[williamf]

I leased my 335i with all the bells an whistles. Since I am a Realtor, I am considered self-employed for tax purposes. Thus, I can write off all lease payments, gas, and any modification to do to the car, as it is my primary work vehicle. So basically 1/3 of these costs are credited back to me in the form of a reduced federal income tax bill.

At the end of the lease, I intend to purchase the car and then immidiately sell the car. Since the dealer says that it will only be worth 61% of its purchase new value, I figure I can resell for at least 10K more. So, if I can sell it for say $38K (it was 50k new), then my total cost of ownership/lease for the car for 3 years will be appoximately $263 per month.

Any thoughts or comments on this plan. I spoke to my CPA about this plan, but I left out the last part about buying the car back. He said the rest was fine.

[vinen]

I'm in a similar situation.. My initial impression is $38K after 3 years of use is too high, mainly because you can almost buy a new 335i for approx 40K base. I doubt you will get dollar for dollar value for expensive options....

[urnuts]

I agree that your assumed selling price may be (is!) unrealistic.

[335i=:)]

Plan on selling it for more like 32k.

[Carnage]

Best advice I can give you is go back to your CPA and re-tell them the plan including the buy the car back and sell it part.

As others have stated, the selling price is too generous. Plan on getting low-30's at best.

[Joe Bimmer]

Originally Posted by williamf

I leased my 335i with all the bells an whistles. Since I am a Realtor, I am considered self-employed for tax purposes. Thus, I can write off all lease payments, gas, and any modification to do to the car, as it is my primary work vehicle. So basically 1/3 of these costs are credited back to me in the form of a reduced federal income tax bill.

At the end of the lease, I intend to purchase the car and then immidiately sell the car. Since the dealer says that it will only be worth 61% of its purchase new value, I figure I can resell for at least 10K more. So, if I can sell it for say $38K (it was 50k new), then my total cost of ownership/lease for the car for 3 years will be appoximately $263 per month.

Any thoughts or comments on this plan. I spoke to my CPA about this plan, but I left out the last part about buying the car back. He said the rest was fine.

...you're not exactly the sharpest tool in the shed...I'm glad I don't use you to make my financial decisions.

[alisoduke]

Originally Posted by Joe Bimmer

...you're not exactly the sharpest tool in the shed...I'm glad I don't use you to make my financial decisions.

LOL

[John 070]

Originally Posted by Joe Bimmer

...you're not exactly the sharpest tool in the shed...I'm glad I don't use you to make my financial decisions.

I totally agree with you.

Seinfeld spoofed on the "write off" thing. So you enter into an unfavorable agreement and you are able to reduce the price of an unfavorable agreement by 1/3......it's still unfavorable.

I'd rather buy what I can afford, and that's mostly driven by our jobs and income. The lease logic would say if you can afford to buy a 3 Series, then you should be leasing a 5, since you can write off 1/3. But we all know it doesn't work like that.

[Jagu]

Your car will be almost worthless in 3 years. Don't realtors drive 40k miles a year?

[Majikthese42]

I'd also wonder what kind of mood the decision maker (wife) is going to be in after sending a summer afternoon in Texas in the back seat of a 3-series with a sport suspension and with the front seats pushed all the way back.

Have you considered a 3-year-old Toyota Sienna?

[bavarian19]

Originally Posted by cars4lyfe

LOL...if a lot of people think like this guy, no wonder there's so many bimmers out on the road!

No kidding... I know there are a bunch of people on the board that lease. I just dont understand it. You are paying to rent a car (basically) with a lot of terms and conditions. At the end of the lease, you own nothing. Yes, I realize your payments are less than if you bought, but a lot of people lease just to own a better car than what they can afford. This I do not understand...

[RiXst3r]

If your gonna lease, lease... if your gonna buy, buy... but dont do both on the same car!

[Louie A]

Originally Posted by bavarian19

No kidding... I know there are a bunch of people on the board that lease. I just dont understand it. You are paying to rent a car (basically) with a lot of terms and conditions. At the end of the lease, you own nothing. Yes, I realize your payments are less than if you bought, but a lot of people lease just to own a better car than what they can afford. This I do not understand...

Well, to each their own. But IMO, leasing is an extremely viable option for folks who love driving a new car every 2-3 years. From a financial perspective, I have the means to own... but instead prefer to lease.

