DO I have the only Car in the World That Isn't Worth More Than I owe?

[G35POPPEDMYCHERRY]

Originally Posted by jmg

I'm not talking about borrowing money to invest, I'm talking about using the cash you might put into a depreciating car to an investment instead.

Sub prime car financing rates are just the norm today, as car prices are inflated. However, the same cash incentives, or lack thereof, are applicable to both cash and financing. There is no real advantage to paying cash as it is a loss of investment opportunity.

I have triple A credit and a low DTI so I qualify for 0.9%. Not sure what the cutoff is, but people are getting it.

I get it though, paying cash is probably what most people should do, because they tend to overlook overall cost of ownership over a monthly payment. However, that's not always the case especially when interest rates are so low.

always make your money work for you

[heavyD^2]

Originally Posted by Killramos

All of my cars are worth more than I owe on them.

Because I buy them for cash.

I don't know. I am paying 0.49% interested on my X3M which is basically a free loan. The interest I can make investing $100k (Canadian pricing) pretty well subsidizes the purchase.

[MmmmmM2]

The problem is you have a ZHP. I also had a 2018 340i ZHP and could not make money off of it. No one knows what the car is. Yes, they only made 100 of them, but you can't book the car on KBB and since BMW did a terrible job marketing the car, people just look at it as a regular 340i M-Sport, which is far less than the $62K ZHP.

I was lucky as I transferred my lease to someone on this site.

[BMWCCA1]

Originally Posted by MmmmmM2

The problem is you have a ZHP. I also had a 2018 340i ZHP and could not make money off of it. No one knows what the car is. Yes, they only made 100 of them, but you can't book the car on KBB and since BMW did a terrible job marketing the car, people just look at it as a regular 340i M-Sport, which is far less than the $62K ZHP.

Correct me if I'm wrong but wasn't the ZHP option in 2018 a port-installed kit by BMW, listed on the window sticker so it could be residualized on a lease? Not to take anything away from what it offered but anyone could order those same pieces as parts or, in the case of the M-performance power kit and exhaust, for their own car to have them port-installed upon arrival in the USA?

[jmg]

Originally Posted by BMWCCA1

Correct me if I'm wrong but wasn't the ZHP option in 2018 a port-installed kit by BMW, listed on the window sticker so it could be residualized on a lease? Not to take anything away from what it offered but anyone could order those same pieces as parts or, in the case of the M-performance power kit and exhaust, for their own car to have them port-installed upon arrival in the USA?

Not sure about the ZHP, but this is an overall problem with specialty cars in the secondary market right now. Companies like Carmax, Vroom, Carvana etc use area comps to come up with their buy prices and used car sellers are either intentionally or ignorantly misrepresenting these cars. I ran into the same problem with my M3 CS which was severely being underpriced because M3 Competition models were being listed at M3 CS models. The M3 CS was not a port installed option, but another trim level with $20-30k in additional equipment, lots of which were exclusive. You have to go to a dealer or private party who knows what the car is to get the correct market value for the car.

[Lightngsvt]

Yes, the ZHP is listed on the window sticker. I believe it was $6995 and included various carbon bits (mirror caps, rear spoiler, exhaust tips), black grilles, MPPSK, M-rear differential. $62k was on the higher end for a 340i back in 2018, where now that is a moderately optioned m340. I have a feeling that being RWD/6MT is hurting the value of the car since the majority of drivers don't care about driving and prefer AT/xDrive?

[brk_05]

I was in the same boat with the same car (ZHP and all), but I had no interest in turning it in or letting it go, so I bought it out after my last lease payment. To me, it just shows how much BMW subsidizes their leases with over inflated residuals typically. In the past, it never really made sense to buy out your lease without an extra discount, because the residual/buyout was typically higher than the market value. Now its about equal with the value of used cars.

So in the end, i didn't feel like i got a smoking deal by buying out my lease, but I also didnt feel like I was overpaying.

[P1]

Originally Posted by jmg

You can get financing for 0.9% nowadays. That's basically free money. I'd rather put $40k in an ETF like VOO with an average annual return of 15%.

So let's say I finance $40k at 0.9%. I'd pay $360 in interest the first year, but get a $6k return on investment on the ETF.

If I paid cash, it save that $360 but lose $6k in potential earnings. It's a huge net loss.

Most that are paying for cars in cash are simultaneously putting $40K in an ETF. It always sounds nice when you're sitting there with the finance manager, but reality is different. If you "only" have $40K in cash, are you really going to put all of that into an investment AND take out a loan on a $40K car?

[MmmmmM2]

Originally Posted by BMWCCA1

Correct me if I'm wrong but wasn't the ZHP option in 2018 a port-installed kit by BMW, listed on the window sticker so it could be residualized on a lease? Not to take anything away from what it offered but anyone could order those same pieces as parts or, in the case of the M-performance power kit and exhaust, for their own car to have them port-installed upon arrival in the USA?

You are correct!

[jmg]

Originally Posted by P1

Most that are paying for cars in cash are simultaneously putting $40K in an ETF. It always sounds nice when you're sitting there with the finance manager, but reality is different. If you "only" have $40K in cash, are you really going to put all of that into an investment AND take out a loan on a $40K car?

You can have $80k in an ETF or if you want to be safe, bonds, which at 6% is better than -0.9%. The concept is that "free/cheap" money is opportunity to invest for a return. Paying $40k for a car then investing $40k is missing out on a $40k investment.

Also, if I "only" had $40k I would definitely not be paying cash for a $40k car. I'd finance a $20k car for pennys on the dollar and use the $40k to build wealth.

[P1]

Originally Posted by jmg

You can have $80k in an ETF or if you want to be safe, bonds, which at 6% is better than -0.9%. The concept is that "free/cheap" money is opportunity to invest for a return. Paying $40k for a car then investing $40k is missing out on a $40k investment.

Also, if I "only" had $40k I would definitely not be paying cash for a $40k car. I'd finance a $20k car for pennys on the dollar and use the $40k to build wealth.

Again, on paper, sure. But how often does his happen in reality?

[jmg]

Originally Posted by P1

Again, on paper, sure. But how often does his happen in reality?

That's a separate issue. How often it actually happens is a failure of initiative and education, not an argument that it isn't a good strategy.

[Lightngsvt]

Originally Posted by brk_05

I was in the same boat with the same car (ZHP and all), but I had no interest in turning it in or letting it go, so I bought it out after my last lease payment. To me, it just shows how much BMW subsidizes their leases with over inflated residuals typically. In the past, it never really made sense to buy out your lease without an extra discount, because the residual/buyout was typically higher than the market value. Now its about equal with the value of used cars.

So in the end, i didn't feel like i got a smoking deal by buying out my lease, but I also didnt feel like I was overpaying.

What color combo ZHP do you have?

I just looked online and for some reason, my payoff has gone up somehow? I am on my 3rd month extension on the lease, but shouldn't the amount be going down? It was around $37k, now it shows $38,121. I've thought about buying the car out, but I don't want to go in $5k underwater on a 3-year-old car. To bad because it's actually been a great car.

[CharsadehBEAST]

Originally Posted by quakerroatmeal

Is it even possible to make out with profit/cash on a lease? Even if the car is worth more during turn in time? Isn't it basically a rental unless you purchase it out right at the end of lease?

Yes it is possible. I foolishly sold my AMG leased SUV to Vroom last summer with 8 months left on a 36 month lease. Vroom's offer covered the payoff + pocketed me $2k. At the time we were a few months into Rona and I was barely using it but now want to purchase the same vehicle used and it's easily $8k-$10k higher (retail) vs what I got from Vroom.