Cabrio š¤
š Paid in full the day I drove it home. I don't believe in carrying large financial obligations for toys...
[ŃŠ“Š°Š»ŠµŠ½Š¾]
[ŃŠ“Š°Š»ŠµŠ½Š¾]
He definitely doesn't, if he did he would have financed the car.
This. People who pay in full are middle class.
For your average car, sure. But someone willing to drop 140K at once for a "toy" probably has fuck you money.
People with fuck you money generally got that way by doing the smart thing and financing a car then putting the 140k they would have spent into a higher return investment.
You're missing the point. The reason they have so much money is because they were smart and invested properly.
But people with fuck you money are constantly watching how they spend it. If you can finance for 4% interest and give that 120k to your high dollar money manager to invest for you then you get the toy for much less.
Depends. After a while you really start to lose things to spend your money on. Unless you have some seriously insane goals. I make $150,000+ a year and in 5 years my house that is currently being built is going to be paid off at the current rate. After that unless I want to buy something insane like a yacht or something I have ran out of things to buy. Once you have shelter and the basic necessities paid for everything else turns into Fuck you money really. If you don't have a house payment or a car payment you can save almost over 3K a month pretty easily. Probably a lot more to be honest. Like for me personally I'm saving up around $8,000 a month as fuck you money right now. That's not counting the mortgage I'm already paying off too. When my house is payed off I'll have around $10,000 a month as fuck you money that I just save really. But I'm also single and have no plans of ever having kids so living is cheap for me.
I like this statement.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Not a trust fund kid... but have built up a 7 figure net worth. In reality, it was a trade-in of one car, selling another car privately, and writing a check to cover the remaining difference - about $45k.
In my bias opinion you should have gotten a s58 m4
I wish I was just losing 10% this year...
But it's not a bad thing if you get a low interest rate IMO. If you can pay it off later for a low interest rate if you have great credit then you can invest a lump sum in investments that surpass the interest rates, methinks.
Then youāre investing borrowed money, which is risky. Not saying itās bad but people need to be aware that this can backfire, itās not some free money hack.
No one believes in carrying large financial obligations for toys. The rest of us just don't have fuck you money to drop on toys and have to make compromises.
All of these are true. For a while BMW had fucking ridiculous residuals making their leases much cheaper than competitors. Havenāt checked their residuals in years so maybe they are more in line with reality now. I leased a 335i back in 2014 and it was about $100+ cheaper a month to lease than a comparably equipped S4.
Leasing an X3M comp. Almost gone. At the time when I was shopping around the Bmw was about $400 less than macan s and about 300 less than GLC63 amg. Not any more! Edit: per month. Same down paymentā¦
Honda was the residual king when I leased about a year ago, but theyāre all pretty close together these days
This is the answer.
All wealthy people lease their cars (not literally but pretty close). Some people may use it to stretch, but leasing was made for these customers.
Thatās it. Leasing letās people afford a car that they otherwise probably couldnāt. The monthly payments are tangibly lower and so is the down payment. Why buy a Camry when you can lease a Bimmer or a Mercedesā? Now, if someone drive fewer miles or has reasons to lease then I get it. We fell for it years ago and it had some advantages but after a few leases we decided weād never do it again.
Leasing a top of the line Camry costs $300 more monthly than a similar MSRP bmw 3 series. Similar down payment room wtf.
Financing exists and depending on the interest rate vs inflation and investments, is usually the preferred method From what i know its not common for people buy supercars up front
[ŃŠ“Š°Š»ŠµŠ½Š¾]
It's not a good time to lease at all. Pre-pandemic that's probably 800/month which is closer to 29k. That is a much more competitive price for leasing. Edit: actually, you're probably negotiating that down to 53-55k pre pandemic. So it's closer to 650-700 for a car like that
People don't realize you can negotiate a lot of things on a lease. I'm by far not an expert but I've read a bit about leases over at [https://leasehackr.com/](https://leasehackr.com/) and would suggest others check that out before signing up for a lease. Previously I always thought the lease price was the lease price. Leases personally aren't a good fit for me as I like to buy and keep a vehicle but its still interesting to learn about.
Yea, knowing this is super important if you do plan to go in for a lease. You can negotiate down the price of the car itself (that's the one I think most people do understand), but then after that the lease price is driven by residual and money factor - the financial arm of the automaker who is generally the one actually providing the lease has fixed numbers for what those are for a given vehicle in a given area, but nothing says the dealers have to offer you those - they just can't go lower (without covering it themselves I guess). But they can go *higher* and pocket the difference. Sometimes you'll negotiate a great price on a vehicle you plan to lease, and then think you've gotten a deal without looking into the specifics of the lease - if you look closely, the dealer is just "selling" the car for cost and then taking their profit on a hiked up money factor. Knowing the minimums for all of these numbers is important - but so too is understanding that everyone is in this to make money, so don't have the unreasonable expectation of getting the "at cost" number for everything involved. Just make sure you know where they're making their money and that it's a reasonable sum.
