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In Reply to: BMW 540I = NO RESALE VALUE posted by Salman Khilji on February 11, 2001 at 19:13:43:
All luxury cars take a huge hit in depreciation, especially in the first 2 years. Why?- because when Joe Average walks into a dealership to by a luxury car, he can get a brand new one for the same monthly payments as buying a used one. Few people calculate or even care that a lease often costs much more than paying cash in the long run, especially if the car is kept 5 years or longer. All they care about is how much it’s going to cost them per month-period- so why buy someone else's cast off?
I often calculate lease rates vs. new prices just for fun in my newspaper and I have yet to see a lease rate that was more attractive than paying cash. By the time you add the down payment to the monthly payments and the buy-out at the end, leased cars often cost a LOT more than paying cash, even if cost of capital is added to the exercise- and this doesn’t include any of the hidden clauses about mileage, condition of car at trade-in, etc. that often nickel and dime you to death even further. If your business allows you to write-off some or part of the lease against your taxes, that’s a different story.
This is not unique to BMW, but to all luxo cars like Mercedes Benz, Lexus, Audi, etc. What this phenomenon should tell us all, is that the most bang for our hard-earned buck is to buy our BMW’s used. Having said all that, I’ll still buy mine new, just because I want to.
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