Man Maths - Does this make sense
Discussion
Ok I was going to purchase a AUC BMW E60 M5 at roughly £20k
However, I thought I'd compare it to leasing a new F10 M5. And it's looking like a close call.
1) E60. Even if I pay with my own cash outright the opportunity cost of the £20k is at least £2k. Perhaps the car will be worth £10-12k in 3 years if I'm lucky given the rate they're depreciating since the F10 was released. So that's £333 per month it will cost me if I sell it for £10k. It would cost another £50 per month on top if you debt financed this instead.
2) F10. To lease costs £685 inc on 6+36. So equivalent of £780 over 3 years.
On the face of it a difference of £450 a month. But then there's the warranty on the used car at around £100 per month and the difference in fuel efficiency would probably be another £100-150 per month over 12,000 miles pa. Then there's servicing and oil which will cost more on the E60. I think it drinks £30 of oil a month and maintenance may cost £100 more per month
So it's getting close and one car is probably 7 years newer.
I imagine that road tax, insurance, brakes and tyres will be very similar.
Good or very bad man maths.
However, I thought I'd compare it to leasing a new F10 M5. And it's looking like a close call.
1) E60. Even if I pay with my own cash outright the opportunity cost of the £20k is at least £2k. Perhaps the car will be worth £10-12k in 3 years if I'm lucky given the rate they're depreciating since the F10 was released. So that's £333 per month it will cost me if I sell it for £10k. It would cost another £50 per month on top if you debt financed this instead.
2) F10. To lease costs £685 inc on 6+36. So equivalent of £780 over 3 years.
On the face of it a difference of £450 a month. But then there's the warranty on the used car at around £100 per month and the difference in fuel efficiency would probably be another £100-150 per month over 12,000 miles pa. Then there's servicing and oil which will cost more on the E60. I think it drinks £30 of oil a month and maintenance may cost £100 more per month
So it's getting close and one car is probably 7 years newer.
I imagine that road tax, insurance, brakes and tyres will be very similar.
Good or very bad man maths.
@s38b36
Yes, at a minimum. There are other ways that £20,000 could be used which probably would return a higher return and therefore would raise the opportunity cost of the capital at relatively low risk. For example, London property "owners" are probably better off paying down their mortgage down by that equivalent amount where allowed as house prices continue to rise and interest is avoided from the mortgage.
Yes, at a minimum. There are other ways that £20,000 could be used which probably would return a higher return and therefore would raise the opportunity cost of the capital at relatively low risk. For example, London property "owners" are probably better off paying down their mortgage down by that equivalent amount where allowed as house prices continue to rise and interest is avoided from the mortgage.
Top man maths. I think the F10 makes a lot of sense on that basis.
You don't say how old the E60 is but there will definitely be some bigger wear and tear bills. I reckon you can add in a couple of grand for that.
Apart from the V10 I think the F10 is a far superior car in all other aspects.
You don't say how old the E60 is but there will definitely be some bigger wear and tear bills. I reckon you can add in a couple of grand for that.
Apart from the V10 I think the F10 is a far superior car in all other aspects.
Boogsie said:
Get the warranty thrown in free to add a spanner to your man maths 
A year is included. It's fairly common knowledge that two years is usually obtainable free of charge if you haggle.Buy one for 20k just serviced with two years warranty, service after year one and trade in after year two or extend the warranty........................
£685 x 24 = £16.5k + inital deposit is £4k. So £20k+ in total (value of an Exx)
If you buy an Exx well i suspect you may work out the value of the car after two years (£13-£15k) better off minus a bit of petrol/wear and tear plus you will only be tied to the car for 24 months (at which point you will own it,extend the warranty,etc if required.
I wasn't convinced reading the first few lines of the proposal...but the numbers do make sense....
There's always better ways things to do with £20K than to spend it on a car...after all a £500 banner will get you work and back just as well as a M5,but thats not missing point, go for it
There's always better ways things to do with £20K than to spend it on a car...after all a £500 banner will get you work and back just as well as a M5,but thats not missing point, go for it
I knew you got a year's free warranty but presumed after that I'd have to pay and would need to purchase for two years and with over 60k on the clock presume it'd be close to £1800 pa.