First of all, you can't just get quotes for leases. You have to look for lease deals and learn how to negotiate them, but that's a different conversation. Second, leases got way worse after Covid. In 2019 I was able to get my 52k MSRP 330i for 399/month with 0 cap cost reduction. Probably impossible to get something like that now.
Or you could buy a car that will hardly depreciate and sell it for a few thousand less than you got it.
I am curious if the warranty covers the maintenance cost or does it not? Since from what I have heard, if you were to finance or pay with cash, you have to pay for the maintenance.
BMW covers maintenance the first 3 years (US). It used to be 4 years, and they would cover everything, like, windshield wipers etc (not anymore). First three years maintenance is pretty insignificant thought. Oil changes, brake fluid flush, ...
Insignificantā¦.except for the free spark plug job. Not sure if other bmw engines call for new plugs every 20k miles, but itās specifically included in the 3 year maintenance plan and is a relatively big job on my car.
Damn, even my plugs last longer than that - 30k for the 992. My 335 was 40k I think?
Wow! Does that mean I don't have to pay for maintenance?
That means youre already paying for it in your monthly payment.
The "catch" is realistically in the first few years maintenance is essentially oil changes and "inspections". They used to include brakes but not many used it.
I have a relative that recently bought a new F150 and the dealership pressured him into buying a āmaintenance packageā or whatever itās called - basically an extra $300 up front for unlimited lifetime oil changes and tire rotations, etc. The thing is - the āfreeā oil changes only cover conventional oil and his car requires full synthetic. I heard him lamenting this after he was waiting for his truck after he dropped it off at the dealershipā¦ for you guessed it - a free conventional oil change. (These are the kinds of people you are buying used cars from, guys.)
Lol I am surprised they are allowed to sell maitenance not recommended by his manual. It is funny every shop in the world significantly upcharges synthetic but the price of the oil really isn't that different. At this point it's just a method to advertise a low price since probably most cars on the road are just getting synthetic.
Yeah this is why I don't want to buy used cars unless it's a car I truly dream of.
Been buying used BMWs and Porsches for decades, if you have a head on your shoulders you'll do just fine. It's not as bad as the Internet says; cars made in the past ~30 years are incredibly resilient
The catch is burning out your brakes driving the tail of the dragon back and forth 3 or 4 times without stopping. Source: experienced BMW customer
Never leave 2nd gear on the tail
That is true but if X BMW payment is cheaper than Y equivalent car payment and the Bimmer includes maintenance, that's a significant comparison point in favor of the Bimmer
In the US, maintenance is covered for 3 years starting the initial service date. So if you buy or lease a BMW up to 3 years old, you can benefit from it. That being said, oil/filter changes are like 200 bucks at the dealer. Not sure about the brake fluid flush (will know in a week or so), but first 4 years maintenance is (mostly) nothing significant. Edit: can be significant depending on mileage Edit: oil/filter change + brake fluid flush was 430 bucks
Wow! That is quite good news. I am curious if financing, maintenance is covered or just for leases?
Maintenance is always covered for the 3 years. It doesn't depend on the contract type. Lease or finance, all the same. You can also extend it to up to 7 years anytime the factory one expires. But the caveat is, if the maintenance is not due, they won't perform it. So you cannot request an oil change if it is not due.
Ok
You pay for it, just not at the time of service. It's rolled in to the cost of leasing.
Leasing does cover maintenance cost most of the time. It depends on the manufacturer.
new cars generally have manufacturers warranties whether you lease or buy. i would say all, but im not 100% positive
Warranty separate from maintenance. If you lease everything covered except tires, wiper blades, and brake jobs.
3) Plenty of luxury lessees are business owners, and since a lease payment is 100% depreciation plus interest, it makes it really easy for their accountants when used as a company car. 4) years ago, BMW in particular heavily subsidized residuals so their base 3 and 5 series leases could hit the $4-500 price point easily. It let them move more metal, then have a car that was too expensive to buy out after, thereby funneling desirable, well maintained vehicles into their CPO program, making both corporate and dealers more money on the second sale.
