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Originally Posted by Lassaxi
Ok, you got me here, I'm not sure I understand what you're saying. First off, the residual is not the depreciated value of the car- it's just an agreed-on end of lease value used for calculating your payments. Your car's actual value, particualrly if you are talking about a trade, it likely several thousand less than your quoted residual.
If you bought your car for $47,500, and put $8,000 down, your payment on a 4-year finance plan should be around $910 per month. That should cost you about $4,000 in interest over 4 years, as you suggest. Total cost is $51,680.
A 24 month lease on the same numbers, but this time figuring a $2500 down payment (since that's what the bmwusa.com calculator is making me use), would give you a monthly payment of about $595 (10,000 miles/yr). Over 2 years, you pay a total of about $16780. If your residual is $35,500, and you paid full residual to buy the car, you'd owe a total of $52,280.
However, if you invested your $5500 (the difference between the $8,000 down payment you made and the $2,500 assumed in my lease calculator scenario) in a CD earning 5% per year, you'd make an extra $1,063.74 in 2 years. This means your actually only would spend $51,216 out of pocket to buy the car if you leased for 2 years, and then bought, rather than paying $51,680 in a four-year financing plan at 5.2%.
Of course, none of this includes taxes or other fees, which could tip the scales in the other direction, but I'm still not sure how you get to saving $3060 over a two-year period by financing instead of leasing. I think I must have misunderstood something you said.
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ok...your probably right and i have my math screwed up...regardless of which way you do it, it will be around the same dollar value in the end, however when you have a lease there are WAY more restrictions that are put on you...a $600 difference either way on a $50,000 car really isn't going to sway me in any direction, but the limitations of a lease over my head will sway me.