This is the third leased BMW I've had and I always come out ahead by selling the car on my own rather than returning the vehicle to BMW NA at the end of the lease term. The beauty of leasing is that you only pay sales tax on the amortized value of the vehicle. For say a $50K 335 with a 61% residual,that is close to a $3K savings of sales tax ($50k x's 61% residual x's CA TAX 9%). And since the residual (i.e. what is owed on the car) is almost always less than fair market value, you stand to recover several thousand dollars by selling in the open market.

So rather than making a blanket statement that owning is better than leasing (or vice versa), I say it depends on each person's circumstance.

[Carnage]

Originally Posted by Louie A

Well, to each their own. But IMO, leasing is an extremely viable option for folks who love driving a new car every 2-3 years. From a financial perspective, I have the means to own... but instead prefer to lease.

This is the third leased BMW I've had and I always come out ahead by selling the car on my own rather than returning the vehicle to BMW NA at the end of the lease term. The beauty of leasing is that you only pay sales tax on the amortized value of the vehicle. For say a $50K 335 with a 61% residual,that is close to a $3K savings of sales tax ($50k x's 61% residual x's CA TAX 9%). And since the residual (i.e. what is owed on the car) is almost always less than fair market value, you stand to recover several thousand dollars by selling in the open market.

So rather than making a blanket statement that owning is better than leasing (or vice versa), I say it depends on each person's circumstance.

Not to pick on you but you're also making a blanket statement that's not necessarily true. In the case of BMW's, most MB's, Lexus's or other makes that hold their value extremely well, your statement of "since the residual is almost always less than fair market value" is true most of the time. What people tend to forget is that buying vs. leasing is a "pay me now vs. pay me later" scenario. At the end of the day you are still paying for the purchase price of the car (if you buy it or selling it yourself and using the cash to pay the final payment instead of turning it in) whether that means you pay $500 for 60 months or $400 a month for 36 months and a lump of $15,600 in month 37. Alot of people think that you can buy the car alot cheaper by leasing it because they equate "cheaper payments" with 'cheaper car".

In a majority of cars, this is not the case and the residual value is higher than their actual value because their resale sucks. Bottom line, there is a limited amount of scenarios and cars that make leasing attractive. For some people it makes sense (if there are tax benefits, you get reimbursment for payments, or you like having a new car every 2-3 years and don't want to own one outright, etc.), for most it does not.

[Louie A]

Originally Posted by matsarge

Not to pick on you but you're also making a blanket statement that's not necessarily true. In the case of BMW's, most MB's, Lexus's or other makes that hold their value extremely well, your statement of "since the residual is almost always less than fair market value" is true most of the time.

In a majority of cars, this is not the case and the residual value is higher than their value because their resale sucks. Bottom line, there is a limited amount of scenarios and cars that make leasing attractive. For some people it makes sense (if there are tax benefits, you get reimbursment for payments, or you like having a new car every 2-3 years and don't want to own one outright, etc.), for most it does not.

I said "almost always".... not a blanket statement. But think about, if that were not true, car companies could not afford to be in the leasing business. Anything otherwise would presume that the finance company is upside-down at the end of the lease term (i.e. stuck with car with a book value > market value). But like you said, there are rare exceptions.... No guarantees.

[Carnage]

Originally Posted by Louie A

I said "almost always".... not a blanket statement. But think about, if that were not true, car companies could not afford to be in the leasing business. Anything otherwise would presume that the finance company is upside-down at the end of the lease term (i.e. stuck with car with a book value > market value). But like you said, there are rare exceptions.... No guarantees.

You make a good point about car companies not being able to afford to be in the leasing business. Banks, credit union, etc. have been taking a bath for years on upside-down vehicles being returned at lease-end and it is for that reason that alot them have been and are continuing to get out of the leasing business and are sticking with traditional loans.

Car companies are in a much better position to handle those because they can directly influence the resale value of their cars by the way they conduct their business and they are only offering leases on their cars not every piece of crap on the market. Banks and others just hold on for the ride and hope it works out, in most cases it has not so instead of only offering leases on a select number of vehicles, they are getting out.

[gerapau]

Originally Posted by Louie A

Well, to each their own. But IMO, leasing is an extremely viable option for folks who love driving a new car every 2-3 years. From a financial perspective, I have the means to own... but instead prefer to lease.

This is the third leased BMW I've had and I always come out ahead by selling the car on my own rather than returning the vehicle to BMW NA at the end of the lease term. The beauty of leasing is that you only pay sales tax on the amortized value of the vehicle. For say a $50K 335 with a 61% residual,that is close to a $3K savings of sales tax ($50k x's 61% residual x's CA TAX 9%). And since the residual (i.e. what is owed on the car) is almost always less than fair market value, you stand to recover several thousand dollars by selling in the open market.