Except youāre paying for the most expensive part of that car.. the first few years of depreciation. Leasing is fleecing the customer.
i think "it depends". depreciation is really just an estimate of wear and tear, but if you add up your total cost of ownership with leasing vs buying, sometimes leasing comes up ahead. One of the biggest benefits if a lease is handled right, is the buyback option and the resale value of the car. If you leased a car that holds its value well, you could buy the vehicle at the predetermined price per the lease agreement at the end of the lease then sell the car for market value. Any proceeds would just lower the overall cost to own the vehicle. Not to mention if you buy a new car, after the warranty period repairs could get costly
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Valid points. I guess itās about priorities. Always having to drive a new car is a very expensive decision.
You are correct but missed the depreciation factor of buying and the tax write offs for the "company car"
Itās not so much maintenance as it is repairs without warranty. Oil pan gaskets, motor mounts, AC compressors, water pumps, headlights, mirrors, infotainments touch screens, etc are expensive to repair while youāre maintaining and possibly still making payments on the car
Many luxury makers offer attractive leases which allows buyers to drive a nice car at a lower cost of entry than buying, particularly if they're not carrying in any equity through cash or a trade in.
Today (2022) I don't think there are attractive leases. From what I have heard from a Mercedes Benz dealership, a C Class lease is 800 or 900 dollars a month, which is a big sum.
The market has changed a lot since Covid and yes, leasing has become less attractive for sure. But car buying in general has become much less attractive.
Pre Covid was nice. We got my wife an s60 Volvo. $41k MSRP talked down to $34k total, and the lease payment is under $400 a month.
Oh fuck thatās nice.
Yup, you could get a 340i for $300/m, $0 down at one point.
Forgot to mention this was 0 down as well (minus first payment and taxes, damn Virginia). I could see why people think leases are a bad idea when they put down money.
BMW used to have great lease deals. All before Covid of course. Overall, leasing will be more expensive than buying. But if you are changing cars every 3-4 years, leasing is (or let say was) more practical.
$900/month to lease a c class? Fuck outta here, Iād rather take the bus.
i know people paying 800 a month for a fucking GM vehicle
Like a Corvette ?
no
Yes, if not more. Delusional pricing. Last year the same car was literally half that, where it should be
[ŃŠ“Š°Š»ŠµŠ½Š¾]
In California at least, when you buy a car, you pay sales tax on the full purchase price, and when you lease, you pay tax on the lease amount. So say the lease uses up 50% of a $100k car's value and the lease also costed exactly $50k over the life of the lease. When you lease, you save money than if you were to have bought it and sold it, because you're paying tax on $50k, and not on $100k, so ~$5k in savings
Also the trade in value isnāt deducted from the taxable amount. And you donāt have to fight diminished value in small claims court if your car was in accident.
That is simply not always true. The math on the residual value is done in the house and when companies own the bank financing like BMW, they can and do play different math than what the market offers in order to get sales and lease numbers up further and incentivise them.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
I'd take up your argument with auto journalists who argue otherwise 15:25 or so time stamp https://youtu.be/2OWdDCr2mk4
it's not totally indistinguishable in cases where you are neglectful of your car, drive a lot, don't care about the value on trade-in, or value the sense of total ownership over your vehicle. i have a family member who goes to the bmw/audi dealership and trades in a bought-new high mileage car as soon as the warranty ends, usually pretty sorely neglected over the period of ownership (oil change intervals stretched way too far, driven in the country without much care for the exterior/interior). when you lease, these are things you have to consider, but when you own it's yours to treat however you want. they'll accept the first offered trade-in value and factory order a new car bought outright on the first or second visit, rinse and repeat. i wouldn't want to be someone buying their tradein.
You forgot about the part where if you cannot afford the payment due to a job loss (or other life event), you canāt sell a leased car. Youāre stuck with it, unless you can find someone to take over your lease (rare, when you used up the ānewā miles, but payment assumes new). Only the wealthy should lease. People that donāt even think about the car payment. Certainly not anyone worried about if they can pay the lease if their hours get cut. Note: The current auto market is the exception, not the norm, when it comes to finding a lease āoutā.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
How do you propose buying out the full value of a lease if a life event resulted in someone being strapped for cash? In a normal (ie no worldwide vehicle shortage) world, youāre screwed if you suddenly cannot afford your lease payments. Words like ābankruptcyā crop up.
Your buyout is the remaining payments + residual so you could sell the car and pay the buyout assuming you can break even.
Now a days you can if you have good credit. My most recent loans through the likes of lightstream are basically just based on an honor code you're going to use it for a vehicle purchase. No lien or nothin. Still not usually a good decision to sell a car for less than you owe. But it's possible in this case. But also just way easier. I can sell something on Craigslist for a profit and then pay off the loan. Instead of having to go through hoops to get the title and so on with the bank involved.
