OEM accessories and residual/cap cost in a lease

[skd]

Jon,
For an OEM accessory like the CD changer how does
the math work in a lease? Is the cost just added to the
cap cost? Or is the residual also affected:

for example 40000 msrp 60% residual will give 24000 residual

If a cd changer is added for 500 will the residual be calculated
on 40500 or not?

Once again I would to thank you for your honest and quick responses :thumbup:

[Jon S.]

Originally posted by skd
Jon,
For an OEM accessory like the CD changer how does
the math work in a lease? Is the cost just added to the
cap cost? Or is the residual also affected:

for example 40000 msrp 60% residual will give 24000 residual

If a cd changer is added for 500 will the residual be calculated
on 40500 or not?

Once again I would to thank you for your honest and quick responses :thumbup:


Good stuff!

There is a 2 part answer to this question.

1) Residualization: depreciating the accessory (e.g.
CD changer) within the lease; residualizable options.
With BMWFS, you can add $400 to the vehicle's MSRP
for residual calculation purposes... There are very few
residualizable options with BMWFS. Another example
would a BMW cellular phone - $200 add to MSRP.

Regarding your question, the residual would be calculated
from a MSRP of $40,400.00 ($40K on the sticker + $400
for the CD changer).

2) Advance: how much will the lessor lend
for a particular car and option. BMWFS will advance
only MSRP for vehciles and dealer-installed options.
In other words, they will fund a lease whose cap cost is
over MSRP, without any cap cost reduction, provided that
the "over MSRP" is supported with a repair order
showing that the accessory was installed.

An interesting side note on advance - the dealers who
charge over MSRP for their cars (e.g. M3's), must either
collect cap reduction to cover the amount over MSRP,
or use a different lease source - other than BMWFS.
Chase, for instance, will advance 110% of MSRP...

[DrBimmer]

Um... let me see if I can translate that into English for my own behalf... ;)

You can add up to 400 to the MSRP for accessories. Is that 200 for the phone in addition to the 400, or seperate? Also, if the car is sold below MSRP, can you still add for accessories until you get to 400 above MSRP?

I take it whatever is in addition to the 400 must be collected from a cap reduction?

I know I probably just said everything over again, but I want to be sure that I got what you said.

[Jon S.]

Sorry about that...

For "residualization" purposes, you can add $400 for a CD
changer, and an additional $200 for the BMW cell phone.
That $200 is really a joke considering the true value
cost of the CPT 8000... When I refer to "residualization"
I am saying that if the true MSRP is $40K, you can add
the extra $400, for a total "effective" MSRP of $40,400.00
Multiply that times the residual percentage (say 60%),
and you have a residual value of $24,240.00. The CD has
beed "residualized"... Otherwise, the residual would have
been $40K times 60% which is $24,000.00. Your residual
is a whopping $240 higher, which means a lower lease
payment (less depreciation). The only downside is that
the CD changer must now remain with the vehicle if
it is given back as a "lease return" (at maturity).

Does this make sense?

The gist of residualization is that it makes the inclusion
of accessories less expensive in your lease payment.

:thumbup:

I shouldn't have confused or convoluted this discussion by bringing up advance, and its' relationship to MSRP.

:(