Originally Posted by Monterra
If you can't write off mileage as an expense, buy and hold (5+) almost always makes more sense- to me anyway. In general the more new car transactions you make the more you'll lose, BMW loves this- who wouldn't? Leasing forces the hand after 3 years, forces timing (maybe that new model isn't out yet), fees, too many miles (+10k per year!)you lose, too few miles you lose unless you buy it out where you'll probably still lose but instead you'll just get another new one and lose even more. Love cars, hate losing ie. leasing. Clearly many disagree but I think many of those who can't write anything off are probably driving more car than they can truly afford. In short the people who can least afford to lose more $ on auto expenses are doing just that by leasing because they can swing the ~450/mo payment with a few k down. That's ~20k to drive a ~40k car no more than 30k miles for 3 years? Sold to you, take 2 while you're at it.
With all respect to you, here is where you are wrong. I hear it all the time from people that purchased their car instead of leasing that leasing is for those that can't afford to purchase.
Even in your example, you cite that a person that leases will only pay $20k for a $40k car within 36 months.
True, on its face.
But, following your example we have to assume that the leaseholder returns the car after 36 months and then travels with a bicycle for the rest of his life.
No, the leaseholder does not live in a vacuum.
Most leaseholders lease a new car after 36 months. So, to properly evaluate the situation, lets look at the 6 year window. In that time, your typical purchaser has one BMW over five years. If he or she is lucky, they may get 6 years out of it.
However, using your example, the leaseholder will repeatedly spend $20k every three years. So, in six years the amount the leaseholder pays is a little more than the purchaser. But, the leaseholder gets to drive two brand new cars, and the purchaser has his original car.
Now, turning to the third cycle, after 9 years, the leaseholder will have three brand new cars. The purchaser will probably buy a new car in five or six years.
Nonetheless, if you consider that we don't live in a vacuum and that most leaseholders will lease again and again, then the leaseholder spends more than the purchaser.
Plus, the leaseholder gets new technology and a new warranty and free maintenance to boot. The leaseholder does not have to worry if the car gets in an accident since he never has to sell the car.
To me, cars are not investments.
But, both leasing and buying make sense for different reasons.