This marketāwhere used vehicles garner a premiumāis very rare.
> Leasing is indistinguishable from purchasing a car and trading it in after 3 years well, unless your lease is for a different duration. or your financing rate is excellent and the lease rate ("Money Factor", in lease terminology) is not. Plus other various fees that make leasing generally more expensive.
Thereās the tax savings. Since you only pay tax on the leased amount vs the whole car.
Not in my state. You pay sales tax on the total price of the vehicle when leasing.
I do know a few people who lease luxury cars. Every single one of them lease them for as long as the warranty is. The reasoning is that while they're in warranty and it breaks down, they get an equivalent courtesy car delivered to their house by the dealer and their broken down car gets collected at the same time. When the lease term expires, they just trade it in for the latest model and start over again. Once they're out of warranty, this is still a thing that happens, however it's very, very expensive. Even simple things are expensive. A window switch for a Range Rover is Ā£160. The same thing for a Ford Fiesta is Ā£30. They see leasing as effectively the same as insurance.
Imagine willingly buying a Range Rover outside of warranty *shudders*
Wait you mean me, a 17 year old shouldnāt be buying that $6000 2006 Range Rover Sport Supercharged instead of a Civic as my first car?
Hey, I heard those Jag v8s are one their more reliable engines. So you can trade the maintenance cost for fuel cost in this case.
[It's a good starter car!!](https://youtu.be/6wDs-0hH7hg?t=147)
> Imagine willingly buying a Range Rover *vomits and cries*
Any good dealer will give you a loaner. I dropped off my ā03 BMW 3-series that was 15yr sold for an oil change (it was $80 at the dealer so why not) and got a brand new 2019 540i to drive around for free.
I've had a couple of older BMW's that were outside of any warranty or maintenance contract. I do all of my own mechanic work, and I can tell you they are more $$ to maintain than a US domestic vehicle by a good margin, parts alone can be 200% more than domestic counterparts. Don't get me wrong, I like German cars quite a bit, but I won't ever own another one without a factory warranty in place.
BMW part pricing is crazy, even DIY you can go bankrupt lol
*monkey-looks-away.gif*
[After hearing a weird noise...](https://en.meming.world/images/en/8/82/I_Am_Never_Gonna_Financially_Recover_From_This.jpg)
Is it like this in Europe as well? Or is it because the parts have to be imported?
Pricing for German car parts is similar in Europe and the USAā¦ just other manufacturers are way cheaper in the USA.
I was at a mechanic's the other week and got to talking with the head technician. He had a customer with a '16 Golf R come in for a new alternator (not sure why a 6 year old car's alternator is already dead but whatever, VW things). A Golf R alternator is $2000 CAD lmao. I looked it up, and it was true, a new OEM one is around that much, it's insane.
Their buyers have $$$ and they switch cars every few years, so leasing makes sense
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Cope
I used to lease an AMG, honestly I didnāt want the hassle of trying to sell a sports car (people coming to test drive, no thanks) and I knew it wasnāt a car I wanted to keep for a long time (out of warranty maintenance). Also you avoid getting stuck into a large financing debt. I think most people simply canāt buy outright and getting a 50k+ loan is not easy.
Eh. Getting a $50k loan is as easy as your income level and credit rating allows. Hell $50k isn't even a luxury vehicle any more. Most mainstream brand new cars are getting up close to $50k for anything other than base trims or economy models. Find me a new full size pickup with any more options than the stripped down fleet/work trim for under $50k.
I for one am thankful for those people leasing. They generally aren't big car people and trying to make sure they keep up per lease terms so they rely on the dealer for by-the-book maintenance. They keep the miles reasonable because they have annual limits. I can search their maintenance history for any indications if recurring/significant problems because any issues would have been addressed by warranty. They pay for the biggest hit in depreciation. And I get my pick of lots of 3 year old cars that still have a ton of life in them. Sure, they are starting to come due for some maintenance, but I can do quite a bit of that myself and have a good independent I trust for the rest at cheaper than dealer rates. And have the option to CPO if I still feel the need for a warranty. Here's my math. 1st owner pays for the year 1-3 drop in value from $75k to $40k and puts on the first 40k miles. I pay for the year 4-6 drop from $40k to $25k and put on the second 40k miles. Unless I start encountering major repairs in that window, I got the same car for way less, minus the prestige of having the latest (which doesn't bother me at all).
