As many of you know, I’ve had a car payment of $305/Month for the past 2 years. That frowned upon payment was a result of a killer lease deal I received on an amazing little car.
During these past 2 years, I’ve been driving around in a new 2015 BMW i3 electric car for a ridiculously low cost. Especially given the amount of technology and innovation bundled into that vehicle.
Unfortunately my lease came to an end this month, and I had to figure out what to do next.
Before I get to what I decided to do, let me recap the past 2 years…
The Lease of a Lifetime
The car I’ve been driving was BMW’s top of the line i3 Electric Sedan. The model I leased was a fully electric model with a range of about 70-80 miles on a full charge. It also came with a small 2 gallon backup engine called a Range Extender which adds an additional 60-70 miles of range.
The car looks something like this…
It came with every option available, including the technology package, parking assist and premium sound system. If you were to spec one out today using BMW’s website, here’s what the totals would look like:
I pulled the above from a 2018 build which has a higher battery capacity, so mine would have been about $2,000 less at the time. The car basically would have cost about $55,000 had I purchased it new.
With no money down and a 3% interest rate, a 5 year car payment would have been just shy of $1,000/Month. A lease payment would have been about $800/Month.
I’ve been operating my household for over 10 years with no car payment. This has helped me develop a healthy aversion to any type of monthly payment commitment.
How did I get suckered into a car payment?
They offered me the car for only $285/Month on a 2 year lease, with no money down whatsoever.
When I returned the car this month, the salesman revealed that they had published a misprint during the week I was window shopping. That monthly payment was supposed to include a large downpayment.
Instead of retracting the offer, they honored it. Which meant I basically got lucky, and was able to take advantage of a loophole. Regardless of how I got there, I was able to drive a fantastic new car for 2 years for much less than it was worth.
The payment itself is not the point, it’s the value I got during those years in exchange for the low cost.
Total Lease Cost Breakdown
Here’s what I spent in total during that period:
Base Lease Cost: $285/Month X 24 = $6,840
Additional Miles: $20/Month X 24 = $480 / This was a mistake on my part
Lease Return Fee: $350
Electricity Cost: $22/Month X 24 = $528
Maintenance Cost: $0
Fuel Savings: $115/Month X 24 = ($2,760)
Total Cost: $5,438 over 2 years or $227/Month effective cost
If we look at the transportation cost table I shared in my prior post, that’s the equivalent of a $35,000 car over a 10-year period.
That’s higher than what I normally spend on cars, but fairly reasonable for a car of this caliber.
Reasons why Electric Cars are Awesome
Beyond just the hard numbers, I gained some valuable experience during my time with the car.
This was my first electric car, and I was able to determine if this mode of transportation was right for my family. This car segment is still very niche, with electric cars accounting for less than 1% of total car sales globally.
That trend is changing with Bloomberg predicting that electric cars will displace 35% of the normal car population by 2040.
That makes me an early adaptor of sorts, and as far as I’m concerned, the day when electric cars outnumber traditional cars is long overdue.
Electric cars are a joy to drive. As I look back on the past two years, here are the things I learned to appreciate:
1. Noise Pollution – Or lack thereof. Everything is much quieter in an electric car. It’s a bit eerie at first, but once you get used to it, it’s hard not to appreciate. Imagine sitting outside enjoying a meal, and not having to wince every time a loud car drove by.
2. Local Pollution – Every time I drove the car, I wondered what it would be like if I was surrounded by all electric cars on the roadways. I would be able to roll down my window, breathe in fresh air, and enjoy the surroundings in a much more natural way. Of course pedestrians would benefit just as much.
I recognize that electric cars still need to be charged, and that the source of the energy to do so is still dirty, but local pollution is without a doubt reduced.
3. Vibration Free – All the typical vibration of an internal combustion engine is absent when driving an electric car. This is most noticeable to me now when I get behind the wheel of a normal car. It’s amazing how clunky a non-electric car feels.
4. Skipping Gas Stations – This was by far the most enjoyable experience. I haven’t been to a gas station in two years. I’ve been able to conveniently “fill up” at home by just plugging in overnight. This convenience has been wonderful, and the novelty still hasn’t worn off.
5. Maintenance – The number of moving parts in an electric car compared to a normal car is shockingly low. To the tune of 10-100X less. This means less costs associated with maintenance and longer lifetimes.
6. Connectivity – The car comes with an application which allows such conveniences as remote starting, pre-heating and pre-cooling the car, locking and unlocking, as well as live status of condition. Many things which are enabled by the fact the car is electric.
7. Performance – The car is just fun to drive. Speed is instant, weight distribution is balanced, and the center of gravity is low. All things that make driving a car enjoyable. It’s also loaded with the latest in safety innovations, including a frame made entirely out of carbon fiber.
