I may in fact sign up for 5k/year if it's offered, so far I haven't seen that product.

With past leases, I've managed to sell the cars privately and make some coin but my the Jaguar just isn't popular in this area, even with just 7700 miles and still in the wrapper.

 

To add to that, I don't think the dealer quoted you a competitive lease for BMW. BMW used to have very good deals where you could use the MSDs to lower the money factor (lease equivalent of interest rate). Recently, BMW got rid of their MSD program and as a result their cars are not as lease friendly.


Here are some simple calculations. Let's assume 0 down for a $50k X5. 50,000/60 = $833.00/month (yes I know 5 year leases don't exist but I am doing this calculation for easy math). That payment is way above the 1% lease rule where a $50k car should lease for $500/month with 0 down. With the 1% lease rule, your lease costs would be $30k after 5 years meaning that leasing would be around the same as buying the car with cash, assuming that you could sell it for $20k.


These are rough calculations because your lease payment has interest built in while I assume you paid cash for MSRP. If you got a 3% loan, you would pay over $3900 in interest over 5 years. I also have not calculated that when you bought the car you would have paid tax sales tax on the $50k instead of $30k.


And keep in mind that great deals well below the 1% rule exist but you have to look for them and they don't exist on all cars.

 

You have highlighted one of the major benefits on of leasing. In a lease, you essentially pay for the deprecation for the car but you WIN no matter what happens to the depreciation. If the car depreciates more than what the lease was negotiated for, the bank eats the loss. If the car depreciates less than your lease, you can sell it to CarMax and they will write you a check for the difference.

 

If you like consider two 30 month leases if that works better for you. I also had $9K equity from my prior 750Li that was rolled into this one. The X5 has more bells and whistles than most cars so other than blind spot sensors it's about the same equipment as new today so "new after 3 years" has ZERO value to me... personally.

Buying the car out at lease end is like kissing your sister and paying for it TWICE. You pay the finance costs for the lease and then you STILL owe the ENTIRE residual and then have to pay the financing for that remainder as well. When that 3 year mark was up on my X5 I owed around $16K and people were begging me to sell it to them for $25K so even at that point it was all break even as your will recall I put $9K down on it originally.

Bottom line is that both options have their benefits. Some people discount those benefits based off their personality and/or perception. Some have never even attempted to buy a car because they could never have afforded to purchase (no down payment due to previously leasing or other reasons). People like me who are fine with keeping cars 4+ years & like to have equity tend to "do better" purchasing then we could ever do leasing. Heck, a few weeks ago I was considering paying CASH for a $89K SVR with zero miles on it but I decided to buy a ski condo instead.

Now I actually AM considering leasing if I go for a new, old stock R or SVR simply so that I can differ the risk associated with this eminent engine change that is slated to happen for the next version of these F-Types. If Jag does buy Maserati as rumored these SVR's may have a VERY different engine 1/2 way through the 2018 year model, right?

 

Thou doth protest too much, methinks. Not certain why you are trying to "reverse engineer" using hypothetical's on my particular example in a futile attempt to position leasing as a superior approach.

No real need as this was never intended to be an "analysis by assumption" type of exercise but for some additional background the purchase interest rate was 1.89%. I also paid it off sooner than term & since I was purchasing rather than leasing I got $9,870 off when new due to incentives at that time, taxes are fairly low here in NC, etc. I am familiar with MSDs and there were decent money factors at the time but had ZERO interest in leasing as I had no plans to get out of this vehicle until the 100K mark anyway.

We can return this discussion to it's original title "troubling issues related to leasing" whatever those may have originally been rather than creating yet another lease vs. purchase tangent.

 

I would pay extra to not have anything from Maserati included in an F Type. JLR finally shook the reliability bug. Maserati floor mats can't even be trusted.

 

When you exit a lease early you owe the total balance of the contract not just the current decapitalized value!

 

You do bring up some good points especially that keeping cars for a long time is usually cheaper than changing them out. Also buying used cars usually makes more sense that buying them new unless you get insane deals like 20-30% off MSRP.


I will point out that the buyout price at the lease in negotiable. If you get a really high residual value, the bank will know that they won't be able to sell the car for that price and you have a lot leverage to negotiate.


To go back to my old example, let's assume that the buyout at the end of the imaginary 5 year lease is $20k but the true market value of the X5 is $10k. If you lease you can either offer the bank $10k to buy the car or you can return the leased car and buy a used X5 for $10k. Either way you get $10k savings in your pocket. Of course, this is a special case where the car depreciates a lot ,more than what the bank expected but it is still something to keep in mind.


