Leasing a new car

I want to share how you can drive a brand new car for less than $100/mo. Two years ago I was eager to buy my first brand new BMW after years of driving e39s and e46s. I had my eyes set on an F80 M3, doing euro delivery, and really making it the experience of a lifetime, but along the way I test drove the BMW i3, a funky looking electric hatchback. It was definitely no M3, but it had the electric punch off the line, CFRP, LED lights – and it was something entirely different. It looked strange to my eyes, but there was something unique about this car that attracted me. I passed on that thought for a while as I tried to weigh whether I should go for the Yas Marina Blue or pay a bit more for the Tanzanite Blue for my M3. But then, I started noticing that the i3 wasn’t selling very well in the fall of 2014. After the early adopters who were all ready committed to EVs had bought it for the first few months of its release, the remainder of these odd cars were languishing on dealers’ backlots. I wasn’t in love with the car, but I figured I could beat a dealer up and take one of these off their hands for a very favorable price. Against the advice of people like Dave Ramsay (who always advocates against leasing) I figured the best way to dip my toes into the EV waters was to try it out on a lease.
I found a dealer who was trying to blow out their remaining ’14s in May of 2015 at $10K off MSRP, to which was added part of the EV tax incentive which was about $4500 at the time. I looked at the numbers, and realized I would not even have to negotiate to get a lease deal of $100/mo. + tax. BMW inflated the residual to 63% for a 24 month lease, which meant that I would pay depreciation of only $700 + interest to drive it for two years.
If you are thinking about buying a new car, you may consider running the numbers using leasing as a financing method rather than purchasing. All you need to really know is the selling price, which is the negotiated price after discounts, the residual (set by the finance co.; nonnegotiable), and the money factor(MF), basically interest. Buying a new car is always a bad investment that depreciates in value, but you are getting intrinsic value of enjoying a new car instead of maintaining your old car. With a lease, you can put the depreciation risk back on the financing company, such that you need not worry about how fast it drops in value while you drive it. At the end of your lease, if the value is less than your residual, give it back, and if it has maintained its value better than your residual, you can capture that value by trading it in, or buy it for your renegotiated residual.
In my case, my BMW i3 (base model) had an msrp including destination of $43,200. The 63% residual took it down to $27,200 after 2 years. When BMW got pinched and I got to drive a new car for two years, was that $10K off, the lease credit of $4500, and a BMWCCA rebate of $1K. BMW also had a multiple security deposit program at the time that reduced the MF, and I rolled in my acquisition fee into the MF. You can see quickly how I was able to get the selling price to an effective $27.7K and I’ve enjoyed my new BMW i3 for the last 2 years for a monthly payment of $92/mo.
Now it is time to return this car and see what is next. The BMW i3 isn’t for everyone, and leaves a few things to be desired. I wish it was bigger overall, had regular tires and regular rear doors. Some of the lines on the exterior are still downright ugly to me. I don’t wish for more range surprisingly. The 22KWH battery (no range extender here) was more than enough for everything I needed to do – with all the push to make 200+ mile EVs, perhaps there’s some deal to be made for me as I can get by with 80 miles.

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