I really like the new BMW 228i but it is out of my price range. It would seem that a CPO 128i might be a good alternative. I have a budget of about $25,ooo and would be willing to use 5 grand for a down payment. However, I don't drive that much and I'm thinking that leasing might be an option. What should I do?

First let's examine some numbers. If you were to finance a $25,000 128 and put 5 thousand down, you would be looking at a payment of around 360/mo for 60 months (assumed 3% interest rate). Currently BMW is running a lease offer for a "well equipped" 228i (MSRP of 37,075) for $309/mo for 33 months with about $3800 down.

Those monthly payment numbers look very similar, but there are a few things to keep in mind. First, none of those figures, the finance nor the lease, include tax, title and tag fees as these will vary from state to state. Also, the terms of those payments are different, you would be financing for 5 years at $360/mo, but leasing for about 3 years at $309/mo. If we were to equalize those terms at shortened your finance to 36 months your payment would be about $582/mo. and I'm guessing a car payment of almost $600 is not realistic. So for the sake of this scenario we will keep the finance term at 60 months.

In addition to the numbers here are a few other things to consider. First and foremost, when you lease you retain no ownership of the vehicle. You are essentially "borrowing" the car for 3 years, but are also only paying for the part that you are using. This allows you to drive a $37,000 car for that amount of time, whereas if you were to finance that 37 grand with 5 grand down your payments would be about $930/mo for 36 months or $575/mo for 60 months, neither of which are realistic given your budget.

At the end of the lease you basically have two choices, turn the car in or buy it out. You will have no significant trade value, but you might have acquired some that you could apply towards your next purchase/lease. During the course of your lease you will be driving a new car, with full warranty protection and because it is a BMW all of your preventative maintenance is covered for 4 years. Also, you will have to be very careful to stay within the mileage limitations of the lease or face a penalties when the time comes to return the car.

Luxury car purchases are out of reach for most people. That is why so many folks either lease or…

On the flip-side, if you choose to purchase your CPO BMW 128 you do not have to worry about mileage nor are you "stuck" with the car for any specific amount of time. If after a year or two you decide you want something else, you can easily sell your BMW Getting out of a lease early, while possible, can be difficult and expensive. Also, once you have completed your loan term you retain full ownership of the vehicle to either drive without payments or trade in for another vehicle.

If the current retail value of a 12 CPO 128 with 40k miles is about 25k and you pay it off in 5 years, the estimated value of that car in 2019 (assuming the then total mileage is about 100k) would be about 8-12 thousand, maybe more or less depending on condition. Having at least 8 thousand as a downpayment for another car is a good place to be. Of course the major thing to consider is that during your ownership of that 128, your warranty coverage will only apply for the first two years of the loan. After that, if anything needs repairs it will be on you and German cars are not cheap to fix. I would argue that the driving experience is worth the extra expense but that is something for you to decide.

At the end of the day it comes down to this, do you want to "borrow" a brand new car and not have to worry about repairs and maintenance but be restricted with your mileage? Or...would you rather own a used car to do as you see fit, but roll the dice on maintenance and repairs?

(Photo Credit: Raphael Orlove)