The key with leasing is to run the numbers and compare it to buying. As I said before some cars are better deals to lease than others so you will always have to do the calculation. You also need to be OK with mileage limitations.

 

That is correct if you want to end the lease early. However, there is always a payoff amount that can be exercised just like a finance contract and does not require paying off the 'total balance' of the contract (meaning the remainder of the payments).

We help people 'exit' their lease early by obtaining a payoff quote and factoring that into a new car deal all the time. Sometimes they owe (just like a finance deal), sometimes they come out even, and sometimes they have a little equity. We took a person out of their Porsche 911 lease recently that had about 8 months left and they ended up with over $2K to put toward their new lease.

 

The leasing bank (at least all the ones I have dealt with) do not care about the 'market value' of the vehicle. The residual is the residual and they have re-insurance to protect their calculations. They will not sell you the car for less than the up-front residual value. They would rather go through the process of offering at closed sale to dealers or going to Manheim with it and taking their chances. If they don't realize the residual they banked on they collect on their insurance. Some do self-insure so they realize the loss against earnings and either way they are made whole.

And as stated before you have no mileage limitations, however many miles you drive can be factored into a lease or you can pay the mileage charge at the end of term. Again, you pay for miles whether you lease, finance, or purchase with cash.

 

I didn't mean to "protest too much" but I personally thought that your example was a bit misleading. You compared a good deal for buying ($10k off MSRP) to what seemed like not a great lease deal. I tried to throw some ballpark numbers out there to say how a good lease deal would stack up even though I understood that in your case leasing didn't make sense because you wanted to keep the car until 100k miles.

 

Not to add fuel to the fire here as I believe this is a great discussion we have going here and lots of good input and information being shared, but the other problem with the BMW X5 example is that in this case everything went right.

What if something went wrong? Let's consider the effects of an accident on the equation. Over 90% of retail and wholesale buyers will walk away from a bad carfax today. With all the choices out there it's just not attractive to own a dirty car.

Also, keeping that X5 to 100K is risking expensive service. It's easy to spend $2K, $3K, $4K or more on mechanical repairs between 50 and 100K miles. In this case you are fortunate you didn't have that experience but this is another of the aspects of risk you avoid when you lease.

 

Still having a little difficulty following some of this logic. Buying the car out at lease end shouldn't be all that different to financing 100% of the vehicle at the beginning. You are still paying interest on the total value of the vehicle. The difference is that when financing you pay higher payments and typically clear down the entire balance in 3 years. With leasing you split the interest charges into two phases - the initial depreciation (lease payments) and then the value once the lease payments have been deducted (the residual). If you compared the total cost of a finance agreement over 3 years versus lease for 3 then take 2 years finance on the residual - I bet they wouldn't be a million miles apart. A couple of $k maybe.

If you are saying that keeping a vehicle longer makes more economic sense - I am with you 100% on that. Changing a car every 3 years will cost you similar amounts of money regardless of the model - buy with cash, lease or take out a loan. The fact you are changing the car so soon is the thing that is causing the large financial loss, not that someone chose to lease versus take a loan.

And to be clear - I am not either in favor of or against leasing, infact as well as my 2014 F Type I have a 2012 Range Rover Sport. I have had them since new, own both of them and likely to keep them a while longer.

I do have to say though that seeing some of those crazy lease bargains on SVR's would make me thing twice if I were in the market for a new F Type today.....

 

I know that you can pay more for going over miles but from my experience leasing starts becoming a really bad value if you need to drive over 15k miles per year.


I am sorry to hear about your experiences with lease buybacks. Here is an article suggesting how to negotiate with a bank on a lease buyout suggesting that at least some banks do lease buyouts.


Tricks for a Lease End Buyout | Chron.com

 

I was trying to be humorous rather than literal but thanks for the give and take. While it would be possible to lay out the details of my options 5 years ago there really is no need, reason nor benefit from doing so at this time. I think this thread was formulated by the OP to address his concern regarding excess mileage beyond lease parameters so we can return the thread to it's original intent.

 

You are correct. If you keep your car longer than 6 or 7 years the argument for financing as less expensive gets better. Remember however that you you are assuming all the risk in this case and if you are comfortable with that then great.

And generally speaking you can purchase the same year, model, mileage of car on a dealer lot for less than the typical residual value on your own lease.

 

Good point. And on that note, I will once again state that there is no difference financially from leasing or financing in terms of the cost of mileage. You either pay for the miles in a lease or you realize reduced value of the vehicle when you finance. That is why NADA has mileage categories and mileage adjustments - because they affect the value of the vehicle.

