One of the most common questions we’re asked at Cartelligent is whether leasing or buying is more advantageous for our clients’ individual circumstances. The answer to this question depends on a number of factors, but two of the most important are 1) what brand of car is being considered and 2) how long the vehicle will be kept before it is replaced.
This article is the first in a series looking in detail at the decision to buy or lease an individual vehicle. It looks at lease incentives and rates at the time of writing which may vary month to month.
Vehicle: BMW 328i Sedan
We’ll start with the BMW 3 Series, one of our perennial best-selling vehicles. The brand tends to incentivize leasing to make it an attractive choice and around 70% of Cartelligent clients choose to lease rather than buy their new BMW. (For more on our most leased brands see Which car brands do people lease or buy?).
For our sample BMW 3 Series, we’ve chosen a 2015 BMW 328i sedan with leather interior, the Premium Package (which includes a moonroof, lumbar support, keyless entry and satellite radio), heated front seats and the navigation system. MSRP for the vehicle as configured is $44,750.
We’ll look at three different scenarios at three years, six years and nine years to allow you to see how the situation changes with time. We’ve made the following assumptions:
Purchase: $2,500 down, 60 month loan at 2.49% interest. Vehicle is in very good condition at time of trade-in. 12,000 miles driven per year.
Lease: $2,500 down, 36 month lease with money factor of 0.00130. No excess mileage charges or wear and tear. 12,000 miles driven per year.
Scenario One: Three Years
This scenario assumes that the vehicle above is only driven for three years. In the purchase case, this involves trading it in at the end of three years and paying off the balance due. In the leasing case, the vehicle is returned at the end of the three year period. Because the car is covered by the warranty for the first three years and includes free maintenance, there are no repair or maintenance costs in either scenario.
| Buy (1 car) | Lease (1 car) | |
| Down payment | $2,500.00 | $2,500.00 |
| Monthly payment (inc. tax) | $760.00 | $480.00 |
| Total of payments made | $29,100.00 | $19,350.00 |
| Balance due | $18,150.00 | n/a |
| Maintenance & repairs | n/a | n/a |
| Estimated trade-in value | $26,000.00 | n/a |
| Equity remaining | $7,800.00 | n/a |
| Lease disposition fee | n/a | $350.00 |
| Total cost | $21,250.00 | $19,650.00 |
In this case, leasing the car for three years saves roughly $1,300. Leasing also makes monthly cash flow easier, saving a little over $250/month in payments. Finally, leasing saves the trouble of selling the vehicle and paying off the balance at the end of three years. In this short-term scenario, leasing is the clear winner.
Scenario Two: Six Years
In this scenario, the buyer either buys a new car and sells it six years later or leases a new car for three years and then leases a second car for the next three years. The purchased vehicle will have payments for the first five years and then will be paid off in the final year. It will only be under warranty and have free maintenance for the first four years after which we’ve assumed that maintenance and repairs will cost an average of $1,500/year. Both leased vehicles will be under warranty for the full six years. We’ve assumed that payments for the second lease will be 5% higher than the first with the same down payment and that the disposition fee will be waived when the first vehicle is turned in because the client is leasing another BMW.
| Buy (1 car) | Lease (2 cars) | |
| Down payment | $2,500.00 | $2,500.00 (x2) |
| Monthly payment (inc. tax) | $760.00 | $480.00/$505.00 |
| Total of payments made | $47,340.00 | $39,475.00 |
| Balance due | $0 | n/a |
| Maintenance & repairs | $3,000.00 | n/a |
| Estimated trade-in value | $11,000.00 | n/a |
| Equity remaining | $11,000.00 | n/a |
| Lease disposition fee | n/a | $350.00 |
| Total cost | $39,340.00 | $39,825.00 |
Both of these options will cost roughly the same amount. Leasing offers the benefit of consistently driving a newer car—in this scenario the vehicle driven is never more than three years old as well as offering lower payments during the six year period.
Scenario Three: Nine Years
In this final scenario, the buyer either buys a new car and sells it nine years later or leases three new cars in succession for three years each. As in the six year scenario, the purchased vehicle will have payments for the first five years and then will be paid off for the remaining four years. It will be under warranty for the first four years and we’ve assumed that maintenance and repairs will cost an average of $1,500/year for the following three years and $2,000/year for the last two years. All three leased vehicles will be under warranty during the nine years. Payments for the second and third leases will each be 5% higher than the previous with the same down payment. The disposition fee will be waived when the first two vehicles are turned in and another BMW is leased.
| Buy (1 car) | Lease (3 cars) | |
| Down payment | $2,500.00 | $2,500.00 (x 3) |
| Monthly payment (inc. tax) | $760.00 | $480.00/$505.00/$530.00 |
| Total of payments made | $47,340.00 | $60,525.00 |
| Balance due | $0 | n/a |
| Maintenance & repairs | $8,500.00 | n/a |
| Estimated trade-in value | $6,000.00 | n/a |
| Equity remaining | $6,000.00 | n/a |
| Lease disposition fee | n/a | $350.00 |
| Total cost | $49,840.00 | $60,875.00 |
Buying a single vehicle saves about $11,000 as compared to three leases over the course of a nine year period (or about $1,200/year). For those who are willing to drive the same vehicle for nine years, this represents a significant savings over leasing.
BMW 328i Sedan: Lease or Buy?
Because BMW offers strong incentives to make leasing attractive, we often recommend that strategy to clients who are looking to drive the vehicle for less than six years. Above six years, buying becomes an increasingly cost-effective option for clients who don’t mind driving an older car. Ultimately the choice is up to the individual and involves a thorough analysis of their personal circumstances. (For more on the decision to lease, see The Beginner’s Guide to Leasing.)
Whether you’re considering a new BMW 3 Series or any other vehicle, Cartelligent can help you get a great deal on exactly what you want. Call our team of car-buying experts at 888-427-4270 or get started today.