Didn't know you could get a two year warranty for free. I guess a newly serviced car with nearly new brakes and tyres would be a cheaper prospect.
Didn't know you could get a two year warranty for free. I guess a newly serviced car with nearly new brakes and tyres would be a cheaper prospect.
According to your first post you are allowing that the E60 could be sold for £10k after three years, so you would recover that much capital.
You don't seem to be allowing that if you lease the F10 you will not own it and you will not get back any capital after three years.
(maybe there's something in there but I don't see it)
You don't seem to be allowing that if you lease the F10 you will not own it and you will not get back any capital after three years.
(maybe there's something in there but I don't see it)
The cost of running the E60 is purchase cost adjusted for opportunity cost minus what you recover from selling it.
While leasing it is all lost.
So buying the E60 only includes the lost money while leasing the F10 it's all lost. So I'm comparing like for like. Running each car for 3 years and having no car at the end.
While leasing it is all lost.
So buying the E60 only includes the lost money while leasing the F10 it's all lost. So I'm comparing like for like. Running each car for 3 years and having no car at the end.
Here's some figures I've been mulling over:
Assume E60 does 16mpg and F10 does 19mpg
I've nearly convinced myself that the E60 is a bargain
Assume E60 does 16mpg and F10 does 19mpg
Fuel cost at 145p/l, E60=£15000, F10=£12500
Warranty(1st yearinc)E60=£2500, F10=£0
Cash Paid E60=£20000, F10=£28000
Asset value E60=£10000, F10=£0
Total over 3 years E60=£27500, F10=£40500
Per month E60=£765, F10=£1125
As you already have £20000, the extra cost over 3 years will only be
Total E60=£7500, F10=£20500
Monthly E60=£210, F10=£570
I've nearly convinced myself that the E60 is a bargain
Feel free to have a play with the man maths spreadsheet I created to do a similar comparison between a new M135 and a second hand car about half it's price
http://locostfireblade.co.uk/Cars/ManMaths_CarCost...
No guarantees of it's accuracy so let me know if you find any glaring issues!
http://locostfireblade.co.uk/Cars/ManMaths_CarCost...
No guarantees of it's accuracy so let me know if you find any glaring issues!
MadProfessor said:
So buying the E60 only includes the lost money while leasing the F10 it's all lost. So I'm comparing like for like. Running each car for 3 years and having no car at the end.
I think I understand you correctly and if I do I agree, but my point is that the E60 leaves you £10,000 better off after three years.@Locknut
In both cases I have £22k after three years. In the E60 case I've been repaying myself to build back up my capital (plus selling the car) and in the F10 I haven't touched my capital.
The only difference is that if the car is worth more than £10k or if the servicing costs are much lower than modelled then the E60 seems to come out much better. The E60 also comes with the option to keep it and not sell it and that option must have some value.
That being said I'm still comparing a 7 year old previous generation M5 with a brand new one.
In both cases I have £22k after three years. In the E60 case I've been repaying myself to build back up my capital (plus selling the car) and in the F10 I haven't touched my capital.
The only difference is that if the car is worth more than £10k or if the servicing costs are much lower than modelled then the E60 seems to come out much better. The E60 also comes with the option to keep it and not sell it and that option must have some value.
That being said I'm still comparing a 7 year old previous generation M5 with a brand new one.
MadProfessor said:
@Locknut
In both cases I have £22k after three years. In the E60 case I've been repaying myself to build back up my capital (plus selling the car) and in the F10 I haven't touched my capital.
The only difference is that if the car is worth more than £10k or if the servicing costs are much lower than modelled then the E60 seems to come out much better. The E60 also comes with the option to keep it and not sell it and that option must have some value.
That being said I'm still comparing a 7 year old previous generation M5 with a brand new one.
pretty much spot on as far as i can tell................ the E60 is a bargain In both cases I have £22k after three years. In the E60 case I've been repaying myself to build back up my capital (plus selling the car) and in the F10 I haven't touched my capital.
The only difference is that if the car is worth more than £10k or if the servicing costs are much lower than modelled then the E60 seems to come out much better. The E60 also comes with the option to keep it and not sell it and that option must have some value.
That being said I'm still comparing a 7 year old previous generation M5 with a brand new one.
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