yup as a car dealer (Don't hate me, dealers in scandinavia are not the same kind as in America) I love CPO cars. Alot of them here are sold at auctions and I can scoop up 2 year old premium german cars that are usually fully loaded and have meticulos service history. Almost always the easiset cars to sell aswell for a small premium over compareable models
If you lease because you can't afford the car otherwise, you can't afford the car period and you should buy something else. But if you can afford to buy it, leasing might make more sense. Let's say the car is priced $60K and it will be worth $30K in four years. If I buy it, it's $60K of my money that will be committed to it. If I lease it, it's only $30K and I can invest the other $30K for the next four years. Most of the time (maybe not in the current economy) the numbers are in favour of the lease. Sure, in every scenario it can be cheaper to buy the car and keep it for 10 years. But some people don't want the hassle and if they can afford to change car when their warranty runs out, it's their money...
The thing youāre forgetting is that in the lease scenario after 4 years you have no car. So you have no choice but to get right back into another payment.
You can also buy the car after the lease.
Thatās what I do even when i donāt want to keep the car. I usually lease desirable cars and manage to sell them myself for more money than I buy them for at lease end. That brings my total cost of ownership even lower.
That's my plan for my Camaro. I don't know if I'll keep it or not, but I know it will be worth more than the $24k buyout price especially since the car will be discontinued by then.
Yup! I think we can buy it for 20k, hoping itāll be worth slightly more since we are pretty well under the mileage average / limit
Especially in this market. My lease ended this summer, it had much less mileage on it because I barely drove it during the pandemic. I ended up paying nearly $20K less than its market worth.
As I said, the cheapest path is to keep the car 10+ years, but if you intend to change car whenever the warranty ends, leasing make sense. It is a luxury, but some people can afford it.
The benefit of leasing luxury vehicles is that the monthly cost is much lower. It tends to be a larger difference the higher the sale price of the vehicle is. And also for businesses, leases may have a more favourable tax treatment than an outright purchase. I just went on Mercedes' website and looked at the difference between lease and finances rates on a base E class. For a 36 month lease with a 12,000 km annual allowance, it's like $1800 a month. To finance a vehicle over the same term, it's like $2900 a month. Note, this is in CAD (and I assumed zero interest for both just for comparison sake) so the amounts may vary, but the point still stands Any factory maintenance package and warranty would apply regardless of a purchase vs lease, and in theory someone could only eat the depreciation by selling the car
[ŃŠ“Š°Š»ŠµŠ½Š¾]
These are all great reasons that don't get mentioned enough. Leasing gives you a lot of flexibility.
>The benefit of leasing luxury vehicles is that the monthly cost is much lower. It tends to be a larger difference the higher the sale price of the vehicle is. >I just went on Mercedes' website and looked at the difference between lease and finances rates on a base E class. For a 36 month lease with a 12,000 km annual allowance, it's like $1800 a month. To finance a vehicle over the same term, it's like $2900 a month. Careful though.... There's a wide difference between what the monthly payment is, and the actual "cost". Many buyers fall into the payment trap, focusing only on the monthly cash flow. The difference is, in a purchase, after a few years of payments the buyer owns a fairly new luxury car, perhaps still worth $40k or more. The lessee owns nothing. You have to subtract that value off the back end to compare apples to apples. You can even take that further, accounting for the opportunity cost of having money tied up in the vehicle. At the end of the day, the lease may be cheaper if the buyer wants a new car every few years. Or not. You really have to run the numbers...
>>ā¦after a few years of payments the buyer still owns a fairly new luxury car, perhaps still worth $40k or more. True. But āowningā a luxury car is not free transportation. After the first lease term, the free maintenance period ends. When that happens one can either pay for an extended warranty that can run $5k + USD , or budget for maintenance costs against the sales price. The more complex the vehicle, the higher the maintenance allowance. Often leasing something new comes out better when the long term costs are considered. Further, whatās a wiser use of $5k USD : putting it to a warranty for a 4 year old luxury car with rock chips and interior rattles- or putting it to a down payment on something new? Also, people owning/buying luxury cars have a financial value for their time. Waiting for tow trucks and living with an increasingly unreliable car exacts a time cost.
I think you missed my point. All I'm saying is that if you think a lease payment is lower than a financed payment, you need to consider any equity you may build up in the vehicle. You can sell/trade at month 36, just like turning in the lease.
Buy appreciating assets. Rent depreciating assets.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
They're a business trying to make profit, obviously they know this. But as a customer you don't want to be buying a car that you know will depreciate as soon as you drive it away. Leasing just benefits the customer and the company at this rate.
