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Car Leasing or Purchase?

Whether to lease, buy, or lease-to-buy a car depends on your financial situation, driving
habits, and long-term goals. Buying offers ownership and no mileage limits, but with
higher payments and maintenance responsibility, while leasing provides lower monthly
costs and the ability to drive a new car every few years, but with mileage caps and
stricter insurance rules.

Factors to consider
Factor Buy (Own) Lease Lease-to-buy (Purchase
option)
Ownership You own the vehicle once the You are essentially renting the You have the option to buy the
loan is repaid and can build vehicle and do not build equity. vehicle at a predetermined
equity. You must return it at the end of price at the end of the lease,
the term unless you purchase it. offering a "try before you buy"
period without the initial
commitment.

Upfront and
monthly • Pros: Payments end when • Pros: Generally has lower • Pros: Offers lower monthly
costs the loan is paid off, potentially upfront costs and lower monthly payments and upfront costs
lowering your long-term costs. payments because you only pay during the lease term, similar to
• Cons: Typically requires a for the car's depreciation during a standard lease.
higher down payment and the lease. • Cons: The option fee is often
higher monthly payments than • Cons: You are in a continuous non-refundable, and if you
leasing. payment cycle if you keep don't buy the car, you lose that
leasing new cars, which can be money and any "rent credits"
more expensive in the long run. toward a down payment.
There is no long-term saving
potential.

Maintenance
and repairs • Pros: You have the freedom • Pros: New cars are less likely to • Pros: You know the car's
to choose your own repair have major mechanical issues, maintenance history firsthand
shop. and the factory warranty often and can avoid the risks
• Cons: You are responsible covers most maintenance and associated with buying a used
for all maintenance and repair repairs for the entire lease term. car from a stranger.
costs, which can become • Cons: You may be charged for • Cons: While the warranty
more frequent as the car ages damage beyond "normal wear covers the lease period, you
and the warranty expires. and tear" when you return the will be responsible for all
vehicle. maintenance once you own the
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car. You also may have to pay

for excessive wear and tear if
you choose not to buy out the
lease.

Mileage and
usage • Pros: There are no mileage • Pros: None, unless you are a • Pros: Buying out a lease
caps, allowing you to drive as very low-mileage driver. allows you to avoid mileage
much as you want without • Cons: Leases typically have overage penalties if you know
penalty. strict annual mileage limits (e.g., you've gone over the limit.
• Cons: High mileage can 10,000–15,000 miles), and • Cons: You are still subject to
negatively affect the car's exceeding them results in steep mileage caps and potential
resale or trade-in value. per-mile fees at the end of the penalties during the lease
term. period if you don't buy the car.

Insurance
• Pros: May have lower • Pros: Lease payments are often • Pros: The possibility of
insurance premiums because low enough that they can offset passing the cost savings from
you can choose your the higher insurance premiums. lower monthly payments
coverage levels, potentially • Cons: Insurance premiums are through the lease period onto
opting for less than a leasing typically higher due to stricter the overall price of the vehicle
company would require once coverage requirements from the you intend to buy.
the loan is paid off. leasing company, which owns the • Cons: You face the same
• Cons: Lenders often require vehicle and wants to protect its strict, potentially more
full coverage (including GAP asset. GAP insurance is often expensive insurance
insurance) for the duration of required. requirements as a standard
the loan, which can be more lease until the buyout is
expensive than basic liability complete.
coverage.
End of term
Once paid off, you own the You can return the car and get a You can choose to either buy
car and can sell, trade, or new one, but you must pay for the car at the residual value or
keep it indefinitely with no any excess mileage or wear and return it and pay any
more payments. tear. You can also purchase the associated fees, such as for
vehicle if a buyout option exists. excessive wear and tear or
mileage.

How to decide
Your best choice depends on your priorities and situation:

 Choose to buy if:

 You drive many miles and want to avoid mileage penalties.

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 You want to build equity in your vehicle and eventually have no monthly
payments.

 You prefer to have full control over the car, including customization and
repairs.

 Choose to lease if:

 You prefer lower monthly payments and want to drive a new car with the
latest features every few years.

 You have a shorter commute and can stay within the mileage limits.

 You want the security of a warranty covering maintenance and repairs for
the duration of your term.

 Choose lease-to-buy if:

 You are unsure if you want to commit to a long-term purchase but want
to test the car before deciding.

 You know the car's history, as you've been driving it, and want to avoid
the risks of buying a different used car.

 You went over the mileage limit or damaged the car beyond normal
wear and tear and want to avoid the turn-in penalties.

Case Study

Let’s examine the scenarios of evaluating multiple car options and whether the
Leasing will make most sense under each scenario: a family sedan (Camry XSE),
a luxury sedan (BMW m440i xDrive), a luxury EV (BMW i4 M50) sedan.

