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      04-25-2012, 03:40 PM   #1
Cstyles
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Lease advice - Experienced lessee's come on in!

So my new X1 will be arriving tomorrow at the dealer (couple weeks early!), and I will be heading in to finalize the paperwork, settle the due on delivery, choose my lease term, etc...

Here is the background info on the deal; the X1 is for my wife (I have an Audi A4) and over the past 7 years with her last car, she averaged 11k km annually. I've chosen to lease the X1 because:

-She drives so little
-I switch cars like underwear
-I drive for business and if the X1 is a good car over the term of the lease, I will buy it out at the end (as it will have very low km), have it CPO'd and drive it as my next business vehicle, while repeating the cycle with a new lease for my wife. If the X1 is a 'mare, or if I simply don't like it, we will walk away and look elsewhere
-I will be looking to get out of my Audi around the same time the lease on the X1 comes due

So here is my dilemma that I am hoping someone with a solid finance background can help me with; I am stuck between choosing the 39mo term and the 48mo term. Here's how they each breakdown;

Capitalized cost of the vehicle: $43,148.00

39mo:
$645.00/mo, 13% tax inc
2.9% MF
$24,024.00 residual (54%)
Total cost of lease interest: $3,170.00
Over 39mo, that averages to $81.28 per month cost of lease (interest)

48mo:
$600.88/mo, 13% tax inc
2.9% MF
$21,355.00 residual (48%)
Total cost of lease interest: $3,730.00
Over 48mo, that averages to $77.70 per month cost of lease (interest)

Which term is the better 'deal'? Does that fact that I may (read: very likely) buy out the vehicle at the end play a significant role in the decision? What about the difference in depreciation versus the two terms compared to the additional total of the extra 9 monthly payments?

Thanks in advance for your opinions.

Last edited by Cstyles; 04-25-2012 at 04:26 PM..
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      04-26-2012, 01:28 AM   #2
Teutonic
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The longer the term the worse the deal gets because BMW takes the risk of getting the car back later so they need to protect themselves.

In my opinion the shorter lease is a better deal.
Now, keep in mind that the residual value does not include taxes, you need to pay them extra at the end of the lease if you decide to buy out the vehicle.

Looking at your case I suggest finance or buy the vehicle cash if you can to skip the intereste rate.
Why? Because with so litle milleage, even if the car is not on your taste after a while still has a value and can be sold anytime especially when the milleage is low, giving you an advantage in comparaison with other sellers.

Lease is good if you can write it off on your company and if you always keep the vehicle 3 years and than change it. If you can not write it of, the lease is worse than finance (sure depends on the interest rate but they are very smart don't worry).

I am a guy who loves the cars, usually I keep them so I buy them on spot.
Even if I want to sell it I always sell my cars in maxim 3-4 days.
Sure depends on the shape of the vehicle but that is a different story.

Bottom line, if you can write off the vehicle lease it for 36 or 39 whatever you can get. Keep in mind however, that if at the end of the lease if you decide to buy it out but you can not pay cash the difference you must finance the residual value; and the interest rate is much bigger so in the end is a bad deal.

Good luck!
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      04-26-2012, 03:15 AM   #3
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Hello,

which deal is best for you depens on how you look at things.
If you intend to lease cars "until you die" you might want to take longer terms for each car you lease, because you pay less money over all. The monthly fees are cheaper, and the buy out only takes place every 48mo. On the downside you only get a new car every 48 insted of 39mo - so I don't know how important it is to you to get new cars...

If you just inteded to lease this one and maybe another car after that I'd go for the shorter 39mo term since you pay less interest - and paying interest is always lost money. This, off course, is only true if you can easily pay the residual of the car after the lease term cash or from your bank account. If need to finance the residual value of your car, things might look different again.

Over here in Germany, lease terms are also popular because you can deduct the monthly fees from your income and thus pay less tax. This is more appealing than buying a car upfront for $$$ and only deduct a small fraction off it each year of your income. I don't know if you can/intend to do this in your country.

bye
Darky
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      04-27-2012, 03:16 PM   #4
Cstyles
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Thanks for the input, I went with the 39mo option. When comparing the interest and payment savings over the 48mo term, and the differences in residual value at the end of each, the 39mo gives me more options at the end and decreases my interest paid.

Now I am just waiting for them to PDI it so I can take it home! The wait continues...
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