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Re: Deplorable dealings. Being hosed on a Z3 trade (archive)

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Posted by Steven on September 25, 1998 at 09:16:17:

In Reply to: Deplorable dealings. Being hosed on a Z3 trade-in. posted by TrevP on September 25, 1998 at 08:22:56:

: Man I'm mad!
: : Here I am with a one-year-old 1.9 Z3 on a lease that I want to trade-in on a 99 E46. The car is in pristine condition, loaded and the dealer is wanting to trade-in my car on a $1000 defecit (less than my buyout). What it means to me is they want to "hose" me so they can sell the E46 with maybe a 2% discount then sell the Z3 with a major markup.
: :
: What is wrong here? I've bought 2 cars from these folks and I keep getting the run around. Thank god I'm talking to another dealer about this. At this point I'd rather give the other dealer the business. Am I whining? No, just totally upset over my dealings and the "resale" value of a 1 year old BMW. I thought things were supposed to be easier?
: :
: Any thoughts? I'm not going to disclose the dealer but I'm in southern Ontario.

Very simple,

Leasing is nothing more than a financing arrangement for owning a car over a specicifed period of time. Also, most leases require little, or no money down. Inception fees are out the window and do nothing for reducing the "owed" balance" or the value of the car.

New cars 1-2 years old depreciate at the greatest percentage rate. As cars get older, the year-to-year depreciation percentage gets smaller. Your basic problem is the fact that the balance due to satisfy the terms of the lease is greater than the trade-in value of your car. You'd be in the same position if you bought the car with nothing down, or only a 5-10% down payment. For the first few years the car will depreciate faster than you can reduce the unpaid balance left on a loan or lease.

As far as the dealer is concerned, he is just going by the numbers. Add column A minus column B, and the difference is where you are, positive or negative. To the dealer, this totally non-emotional. To you, it is purely an emotional issue. Unless your life style takes a major change, or you wreck your car, there is no need to trade a 1 or 2 year old car. If you want to play with the big boys that buy and sell their toys on a very regular basis, then you got to pay for the privilage. If you have enough disposable on-hand cash or income (read: play money) then jump on in. If not, you're going to get hurt every time

This could get to be a real technical discussion on the mechanics of leases and money, but that's it in a nutshell. This is not necessarily a BMW thing. It's just the way cars and financing work out.

Generally speaking, leasing was originally used by business that could write off the cost of leasing capital equipment that had a very short useful life. Much the same as leasing copiers, heavy equipment, etc.
The car companies started promoting leases for the general public as a way to get into a car with very little money down, and the ability to turn it in every 3 or 4 years for a new model. This moved a lot of inventory and pretty much assured a continued sale of new cars and a loyal customer base as leases expired and people just went back to their dealers for "another" new car.
Problem with leases is if you need to get out before the term, you almost always end up behind the eight-ball.

General rule of thumb is if you have a business need and a solid taxable write-off, go ahead and lease. Otherwise, buy what you can afford, put the most money down, finance for no more than a 4 year term, and drive the car for 8 or more years before buying another. There is no cheaper way to own a car. A lot of people will disagree, but if you can afford it, just pay cash and be done with it.

Virtually every new car manufactured today will perform almost faultlessly for 100,000 miles or more. People say that the cost of keeping an old car on the road is more than the monthly payment of a new lease. Guess what? Add up ALL the costs of leasing a car(don't forget inception fees and bank fees)for two 4-year periods vs buying one car and keeping it for 8 years (don't forget the value of your 8 year old car). You'll be $$'s ahead by owning.

If you want to change cars like you change your underwear, you're gonna pay for the privilage.
Good luck

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