In comparing the Toyota Camry Hybrid XSE, BMW m440i xDrive, and BMW i4 M50
reveals different financial paths and ownership experiences, with the Camry
generally offering a budget-friendly, low-maintenance buy option and the
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BMWs being better suited for leasing due to their luxury features and higher
ownership costs.

At a glance: Buy vs. Lease decision

Car Model Buy (Own) Pros Lease Pros Lease-to-Buy
Consideration
Toyota Camry • Lower overall cost of ownership • Low monthly payments and Can be a good option to test
Hybrid XSE long-term upfront cost hybrid technology, but buying is
• No mileage restrictions • Drive a new, efficient car every often more financially sound due
• Excellent resale value and few years to the car's reliability and low
reliability • Warranty covers maintenance depreciation.
for lease term

BMW m440i • No mileage limits, ideal for • Lower monthly payments for a Excellent for a "try-before-you-
xDrive frequent drivers or road trips premium vehicle buy" scenario, especially given
• Ownership and ability to • Drive the latest model with the high potential repair costs after
customize the vehicle factory warranty covering early, the warranty expires.
high-cost maintenance

BMW i4 M50 • Tax incentives and long-term • Significantly lower monthly Ideal for drivers unsure about
fuel savings on electricity payments than purchasing committing to a new electric
• Full ownership and • Provides a low-risk way to vehicle or its technology, as it
customization experience evolving EV allows for a buyout after the lease
• Avoids lease mileage penalties technology and range without period.
for high-mileage EV drivers long-term commitment

Evaluating along the criteria for the average consumer:

Financial and long-term value

 Camry Hybrid XSE: Buying is often the better long-term financial decision due to
its lower cost of ownership, exceptional reliability, and strong resale value.
Payments will be higher than a lease but end once the loan is paid off, allowing
you to build equity.

 BMW m440i xDrive: This vehicle has a higher purchase price and maintenance
costs. Leasing often makes more financial sense by offering lower monthly
payments for a luxury, high-performance car. Buying can be expensive,
particularly once the factory warranty expires around the third year.
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 BMW i4 M50: As a high-performance EV, the i4 has a high MSRP and potentially
steep depreciation as EV technology rapidly advances. Leasing offers lower
payments and provides an easy exit to upgrade to newer tech in a few years,
while a purchase may be more cost-effective for drivers who can take
advantage of tax credits and intend to keep the car for many years.

Maintenance and repairs

 Camry Hybrid XSE: With Toyota's renowned reliability, maintenance and repair
costs are predictably low. A purchased Camry becomes very economical after
the loan is repaid and the warranty expires, while a lease provides worry-free
driving under warranty coverage.

 BMW m440i xDrive: While a factory warranty typically covers a lease term,
owning this car means being responsible for potentially costly repairs after the
warranty ends, which often coincides with the typical three-year lease period.

 BMW i4 M50: Like the m440i, a lease covers the warranty period, avoiding
potentially high out-of-pocket costs for complex EV repairs. Buying requires
accepting the risk of expensive repairs for EV-specific components or
technology issues after the warranty expires.

Mileage, usage, and insurance

 Camry Hybrid XSE: This car is a practical choice for all drivers. Buying is ideal for
high-mileage drivers due to no mileage limits. Leasing works well for those with
average commutes who want the benefit of a fuel-efficient, new car without
long-term commitment. Insurance costs are generally near the national
average for hybrid models.

 BMW m440i xDrive: A purchase is the clear choice for drivers who love road trips
or have long commutes and don't want to worry about expensive mileage
penalties, which can be around $0.25 per mile on a lease. The average full-
coverage insurance premium is significantly higher than for the Camry, often
exceeding $3,500 per year.
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 BMW i4 M50: Drivers interested in this high-performance EV should first assess their
driving habits. Leasing is perfect for urban or suburban drivers who can stay
under low mileage caps (often as low as 7,500 miles per year for an EV lease).
However, buying is a better fit for long-distance drivers or those with "range
anxiety". Like the m440i, the i4 has substantially higher full-coverage insurance
costs, averaging over $3,800 annually.

Which option is right for you?

 Buy the Camry Hybrid XSE

if you prioritize reliability, long-term savings, and building equity, especially if you
plan to keep the car for many years and drive frequently.

 Lease the BMW m440i xDrive

if you desire the driving experience of a luxury, high-performance car with lower
monthly payments and want to avoid the potential for high maintenance costs
that occur when the warranty expires.

 Lease the BMW i4 M50

if you want to try out the latest EV technology, benefit from lower monthly costs,
and have the flexibility to switch models in a few years as the EV market evolves.
The lease-to-buy option is ideal if you are unsure about a full EV purchase
commitment.

