Looking to get a 2022 BMW M240i and have been back and forth with a number of brokers and dealers. Given the market, this is the best I can come up with and have a verbal agreement with a dealer (credit not yet run, etc.)
MSRP: $53,545
Selling price: $53,000 (-1% discount)
MF: 0.00158 (not marked up)
Residual: 55% (7.5K miles/3yrs)
Incentives: $1K new grad
No down, all fees rolled in; will do MSDs but have not yet discussed
*** Monthly payment: $854** Link to calculator
My guess is we will drive less than 5K miles per year. We live in MA (Boston) and don’t have a commute. We own a parking spot. We probably would want to move to a 4-door sedan after 3-5 years.
Recognize this is crazy high but seems like as good as it gets given the current environment. We don’t need a car and this is purely a pleasure/enjoyment purchase after a couple of years of hard work. Payments are <5% of monthly take-home pay post-tax/401K.
Question is - given how high lease payments are and how few miles we’ll actually drive, is it worth actually financing this thing at ~3% APR? Payments come out to ~$900/month for a 60 month loan, which can be reduced further by putting a bit down. Tradeoff is that we’ll likely want a different car after 3-5 years.
Thanks for the help - haven’t owned or bought a car in 10+ years.
Can I just ask the rationale of why financing is the no-brainer here, just so I learn and better understand?
I assume its the lower APR vs. the MF, as well as the low residual for our expected mileage, means that our total cost of ownership will be higher with the lease, even if it means financing and then selling the car ourselves after 3 years?
Even though the numbers lean in favor of buying, this would have me more inclined to lease (it’s going to end up painted somewhere at least once in 3 years).
You are also going to get slammed with Mass use tax - assume you already looked and there are no 2021s left to be found (buying a 2021 would save enough in tax to make me rethink a purchase).
He is stating you took the time to review our resources and info about leasing. Lots of people come from youtubers who don’t give the best or up-to-date information and need to be spoonfed simple info here.
Your depreciation might be lower (which would mean higher resale value vs. the RV set by BMW Financial), but, overall, yes, I think that is the correct concept.
And playing this forward, what’s the difference between paying for the depreciation now + capturing the equity on the backend (on the lease) vs. financing it? By leasing, aren’t I passing along that risk to the dealer of if the residual is lower/higher then the 55%?
I’ve never leased (just read the board a lot), so I’ll defer to a trusted hacker for the “better” answer.
The residual value (which I’ll refer to as “RV” from now on) is not necessarily the same as the actual resale value of the car, as you know.
There is only risk to you if the resale value ends up being less than the RV. I don’t know what historical data for the M240i would suggest. And you also have more flexibility if you finance since, should there be a ton of equity on most BMW models, BMW Financial will presumably enforce the contracts in a way to make it hard for you to capture that (as it has already started doing).
I think that answer your question fairly accurately and succinctly…
With that MF you are paying about ~$4700 of interest over 3 years. Plus a $995 lease acq fee and possibly $350 disposition fee at end of lease if you don’t buy it or get another BMW.
Ok flip side with purchase you could get 2.49% for 65 mos. from DCU (1.99% with direct deposit & auto pay) which would get you around $940/mo with nothing down. $3900 interest over full 65 mo term, no fees. Too lazy to calc interest over first 36mo but let’s call it ~$2500. Save some interest + acq fee but you take the risk on residual. Will say that even pre-pandemic, M235 & M240 coupes had pretty strong resale so I don’t think there’s much risk at this residual as long as the car isn’t wrecked.
Re: MA taxes and accidents - I was in same position as OP for a while - lived in Boston and had new BMW that we only used for pleasure. As long as it’s parked off street in a garage, I’d say low risk. If you’re parking on street, yeah you’re f*cked. Excise tax is a flat tax regardless of what town you live in - $25 per thousand of value, highest in calendar year of model year (ex. a 2022 model in 2022) and then tapers off. So call it $1375 for first year for a $55k car. It is what it is and price for admission.
I hear you on the $5K lease ($3.9K interest + $1K acquisition) vs. $2.5K for financing. Does having to pay tax on the full price of the car close that gap though? I guess it doesn’t really matter beyond time value of money because if I buy out the car at the end I’ll have to pay tax anyways. Though the $1.3K excise does matter, right? So it’s really $5K lease vs. $4K financing. With financing I get all of the upside of the residual at lower cost, but lease gives me a residual floor.
This feels really like splitting hairs. Am I wrong to say that there is no optimal decision here?
Lastly - net-net, just how bad is this? I recognize this isn’t the 10%+ MSRP discount + $4K in incentives of yesteryear, but is this just totally financially irresponsible? Ability to pay isn’t the issue.
Yes, in a garage parking connected to our building. So not on the street.
You pay the same excise tax either way - on a lease BMW gets the bill, pays it and then passes along to you.
Good catch on the sales tax. Yes you pay full tax if you buy, vs. only on monthly payments on lease (plus would pay tax on residual if you buy at lease end). In event you don’t buy a lease end you saved some tax $$. However if you buy and trade to a dealer down the road (vs. private sale) you can get a tax credit for trade in value. So it might end up being a wash.
It’s really coming down to 1-1.5% difference in interest rate plus the $995 acq fee being the “cost” of the walk away safety net you get on the lease. If you hate the car or it’s in an accident you get a clean walk away on a lease. But if you end up keeping it at lease end, you paid a few thousand extra for that protection and never needed it.
As for responsibility - 2 series never had the strongest deals. Leases on them always sucked (this really isn’t much worse than it would have been a few years back other than the lack of discount). If you really like the car - does a $2-3k difference in discount stop you? Sounds like you have the means. If you want a better “deal” you could look into a 330 or 530 where you can get bigger discount % off MSRP. Otherwise go for it and enjoy it!
Thanks - makes sense and thanks for helping me get here in the logic flow. Leasing feels like the better approach here just to be able to walk away after 3 years - I can justify it to myself as a “convenience fee.” Especially given my wife is a new driver, if she (or I) is in some sort of accident it will be good to be able to walk away from the car after the lease.
It will also come down to interest rates…ultimately even if I order tomorrow, I won’t get the car for 2-4 months, at which interest rates will almost certainly be higher - if the Fed can be trusted at face value, I’d wager at least 100bps from where they are today. I’ve locked in the MF, but BMW FS will only give me 3.99% for some crazy reason, and any 3rd-party financing won’t be honored for more than 30 days, I’d imagine.
No, $3k isn’t going to stop me. If you told me this car could have been $10K cheaper a year ago, maybe I’d pause just to not feel stupid, but at the end of the day the situation is what it is, and even if supply chains gets better in 6-12 months, that is still time wasted without the car…
Concur. I test drove one a few years back, and almost spun it out due to the power. I had been driving a 200 hp Acura TSX, and the M240 was much more powerful than I was used to.