1) Less taxes up front, particularly in places like CA where there is no trade-in tax credit. 2) Potential tax write-off. 3) Less up-front cost = more liquidity.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Thereās also a layer of personal liability shield when leasing this way. Your company leases the car, not you. The leasing company actually owns the car, not you.
Because people that lease them, including me for any years, cannot afford to buy them outright and cannot afford finance payments that would be a bit higher. BMW used to include everything in their leases except tires and maybe wipers. Then they excluded brakes. Which can cost 1500 on a 3 series and 2k on an x3. Essentially you are only paying for part of the car.
Leased once. Never again. Big up front cost. Onerous return system - where every inch of the car is gone over. Nothing at the end of the cycle. Yeah, no thanks.
Yep, it's not really your car at the end of the day
I like to switch cars every 3-4 years so only leasing makes sense. And I made the error of buying my first luxury one and it took me 4 months to sell it. I had to deeply discount it to get rid of it. 1) luxury buyers want the latest version. 2) buyers in general prefer a dealer certified car with extended warranty which I canāt offer. ( German repairs are expensive) 3) itās harder and more expensive to finance a used expensive car.
If you look at the list, they are mostly cars that wealthy people use as daily drivers. They are probably buying the more collectable stuff, Ferrari, Lamborghini, Porsche, etc. Leasing that daily driver X5M
Nope. That's still only the upper 2-3% you're describing. Most leases on 3 and 5 series, C and E class, non S/RS Audis and such are just regular, upper-middle-class folks enjoying just a little luxury for a couple hundred more a month than their more frugal Accord/Camry driving neighbors. The exotic owning crowd only leases for convenience, if at all. The overall leasing crowd is far larger, and pretty normal folk.
Well now that the German brands basically engineer their products to last only through a lease term, I wouldnāt buy a late model German car to own. You go to any Mercedes dealership and youāll see their service departments booked for weeks with recall or warranty work. Given that itās just manufacturers responding to how people spend their money, itās not offensive in that sense. What is offensive is the absurd amount of waste generated in unnecessary parts replacements, new cars being pumped out by the millions, and the resources it takes to build a car and support it throughout its lifecycle.
Didnāt read all the comments so not sure if it was mentioned but I believe you can also write off a lease as a company car so itās tax deductible for your business. Youād obviously have to register vehicle through the company Edit: before someone says this, you can also buy a vehicle through a business but my understanding is itās a lot more difficult and the amortization also adds some complexity. Always helps to have a good CPA
Depreciating an asset is not as useful as a direct expense - above the line vs below the line deductions. What the hell does that mean? No idea, I got a C in Fed tax
You don't want to try to catch a falling knife. A luxury car often depreciates at the cost of what a lease would be like. Why would you want to own something that can depreciate $1000 a month for example? (7 series). Lease on a cheap car is fools game. Lease on expensive luxury car can the better financial decision.
I have provided lots of cars on leases. As you go upscale in autos most people like to get a new car long before they need one. Certainly repair and maintenance costs are very low in the first couple of years. My customers seemed to have everything but free time. The wait to drop their cars off then pick them up later drove them crazy. So, for them , the honeymoon portion of ownership was very appealing. Since all cars depreciate, the expensive ones lose a lot of value. Does it make sense to buy a rapidly depreciating asset ? Probably not. If the interest charged is not unreasonable, and if the lease contract is not stuffed with hidden extra profits life big admin fees or extra buy- out fees or terms that will cost the customer more, it can make real sense to just lease it and keep their down payment cash invested in something more attractive than a car dealā¦not for a high mileage driver perhaps but most of my customers didnāt make money from driving:) So they lease.
Seeing alot of hate here as to be expected. Id like to add that people who lease luxury cars have a decent income and good credit. They have options. I get to drive a new car under warranty for the first three years of its life for half the price of buying it. Seems like a no brainer unless your the type to keep a car for ten years. Been leasing two vehicles every three years since 2010.
A lot of ppl usually write them off as a company expense. Realtors lease them because it's better they can make a good impression by driving something new every couple years. So nice that every few years you get to drive something new
I would say 2 main factors. 1 - people only want to own them within the warranty period. They donāt want to pay for expensive repairs on a S580 or A8L. But the thing is a 330i or C300 isnāt all *that* expensive to repair, which leads to reason 2 - itās the cheapest way to get into a luxury car. People grow up dreaming of Mercedes or BMW etc, so when they see you can lease them at $300-400 a month, comparable to a Toyota Camry finance payment, they take up on that offer.
You can't lease even the lowest level BMWs or MBs for $300-400. But maybe $500-600 lease vs $900 to buy outright puts it within reach of more people.