And regarding the comment "leasing starts becoming a really bad value if you need to drive over 15k miles per year." the same logic applies. If leasing is a 'bad value' over 15K miles per year then so is owning because the mileage will be factored into the equation either way.

 

Mileage is definitely one of the troubled aspect of leasing. I have heard stories of people paying thousands for dollars for going over their miles.


I also don't like how complicated the numbers on leasing are. The money factor (interest rate) is calculated by taking the interesting rate and dividing it by 2400! Why not just state the interest rate? You have to play with MSDs reducing the money factor, negotiate the sale price including any incentives, some leases have security deposits while others don't, acquisition fees vary and $0 down is different than $0 drive off. Once you learn all the tricks you are in good shape but there is a learning curve.

 

Lots of speculation but you are now introducing non-elements into the equation.

Repairs - Consider for a moment that we are talking about the EXACT same mileage in both instances over the 5 year term (10K miles/year). The BMW is actually COVERED up to 50K miles so.. no issues there and no difference leasing vs. buying. I am just short of 80K miles today and no major issues that were not covered by recalls. This is pretty common. Most who have issues with cars are due to buying "unknowns" in used cars that were likely prior peoples issues.

Accident - Sounds like you aren't familiar with diminished valuations that Insurance companies pay out on accidents. In the real world you can get any reduced values back from the insurance company as components of their payout.

I know that there are a number of people who make their living leasing vehicles and it may well be in their interest to sway the discussion in their favor. That's fine but they really SHOULD have some type of disclaimer in their signature if that is the case like "I make my living selling leases"...LOL

Here is a complete analysis even though I have no dog in this fight. My X5 35d Sport listed for $68K ($65,745 + BMW OEM hitch, programming, Window Tint and swap out run flats for Continential DWS All Seasons) and was purchased in Nov of '12 for $59K (including all taxes). $9K was in positive equity from trade (high wholesale at the time as I have access to Manheim and showed that to the dealer and they agreed). $50K was financed @ 1.89% for a 60 month term. My total interest costs over that period was $2,206.10 (Recall above where I informed you that I had paid it off early above so only made 42 payments). Total cost for financing and interest as purchased was $61,206.10. This X5d is fairly loaded & low miles so the $20K is average private party. Total cost to this point ~ $41,206 or $686.76/month

The lease "sales" price would have been ~ $64K as the dealership was holding back $'s to cover lower MF rates (though not THAT much lower as you will see in this outline). Using that for two 30 month leases comes out as follows. For purposes of simplification, each of the 30 month leases would have been the exact same 10K miles/year & 2.5%MF rate & 58% residual & ZERO $'s down because ... it's a lease, right? I believe this all comes down to around $926/month to drive two IDENTICALLY configured cars for that same period under lease. Sure, you could probably get the monthly rate down a bit if you bought some MSDs but the reality is that you are giving the Finance company those $'s to use for the duration. Since we have the benefit of hindsight, we KNOW that there have been better returns in the stock market from Nov '12 to Nov '17 so it's only logical to eliminate any MSDs from this discussion (sorry lease guys you don't get to use that "tool" for this analysis simply due to the ACTUAL stock market returns in this period). And before any lease guys say "yeah but I can give you a great lease NOW at a lower MF if you simply..." Sorry, but those weren't available THEN so you don't get to use that tool either.

Bottom line is that a lease would have cost me $239.24/month more for the "pleasure" of having a new car at the 1/2 way point. In short, the lease would have cost me $14,354 more over this same duration vs. a purchase (granted I had $9K down and was able to pay it off early due to year end bonus, had no mechanical issues, etc) but the "bottom line" is simply that a lease would have cost me a great deal more than my purchase actually DID cost me. Had I leased is in November of 2012, I would be turning back in the second car in less than 2 weeks and at this point and time I have nearly $15K to cover the cost of any "catastrophic" failure that may happen in the next two weeks so this really is the end of this discussion fellas (for me at least).

 

But you are comparing apples to oranges. Keeping the same car for 5 years versus having a brand new car at year 3. Doesn't matter if having a new car means something to you or not - its still a new car and not a valid comparison for a financial model.

For a fairer comparison, what about the delta in leasing for 3 years, buying the car at lease end with a 2 year loan on the residual. Bet the gap isn't all that big at all - and you would own the vehicle at the end in exactly the same manner as you currently do now.

Yes doing it your way would work out cheaper - but at least be fair in your comparison instead of skewing the view by comparing a 5 year old car with changing to a new vehicle after 3 years