Should I buy or lease a car given that its not a super luxury car and I only drive 15 miles/d on avg?

Question

For my first car, I bought a Toyota Camry. 3 years later I sold that car and I am leasing a BMW series 3. My lease will expire early next yr and I am thinking getting the X3/X5, do you recommend leasing or buying?

Personally by far I think the leasing option is a scheme. Of course the dealer/manufacturer will want you to change cars every 3 yrs so they can make more $$. Each time I walk into a dealership the sales will always eventually try to talk me into a lease. I think it must be that they know this is the scheme or even they have been brainwashed. They have every reason/excuse for you to do a lease.

The reason I don't like the lease is if you just lease a car for life you will end up paying for a car for the rest of your life. You can never pay off a car that way. I understand that by the time when my lease ends, I have the option to buy it, but now I have realized that the car value is way under the payoff quote, even given the condition is great and it only has 15k miles on it. Thoughts?

Answer 1

I have a few recommendations/comments:

1. Consider keeping your current car. The buyout amount for your lease is often negotiable. Tell the dealer you are NOT going to be leasing or buying a new car from them, but you are interested in buying out your BMW if they are willing to negotiate on the buyout amount. They will say, "no deals" and then you schedule to turn in your car. After a few days, they might call you back (it happened to me) and offer a lower price for you to keep your own car. Even if they don't call you back, you can call them one more time the day before you turn it and say, "last chance for a deal or I turn it in!" If they won't deal, turn it in.

The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal.

2. If you can't or don't want to keep your current car, after turning it in, look for a used/pre-owned BMW X3 (or whatever) that is just a few years old. You'll be able to find a late model year BMW very easily. BUY it! Don't lease it. You'll still make payments, but you'll save a lot of money because when you pay off the loan the car will be yours.

Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time!

Answer 2

If you lease a car, you are paying for the depreciation of a certain number of miles, even if you don't actually use those miles. Since you know you will be well under the standard number of miles when your lease is up, and you already know that you want to keep the car, buying is better than leasing.

Answer 3

Alternative: buy a recent-model used car in good condition. Or buy an older car in good condition. Let someone else pay the heavy depreciation that happens the moment you drive a new car off the dealer's lot.

Answer 4

Which to do is determined by how you like to consume cars. If you don't drive a lot and like to get a new car every 2-3 years, leasing is often the better choice.

If you drive a lot or want to keep a car longer than 3 years, you're normally better buying.

Answer 5

Leasing is not exactly a scam, but it doesn't seem to be the right product for you. The point of leasing over buying is that it turns the capital purchase of a car which needs to be depreciated for tax purposes into what is effectively a rental expense. Rent is an expense that can be deducted directly without depreciation.

If you are not operating a business where you can take advantage of leasing's tax advantages, leasing is probably not for you. Because of the tax advantages, a lease can be more profitable for the car dealer. They can get a commission or finder's fee on the lease as well as the commission on the car sale. That extra profit comes from somewhere, presumably from you. If a business, you can then pass part of that to the government. As an individual, you lose that advantage.

At this point, the best financial decision that you could make would be to buy out the lease on your current car. Lease prices are set based on the assumption that the car will have been abused during the course of the lease. If you are driving the car less than expected, its value is probably higher than the cost of buying out the lease. If you buy that car, you can drive it for years. Save up some money and buy your next car for cash rather than using financing.

Of course, if you really want a new car and can afford it, you may not want to buy out the lease. That is of course your decision. You don't have to maximize your current financial position if buying a new car would return more satisfaction for the money in the long run. I would try to avoid financing for what is essentially a pleasure purchase though.

Answer 6

I usually recommend along these lines.

If you are going to drive the same car for many years, then buy. Your almost always better to buy, and then drive a car for 10 years than to lease and replace it every 2 years.

If you want a new car every two years then lease. You're usually better off leasing if you're going to replace the car before the auto loan is paid off or shortly there after. Also you can get "more car" for the same monthly money via leasing.

I honestly would advise you to either buy out your lease, or buy a barely used car. Then drive it for as long as you can. Take the extra money you would spend and spend it on an awesome vacation or something.

Also, if you're only driving 15 miles a day, then get a cheap, but solid car. Again, just my advice.

Answer 7

Cars depreciate and lose value the second you drive off the lot. Why lose money?

Foreign cars require too much maintenance. What will kill your wallet will be the maintenance on the car, not the payment.

Think tires, oil changes, spark plug changes, transmission oil changes, filter changes, brake changes, cost of maintaining is the expensive part. Call the dealer speak to the servicing dept, and go to town. Ask away what all this costs. Basic stuff you expect to have, and find out what the cost of owning that car. Then ask yourself, "should I buy it?".