 Choose lease-to-buy for either BMW if you're uncertain about committing to a

purchase but are strongly considering it, as it allows you to get to know the car
and its maintenance history firsthand before exercising the buyout option and
avoiding potential lease-end penalties.

Running the numbers on Costs of Ownership

To calculate the costs for the different options, the following information would
be needed:
 Expected annual mileage (for example 15K miles)
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 Evaluation Period (for example 3 years)

 Manufacturer's Suggested Retail Price (MSRP),
 loan interest rates,
 and lease terms.

Calculation methodology
The following steps and formulas can be used to determine the total cost for
each option over a 3-year period.

Step 1: Calculate the total cost for buying

The total cost of buying a car over three years includes the total loan payments,
down payment, maintenance costs, and insurance. This method assumes a 3-
year loan term for simplicity.

Total Cost (Buy)=(Monthly Payment×36) + Down Payment + Maintenance Costs +

Insurance Costs

 Monthly Payment: The payment is calculated using the loan amount,

interest rate, and term.
 Maintenance Costs: These costs for the Camry Hybrid are typically lower
than for the BMWs.
 Insurance Costs: The average annual insurance premium for each car
can be used to estimate the 3-year cost.

Step 2: Calculate the total cost for leasing

The total cost of a lease over three years includes the total monthly payments,
any upfront fees, and potential end-of-lease charges like excess mileage fees.
For a 15,000-mile annual limit, which is higher than many leases offer, the Camry
and BMWs may have different mileage overage costs. An overage would be 0
miles since the annual limit is 15,000 miles.

Total Cost (Lease) = (Monthly Payment×36) + Upfront Fees + Disposition Fee +

Excess Mileage Fees

 Monthly Payment: This is calculated based on the car's depreciation

during the lease term (MSRP minus the Residual Value) and the money
factor.
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 Upfront Fees: This includes a down payment, security deposit, and

acquisition fees.
 Excess Mileage Fees: Since the scenario assumes a 15,000-mile annual
limit, there would be no excess mileage fees.
 Disposition Fee: A fee paid at the end of the lease to cover inspection
and reconditioning.

Step 3: Calculate the total cost for lease-to-buy

The total cost for a lease-to-buy scenario includes all the costs of the lease plus
the predetermined residual value (buyout price) at the end of the term.

Total Cost (Lease-to-buy) = (Total Cost (Lease)−Disposition Fee) +Buyout Price

 Total Cost (Lease): The calculation from Step 2, but without the disposition
fee, as you do not return the vehicle.

 Buyout Price: The pre-negotiated residual value of the car at the end of
the lease.

Applying to our scenarios:

Due to the dynamic nature of car pricing, deals, and local factors, a precise
calculation for your specific situation is not possible without real-time,
personalized data.

However, using recent national averages and public offers, a comparative

estimate can be provided for the costs of buying, leasing, and lease-to-buy for
each vehicle over a three-year period with 15,000 annual miles.

The following calculations are based on the latest available information and
should be used as a guideline.

Toyota Camry Hybrid XSE

 MSRP: Approximately $34,600.

 3-Year Maintenance: Around $1,547.
 3-Year Insurance: An average of $2,810 per year, totaling approximately
$8,430 over three years for full coverage.
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Buy (3-Year Loan)

Assuming a 3-year loan with a down payment, your total cost will include the
purchase price, interest, maintenance, and insurance.

 Estimated Total Cost: Varies widely, but expect a total cost of ownership
over 3 years to be in the range of $42,000 to $48,000, including financing,
taxes, and fees. Buying is generally the most cost-effective long-term
option due to the car's high reliability and resale value.

Lease (36 Months, 15,000 miles/year)

 Monthly Payment: Approximately $424/month.

 Due at Signing: Varies, but a typical offer is $2,999.
 Estimated Total Cost:
(424×36) + 2,999 + Fees = 15,264 + 2,999 + Fees

Total cost, including insurance, is approximately $26,693 plus fees. There

are no excess mileage fees since the annual limit is 15,000 miles.

Lease-to-Buy

 The total cost would be the sum of the lease payments and fees, plus the
pre-negotiated buyout price at the end of the term. The buyout price is
typically based on the residual value, which for a Camry is strong. This
option allows you to avoid mileage penalties if you decide to buy the car
at the end of the lease.

BMW m440i xDrive

 MSRP: Approximately $68,225.

 3-Year Maintenance: Around $705 for the third year, with the first two
years often covered by a maintenance plan.
 3-Year Insurance: An average of $3,561 per year, totaling approximately
$10,683 for full coverage.