So rather than making a blanket statement that owning is better than leasing (or vice versa), I say it depends on each person's circumstance.

But do you not have to pay the sales tax when you buy the car at the end of the lease? And then lose the sales tax when you sell it? Here in Ontario you would definately lose the tax.

I have leased a number of cars over the last few years and every one that I have leased was worth less at the end of the lease then the residual value. Isn't this what we want? If the residual value is less than the real value then haven't you really gotten screwed and payed more to lease then if you would have bought? You then don't have a choice but to buy and try to sell but the problem is that you ten lose the tax (as mentioned above).

I bought my 325i because the interest rates to buy were more favorable then the lease rates. Because of this I never really looked into the residuals but I guarentee that if the residuals were a lot less than the actual values I would never have leased.

[sdiver68]

Time out here...

When you run ROI or TCO calculations for lease versus buy, often times you come out ahead on the lease particularly on high residual, subsidized leases like BMW's current 3 series (.0015 MF, or 3.6%). There are often many, many reasons to lease versus buy even when the buyer could put down cash outright, and only by looking at each individual situation and deal can you make that determination.

People who think buying is the best financial decision are often fooling themselves. For instance, if you are in the top tax bracket, and can either give BMW $45K of your money OR borrow from them at 3.6%, deduct the cost of the lease, and invest your $45K in a safe double tax free bond at 5% (equivalent to ~7%)...you will come out way ahead leasing at the end of the lease period.

Then there is the risk shifting portion on resale...I could go on and on....

[SteveMD]

I believe that in TX, you pay sales tax on the full negotiated price of the lease, not the leased portion (the payment). Someone check that but I think it is like Maryland and Illinois.

When you buy it out, you will pay sales tax again on the residual value.

Someone else said it - Buying out your own lease is seldom a good idea. Especially in TX

[Louie A]

Originally Posted by sdiver68

Time out here...

When you run ROI or TCO calculations for lease versus buy, often times you come out ahead on the lease particularly on high residual, subsidized leases like BMW's current 3 series (.0015 MF, or 3.6%). There are often many, many reasons to lease versus buy even when the buyer could put down cash outright, and only by looking at each individual situation and deal can you make that determination.

People who think buying is the best financial decision are often fooling themselves. For instance, if you are in the top tax bracket, and can either give BMW $45K of your money OR borrow from them at 3.6%, deduct the cost of the lease, and invest your $45K in a safe double tax free bond at 5% (equivalent to ~7%)...you will come out way ahead leasing at the end of the lease period.

Then there is the risk shifting portion on resale...I could go on and on....

+1 Very eloquently said!

[Carnage]

Originally Posted by gerapau

But do you not have to pay the sales tax when you buy the car at the end of the lease? And then lose the sales tax when you sell it? Here in Ontario you would definately lose the tax.

I have leased a number of cars over the last few years and every one that I have leased was worth less at the end of the lease then the residual value. Isn't this what we want? If the residual value is less than the real value then haven't you really gotten screwed and payed more to lease then if you would have bought? You then don't have a choice but to buy and try to sell but the problem is that you ten lose the tax (as mentioned above).

I bought my 325i because the interest rates to buy were more favorable then the lease rates. Because of this I never really looked into the residuals but I guarentee that if the residuals were a lot less than the actual values I would never have leased.

You are correct in the case of someone who has no intention of buying the car. If the residual value was set too low, you did pay for more "lost worth" than the car actually lost over the time period.

[Carnage]

Originally Posted by sdiver68

Time out here...

When you run ROI or TCO calculations for lease versus buy, often times you come out ahead on the lease particularly on high residual, subsidized leases like BMW's current 3 series (.0015 MF, or 3.6%). There are often many, many reasons to lease versus buy even when the buyer could put down cash outright, and only by looking at each individual situation and deal can you make that determination.

People who think buying is the best financial decision are often fooling themselves. For instance, if you are in the top tax bracket, and can either give BMW $45K of your money OR borrow from them at 3.6%, deduct the cost of the lease, and invest your $45K in a safe double tax free bond at 5% (equivalent to ~7%)...you will come out way ahead leasing at the end of the lease period.

Then there is the risk shifting portion on resale...I could go on and on....

good points, but you're assuming that people have 45K on hand to make that scenario work. Just looking at the overall savings rate for the US tells us that few have that much cash on hand (top-bracket included- making alot of money doesn't equal saving alot of money). In most cases, the only extra money they have to invest is the $50-100 difference between the lease vs. buying payments.