All these reasons are why I believe electric cars will become mainstream in less time than most people expect. Once you experience an electric car, it’s difficult to switch back to an Internal Combustion Engine (ICE) car.
Downsides to an Electric Car
Since this technology is still fairly new, there are a few headwinds keeping electric cars from going mainstream.
1. Range – The most limiting factor today is range. Until these cars can get at least 300 miles on a full charge under any conditions, they will be hard to adopt. Thankfully, battery technology is improving at a blistering pace. I’m certain that the range will be drastically improved in less than 5 years.
2. Infrastructure – Charging stations are still not very prevalent. Although Tesla has done a good job building a decent charging network around the world, it’s still lacking for other brands. This will improve with the number of cars hitting the street over the coming years.
3. Cost – Most of the electric cars on the market today are fairly expensive. As great as a Tesla is, it’s still a trophy car for most people. Electric cars will need to get under $25K for them to be accessible to the masses. As much as I loved my leased BMW i3, I would never have paid $55K for the pleasure to drive it.
Also related to cost is depreciation, which is a significant issue with electric cars at this point in time. Something I’ll cover in more detail in the next section.
All of the above downsides will be addressed in the next few years. Car companies are pouring immense amounts of development dollars to overcome the challenges. As a result, I’m convinced my daughter’s first car will be electric.
I’m Going All Electric
As I’ve already demonstrated, I’m a sucker for a good deal. More specifically, I love getting the maximum value for my money.
After my experience with the leased BMW i3, I knew that I needed to add an electric car to our household permanently. Based on our driving habits, the combination of an electric car and a normal car was ideal for our family. In fact I decided we could manage with a fully electric model, as opposed to a hybrid or the range extender model.
It turns out the depreciation on the BMW is shocking. When I returned my car, the dealership wanted $32K to buy it outright. I had no interest in buying it at that price point. Because I knew I could get one for HALF that price on the used market!
I searched for a used 2015 BMW i3 online, one with all the options, except the range extender.
I finally found one listed for $21K with only 17k miles, and with every option I wanted. It was in very good condition, and the right color. Here’s a picture of the purchased car (forefront) parked next to the leased one…
After some negotiating, I was able to purchase the car for only $16,100 + TTL. The car still has almost 2 years of warranty left on it, and should easily last 5 years with no issues.
The original retail price when it was new would have been just under $50K. I knew the car would depreciate, which is why I leased originally, but didn’t think it would be that dramatic.
With technology changing so quickly, prices for these cars can fluctuate quite a bit. Especially with no historical precedent.
The Numbers are in my Favor
If I keep the car for 10 years, as has been my habit in the past, the numbers look quite favorable. Especially if I compare to the total cost of ownership of an equivalent ICE car.
Purchase Price: $16,100
Electricity Cost: $22/Month
Maintenance Cost: $300/year average
Fuel Savings: $115/Month
Trade-in Value: 75%/56%/40%/25%/0% @ 2/4/6/8/10 Years Respectively
I should mention that the car battery is covered under warranty by BMW for 10 years. It’s likely the car may be close to worthless at the end of the 10 year period given how quickly technology will change. This is why I assume a $0 total at resale after 10 years.
My Total Cost of Ownership, which factors in the above assumptions starts looking pretty good. Even compared to what I thought was a fantastic effective monthly lease cost of $227/Month.
The longer I keep it of course, the better off I am. Seems like 8 years is the optimal length of time if my assumptions on resale and maintenance are correct.
If I keep it that long, it only costs me $69/Month to own compared to an ICE vehicle.
I’m even hoping it will last beyond the 8 years trouble free, since it could make a great little starter car for little Max.
It’s hard to beat that kind of math for what I’m getting in return. In fact, this could very well be the nicest AND cheapest car I’ve ever owned.
All it would take is a $10K investment in crowdfunding, and I could offset the costs entirely.
This is yet another great example of curbing lifestyle inflation. I can easily afford a much more expensive car, but I’m not willing to compromise my financial freedom to satisfy short term gratification.
In this case, I didn’t have to compromise. I’m able to satisfy both my transportation itch and my independence goals concurrently.
If you’ve ever considered an electric car, and your lifestyle allows it (i.e. commute, personal needs, etc…), you should seriously consider looking at the BMW i3. The used market is currently full of models coming off lease at very attractive values.
Feel free to send me a message if you want any feedback. I’ve learned quite a bit about this car and electric cars in general over the past two years.
Readers, would you ever consider driving an electric car? Have you ever driven one before? Do you think the numbers I shared make sense? Do you think the future of driving is electric? Share you thoughts and comments below!