Buy (3-Year Loan)

 Estimated Total Cost: A purchase price this high results in a high total cost.
The high cost of ownership, including financing, maintenance, and
insurance, would likely put the 3-year total in the range of $85,000 to
$95,000.
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Lease (36 Months, 15,000 miles/year)

 Monthly Payment: Around $877/month.

 Due at Signing: Varies, but a typical offer is $6,589.
 Estimated Total Cost:
(877×36) + 6,589 + Fees = 31,572 + 6,589 + Fees

Total cost, including insurance, is approximately $48,844 plus fees.

Lease-to-Buy

 The total cost would be the lease payments and fees, plus the residual
value. This option is beneficial if you want to experience the vehicle
without the risk of long-term ownership and high repair costs.

BMW i4 M50

 MSRP: Approximately $70,700.

 3-Year Maintenance: Around $1,280 over three years, with the first three
years often covered by BMW Ultimate Care.
 3-Year Insurance: An average of $3,808 per year, totaling approximately
$11,424 for full coverage.

Buy (3-Year Loan)

 Estimated Total Cost: Similar to the m440i, the high purchase price and
insurance costs make this the most expensive option. The total cost of
ownership over 3 years is likely in the range of $90,000 to $100,000.

Lease (36 Months, 15,000 miles/year)

 Monthly Payment: Around $559/month.

 Due at Signing: A typical offer is $6,389.
 Estimated Total Cost:
(559×36) + 6,389 + Fees = 20,124 + 6,389 + Fees

Total cost, including insurance, is approximately $37,937 plus fees.

Lease-to-Buy

 This is a popular option for EVs, allowing you to experience the technology
and performance without the long-term risk of depreciation. The total cost
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would be the lease payments and fees plus the buyout price at the end
of the term.

Car ownership cost

Here is a grid summarizing the cost comparisons for the Toyota Camry Hybrid
XSE, BMW m440i xDrive, and BMW i4 M50 for a 3-year period with 15,000 annual
miles, based on recent national averages and public offers.

Car ownership cost comparison (3-year / 45,000-mile estimate)

Factor Toyota Camry BMW m440i xDrive BMW i4 M50
Hybrid XSE
MSRP Approx. $34,600 Approx. $68,225 Approx. $70,700
Buy $42,000–$48,000 $85,000–$95,000 $90,000–$100,000
(Ownership) (Includes financing, (Includes financing, (Includes financing, maintenance,
Total Cost maintenance, insurance, maintenance, insurance, and insurance, and fees)
and fees) fees)
Lease (36- $26,693 + fees $48,844 + fees $37,937 + fees
mo/15k-mi) (Approx. $424/mo + (Approx. $877/mo + $6,589 due (Approx. $559/mo + $6,389 due at
Total Cost $2,999 due at signing) at signing) signing)
Note: Includes estimated Note: Includes estimated Note: Includes estimated insurance
insurance and insurance and maintenance. and maintenance.
maintenance.

Maintenance Approx. $1,547 Approx. $705 for year 3 Approx. $1,280

(3-Year Est.) (Known for low and (First 2 years often covered by (Often covered by BMW's Ultimate
predictable costs) warranty, but future costs are Care for first 3 years, but complex
high) repairs can be expensive later)

Insurance (3- Approx. $8,430 Approx. $10,683 Approx. $11,424

Year Est.) (Generally near the (Significantly higher than the (Higher than the m440i on average
national average for a Camry due to luxury and due to high-performance EV
hybrid sedan) performance) components)

Mileage and • Buy: No limits; ideal for • Buy: No limits; best for • Buy: No limits; avoids EV lease
Usage high-mileage drivers. frequent driving to avoid mileage anxiety.
• Lease: Well within penalties. • Lease: Penalty of approx. $0.25/mile
standard 15k-mile limits; • Lease: Penalties of approx. applies for overage.
no penalty fees. $0.25/mile apply for mileage
overage.

Best Option Buy is generally the best Lease offers lower monthly Lease-to-buy is ideal for testing the
Summary financial decision due to its payments for a luxury vehicle latest EV technology without long-
low running costs, high and avoids high repair costs that term commitment, offering lower
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reliability, and strong may occur when the warranty monthly payments and the option to
resale value, especially for expires. Lease-to-buy is a great avoid penalties by buying out the
long-term ownership. option to try before you commit car. Buying is better for drivers who
to owning. want to keep the car for many years
and benefit from potential EV credits.

DISCLAIMER: ALL FINANCIAL FIGURES ARE ESTIMATES BASED ON AVAILABLE DATA AND ASSUMED
CONDITIONS. ACTUAL COSTS WILL VARY SIGNIFICANTLY BASED ON YOUR CREDIT SCORE, LOCATION,

SPECIFIC DEALER OFFERS, INSURANCE PROVIDER, DRIVING HISTORY, AND MARKET FLUCTUATIONS.