Anyone know how long of ownership it typically takes from an average vehicle to gain the financial benefits from financing as opposed to leasing?
I compared the two using a '24 S5 SB: 70K MSRP; .00199 MF/64% residual for 36 months, 3.99% APR @ 60 months; 0 down lease, 20K down finance; assumed resale value of 40% from 5 years ownership. At 5 years, the effective monthly for purchasing was about $80 higher per month, and didn’t go below leasing until close to year 6 of ownership – which doesn’t even account for losing warranty after year 4 and potentially thousands in repairs.
Obviously numbers are going to differ on how each contract is structured; but is about 6 years normal to actually gain equity over a lease?
You don’t want to own any German past 4 years or 44k miles. Whichever comes first. I’m all for frugality and ownership, but it would have to be with one of the brands known to last forever. ie. Lexus, Toyota, Acura, Honda, etc.
I’ve purchased and leased, and have held nothing new longer than 49k miles (I’ve had some used BMWs past their primes and it’s worked out okay). More than the fear of repairs, I tend to switch to a new vehicle to get in something updated and because I don’t tune my vehicles anymore. I’m just trying to figure out where the average tipping point is where it starts becoming advantageous to purchase over lease.
It would really depend on the vehicle. PHEVs and EVs you get 7500 for leasing that would push it even further probably. Some vehicles have more incentives on leases.
I kept a Bmw 3 series for 8 years and I don’t think I came ahead of the lease. With a rough math it costed me more than leasing.
Smart. I use 44k because it helps with resale value and less associated with the “dreaded” 50k. To answer your question, it would all depend on depreciation of the specific vehicle. If you’re talking a German, you won’t get ahead with purchasing with all of the maintenance and repair costs. Leasing will nearly always be better for those.
Yeah, the incentives can really make a difference. Wouldn’t surprise me if keeping your bimmer that long costed more than leasing; the Audi I compared didn’t account for out-of-warranty repairs.
Haha, you know that 50k mark. Maybe it’s being blown out of proportion but it’s a psychological thing, like $99 vs $100. For depreciation, I figure outside of a 911 or GT4-based Porsche, all German vehicles are depreciating at average or worse.
On a lease you pay a lot of interest because you are financing a large amount over a longer period. Whether you come out ahead just depends on your after tax risk free rate of return vs. the interest rate on the lease.
Then you factor in that your lease also contains an option to purchase the vehicle at the end to realize any equity in case deprecation is less than the lease anticipated.
I got it for 52k including tax. Sold it to Carvana with a broken windshield for 12k.
That means it depreciated $420 a month. + one set of new tires, Maintenance and out of warranty repairs. and this was when interest rates were like 1-2%. Could have easily leases 3 new cars in that time period.
You have to plan for resale if you want to buy, get the best resale value model, only add the options that increase resale value etc. (still very hard to come ahead of lease on most models)
Like I had bunch of options on that car. For same price if had gotten the 340i less options, it would have depreciated much less.
Assuming pre-tax sale price was about 48k, looks like you lost about 75% in 8 years, or 9.375% per year. Doesn’t seem much worse than the average car, but I know the maintenance and repairs weren’t cheap. Also sucks to only get back 12k for a BMW.
Yeah, seems tough to get ahead on a purchase unless the incentives are much greater than the lease and the repairs out of warranty are limited or not needed.
Only time I (temporarily) felt good about selling a car was in 2021. Then as 2022 went by and values were still increasing, I felt sick to see I missed out on thousands more.
Lol. I sold my Bmw in January 2021, then everything skyrocketed . But it ended working out better actually because I leased an Alfa and got like 7k back for it at the peak of 2022.
I assume you still get something after selling yours in 2021, what you got probably appreciated too.
On the contrary, I like to own German after 4th year and >50k miles. This is the point when depreciation is highest and you can get a really nice car for a good bargain.
Reliability/cost is overstated depending on the model. Eg. BMW models with B58 engine are very reliable. You will need to budget 2-3k a year for replacing parts like air suspension that’s going to fail but that just comes with driving a nicer car.
For Japanese cars, you are paying a premium for used to drive a crappy car.
I think this directly correlates and supports leasing over buying new
Buying used vs leasing is a different ball game.
I always tell people if you buy, you should always buy a 3-4 year old used car. However if you buy new you would need to own it for 9 years to come out on top of me leasing 3-4 cars in a span of 9 years.
This is the way to do it. Or buy an even older version when depreciation is at 80-90%. Especially with BMW, the forums will all have step by step instructions on how to fix just about every issue imaginable. And worst case, if the engine grenades, you arent out that much money.
I have been successful with a couple of 3 series. I would avoid anything M related. I always wanted a 7 series, think the E38 would have been a good candidate, but those are a bit old now (plus I would want a short one which are harder to find). I might try a 10-15 yr old X5 if I can find the right example. I’m also looking between that and a similar vintage Cayenne for a “fun” extra car.
Nice choice. IMHO e38, e39 & e46 are BMW epic design and goes downhill from there ;). Not a fan of their SUV. I may want to pick up e46 M3 coupe with mystic blue or imola red once I’m done with my kid’s college.
@PNWcr , the LH calculator already has tools to help someone quantify the break-even ownership duration. You can provide deal economics of a lease to get an effective monthly cost over the lease term. And there’s an option to provide the financing/purchase economics (with a corresponding sale of the vehicle after X months) to find an effective monthly cost over the ownership term.
Assuming you agree with the use of the effective monthly cost approach, then there is break-even period of ownership where the monthly costs are the same between those two approaches.
Here’s an example of it for an X3:
I believe the calculator is missing some things though. For me the glaring omissions are the opportunity cost of the equity stuck in the vehicle, and the expected cost of owning the vehicle beyond the warranty period.
As with all math exercises, this could get wildly complicated before it provides a valid comparison… so there is no easy answer we all agree on (yet).
@littleviolette , @delta737h … The OP of this thread is not a burner or alt for my account haha. I agree there seems to be an opportunity to educate users on the tool. So far, in this thread people think the break even for financing/owning to be better than a lease is somewhere between 4 years to infinity years… and “it depends”.
But at least the dialogue here is in a positive direction.
. But it ended working out better actually because I leased an Alfa and got like 7k back for it at the peak of 2022.
