Buy my BMW at lease end....Good idea? Or Bad idea?

Question

My lease on my 2004 BMW330Ci is coming to an end next month. I will have made $27,000 in payments. My payoff is $25,500 which means if I opt to buy, I will end up paying $52,500 for a car that was worth only $42,000 brand new back in 2003. My wife insists that I should sell my car and try and make a couple grand. But I actually like my car! And I am not looking forward to running out and getting a new car with a $600 or $700 per month payment. So should I finance my car over 60 months and pay way more than what it was worth in exchange for small monthly payments? Sell it in maybe a year or two? Or should I try and sell it now and make a couple grand to put down on something else?

Answer 1

Two rules of thumb:

1) leasing is usually one of the most expensive ways to own a car in the long run. Yeah, you pay only for the part of the car that you "use", but you're paying for the most expensive part. A car's value depreciates the most in the first couple of years.

2) If you can't pay a new car off in 3-4 years, you can't afford it. My back-of-the-envelope calculations say your payment for a loan of $25,500 for 3 years at 7% would be about $780. The car is already 3 years old - if you finance it for 5 years at the same interest rate, your payment will be about $500. That means in 2012, you'll still be paying $500 a month for a car that's 8 years old.

That's no bargain.

Yeah, it's a beemer. But even beemers aren't indestructable, and I'll bet the repair costs will be breathtaking when something does break.

I'd say turn the car in at the end of the lease, go *BUY* a cheaper car that you can afford, and go on with your life.