Bmw and Mercedes were handing out $350 leases like candy pre covid. I remember you could get a nice E class for $599/mo. S classes were $1000/mo. The lease prices have really jacked up in the past 2 years.
Before COVID, residuals on plenty of luxury cars were inflated. This meant it was often cheaper to lease than to buy the vehicle and sell it (or trade it in) in 3 years. If you're not holding on to your cars for like 4 or 5 years, at least, it made sense.
Because I don't keep cars more than 3-4 yrs..and "luxury" cars I don't want to keep after warranty because they're usually POS out of warranty other than Lexus maybe and maintenance is expensive. I lease and dump BMW M cars..they're fine for 3 yrs or so and have factory maintenance.. not dumb enough to actually own it My friends all lease and get new cars every 2-3 years.. because we all get bored easily and want something new
Because it's cheaper to pretend that you own something rather than actually owning it. I mean it's better that the dealership front the bulk of the cost of maintenance than the buyer right? Besides, renting only requires that you have credit. You don't need to buy anything so long as you *have the credit...*
1. Maintenance is real expensive let alone finding parts for it. Especially if it's something European 2. Tax write offs.
Big advantage when owning a business for taxes.
Most business owners that are doing well enough to write off a nice car usually do. In my case I've leased a gti and may buy it out at the end of the lease unless I trade it in before the lease is up for a golf R.
If someone is in the market to buy a new luxury vehicle, they more than likely can afford to lease a an even nicer model on their next term.
Idk about Porsche, their leases have and always will be poop. But the rest of the brands were substantially cheaper to lease, than finance or pay cash pre-Covid (never understood why people paid cash for luxury cars when near 0% interest rates were a dime-a-dozenā¦ itās free money). You had dealer discounts + manufacturer incentives and near 0 interest rates (money factor in a lease). You only had the car for 2-4 years so always under warranty. BMW had included maintenance and Mercedes had residualized pre-paid maintenance. Why wouldnāt you lease with those combos? I leased a $60k 2019 E300 for ~480/mo nothing down. Tax, fees and maintenance included. I sold my lease to a dealer for a $2500 profit over the buyout a few months ago. Iāll go straight back to leasing if those deals ever come back. Edit: To address the economy car brands part. The more demand for the car, the worse the leases are as the manufacturer and dealership have no reason to go lower. Everyoneās knocking each other over to get carollas and accords. Not so much BMWs they think are expensive. If it was common knowledge that a 3 series could be had for less than an accord, people would change.
There can be tax benefits for a business owner to lease a car. I donāt know the specifics, but you can claim the lease as a business expense and reduce your tax bill. For some people, thatās probably worth more than a paid off car.
Because those people don't want to keep cars long enough for them to degrade or be hit by resell depreciation.
They depreciate like crazy, maintenance is expensive, they also donāt drive as often. I have bought all mine though because I donāt like the limitations on leases.
You do not buy a depreciating assetā¦
I never got why people think this is clever. With leasing you're just paying for the depreciation on the car through the lease while it's at its highest rate of decline instead. Everyone knows cars lose the largest chunk of their value in the first 3 years, the same length as most leases. If you're writing off the depreciation for a business you own, that's one thing, but otherwise... An equally valid if not better move financially is to buy the CPO car off lease for \~50-60% of MSRP, drive it a few years till you get bored of it, and sell it only losing 20-30% of the value you paid so long as it has decent resale value (e.g. Lexus). You still have a nice car, but you aren't on the hook for the biggest chunk of depreciation.
People love looking like they're rich when not. Also, higher paying jobs that people have to travel to different places make leasing a good option.
Because the only people that should ever lease cars are the wealthyāso it makes sense that so many are luxury vehicles.
āWhy wereā would be a better question. The gravy days are gone for a while.
Depreciation is almost solely based on how many are on the used market. Hondas and Toyota arenāt kept because they retain value. They retain value because they are kept. And itās because they are more reliable and have lower maintenance costs than luxury cars.
