A New Way of Scoring a Lease Deal?

I’ve been trying to figure out whether I should buy or lease a new BMW 330e in February and realize that the key parameter that I don’t know is what the trade-in value will be in three years.

Then I thought that it could be a useful way of scoring a lease deal. Essentially, calculate what is the lowest residual value at trade in that you would need to get in order to be indifferent between buying and leasing. Here was my calculation for a $50k 330e:

Assuming 10% off MSRP on both lease and purchase, all the same $3000 in total rebates (loyalty, BMW CCA, and PenFed) except $500 extra on the lease given lease to lease loyalty. Then I use the Leasehacker calculator to get total cost of lease as $16482. I then calculate m from:

16482 = 50000 x 0.9 x 1.085 - 3000 - 5800 - m x 50000 x 1.085,

Where I subtract the 5800 federal tax rebate for purchase and then use the tax savings from a trade-in. I get, for this example, m = 43.4%.

So the higher is this number, the better it is to lease. For this example, it seems unlikely that the residual on a 330e would be lower than 43%, so I think I will buy, but if I had done the same thing without the $5800 tax rebate then I’d have calculated m = 54% and would definitely lease over buying.

Anybody care to calculate something like this for some deals they’re thinking about and let me know if you find it useful?

*Note I did this with a 0% interest rate, in principle it would be easy enough to do it with any financing rate you wish.

I do that a lot, but often the incentives are different between lease and buy. We typically land at lease

I’m going to put together a spreadsheet that takes lease and finance terms as I puts and then calculates this number. It also depends on how a person’s state handles trade-ins, so I’ll make that an option.

One thing I don’t know is whether some states have personal property tax on financed but not leased cars…

Personal property tax ie mill tax or excise tax is on leased and financed cars

Cool, I wasn’t sure if that was true everywhere, though I know it is in Missouri.