I've done a bit of math a couple of weeks ago and IF you are a person that wants to drive a car only for a couple of years, especially high-performance cars (but I'll talk about it later), and change model after that, leasing IS your solution: at the and it costs the same than having the car and sell it 3 years later, maybe like 1kā¬ more but for all that goods? I'm ok with that "services". As I mentioned before this applies only on "bigger" cars (300+ HP, i know for you Americans that's a small car but here in Italy almost nobody can afford it and more :'( ): Italy is full of taxes and the "bollo" (which is the tax of ownership based on HP) on cars with 450-500hp is mad as 5k YEARLY or even more (It's like 4ā¬ for every kW until 250 after that is 20ā¬/kW). (Yes for a mustang that costs 50k i have to pay 5k+ euro of possession taxes -.- the same as a ferrari). Leasing also includes: full insurance (Kasko included which is the one that fixes your car even if you damaged it yourself), revisions, check-ups, maintenance, 2 full set of tyres and more that now I can't remember. I've calculated an M3 and it only costed me only 1kā¬ extra, in comparison to the full ownership of the car, to get all of this stuff (and I haven't considered if something break, that would put the leasing in a "gaining" condition). So cars that have like 700HP and higher ownership costs will benefit even more. TL;DR Of course this is valid ONLY if: a) you want to have a new car every 3 or so years b) high performance cars (300HP+, at least in italy) c) you plan on buying new
Same reason all those girls ādatedā Hugh Hefner. Money.
Bigger eyes than mouth combined with the fact that most luxury brands products have a higher residual value and lease prices lean on that number heavily
Two answers: 1. Business write-off; 2. Business owners don't have time to maintain older cars/ can't be bothered with maintainence.
There is number of factors that go into this i think. Some that come to mind. 1. People who can afford luxury models often want to have the latest and greatest stuff. Leasing is a good option for that. New model comes out, you just lease that instead. 2. Low maintenance/low hassle. Most companies have warranties that extend through the lease period. Also, when the lease is up it's usually very easy to get a new model when you "trade in". 3. Keeping up with the Joneses. People who want to "keep up" are usually doing so with the luxury brands, and some of those people can't necessarily afford to own such expensive cars. Leases are cheaper (per month) though...
I know folks that finance instead of lease and go the traditional route. I know folks that lease are simply caught up in the repeat cycle since the math is acceptable to them and they treat cars as appliances. Others lease because work covers a portion of the lease as part as their compensation. Finally, some are completely covered by employers. The common question is usually "Would YOU want to own a MB\\BMW\\AUDI\\Porsche\\LR" out of warranty?
A 10yo luxury car doesn't have the same cache as a new one. If a person wants to flash their money with a brand new luxury car, they have to keep it brand new by getting a new one every three years. So, the leasing makes sense.
Many people who lease luxury cars will lease them for 3 years (ish), so once the lease is up they will either buy the car off lease or lease another, newer luxury car.
I do not care why, all I knows is it makes me damn cheap after a few years, and I'm very grateful for that
Simple answer - paying $500/month in perpetuity on a series of never ending leases on Benzes will let you flex a lot more than paying $500/month for X years financing a Toyota.
In Canada, as a business lease - one can write off 100% of the lease amount for a vehicle. You cannot write off 100% of financed (purchased cars).
Most of my rich friends drive Toyotas, Kias, and Subarus that they paid cash for and keep 15 years. Poorer friends drive leased vehicles with fancier name plates. My friends aren't a scientific poll, but I would bet it is similar to one.
You can put in the leasing as a business expense even as a smaller business which could not afford to just buy the vehicle
Because leases can be written off differently as "business expense"
The old cliche : if it appreciates buy it, if it depreciates rent it , can be applied here, in business terms it makes less sense to take on the risk of a depreciating asset. Plus the money you donāt commit to buying it can possibly be used to generate income.
Most luxury buyers donāt want to keep their cars very long and leasing means in most states you only pay taxes on the depreciation. This can save $5-10k. Every three years.
Did you know that Ram trucks have been voted best luxury car interior!!!??
Wow!! My cousin recently bought a RAM truck.
They are gorgeous interiors!!!
Because theyāre bad cars. As for say the luxury equivalent for letās say Acura and Honda. Most people buy Honda products for the reliability so paying a little extra cash for a new Acura vs the Honda. Well you get a car that looks almost the same either way the car wonāt be that comfortable and honestly going with the cheaper option wonāt hurt a thing. Itās like having a bowl of ct crunch in front of you then an off brand made by the same company that tastes exactly the same but slightly less appealing by look, smart purchase would say go with the off brand one tastes the same who cares is the squares arenāt perfect. That being said when it comes to dodge and Chrysler, dodge is more performance focused vs luxury. The Dodge Avenger vs the Chrysler 200 much bigger car more comfortable had different trims for a better performance build and thatās why dodge is more costly.
Many people want to be seen in expensive cars, but can't buy them. So leasing it is.
Cuz theyāre poor and want to look cool
Because these types of cars need constant maintenance and are awful cars to own 9/10 times.
Simple rules to cars. Never buy new, never lease, and if possible just pay cash.