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New to leasing? Tips and Facts here

92K views 92 replies 59 participants last post by  zibawala 
#1 · (Edited)
I recently placed an order for my new 330i, which I will be leasing. I did a lot research to try and get the best deal possible. Unfortunately much of the information I needed was scattered among many threads, so I put together what I learned here, hoping that it would help those of you who are new to leasing. I welcome any additions, suggestions or criticisms of my findings.

I included what factors to look at before entering negotiations and what I feel are the least important variable to the lease equation and the ones I feel are the most important. I also included some notes down at the bottom that you should keep in mind.

Before Negotiations Begin
What Car This may sound like common sense but you should know what car you are talking about. Some of the figures explained below vary depending on what car you want. Even though they are both part of the 3-series the 325 and 330 do not use the same Money Factor or Residual Value.

Lease Terms Right after figuring out what car you want you should figure out what lease terms you want. Are you going to lease for 24, 36 or 48 months? Will you need 12,000 miles a year or 15,000? Your answers to these questions will also affect the Money Factor and Residual Value.

Least Important Factors
MSRP Many people place a lot of importance on this number but it's not as important as you may think. Negotiations should never start here. You should however know what the MSRP of your car is, as it will factor into the lease formula. Also note that MSRP should also include the Destination Charge, currently $695

MACO This is an advertising fee that all dealers charge. It ranges from $200 - $400 dollars. There is usually very little negotiation with this number

Residual Value This will represent how much your car will be worth when the lease expires. Typically this number is represented as a percentage. It varies depending on what car you get and what lease term you are looking at. This number is basically set for a given car and lease term combination, and there is no room for negotiating here, but make sure to check that the dealer is giving you the correct percentage, if they for whatever reason will not, don't bother dealing with them, look for someone else. If this number is represented as a dollar amount on your lease it is calculated by multiply the MSRP of the car by the Residual Value Percentage.

Most Important Factors
Money Factor This is equivalent to the interest rate in a traditional loan. Make sure you know the Money Factor your dealer is giving you. There is a fair amount of negotiation that can be done with this number. Unlike traditional financing there is a minimum a dealer can offer you called the "Buy Rate". Please note that the Buy Rate is set for a given car and lease term combination, but what you can negotiate is how much above that Buy Rate they will charge you. The maximum they can charge you is set at 0.0004 over the Buy Rate. Make the Buy Rate your target and try to get as close to it as you can.

Invoice Price This is one of the most important numbers of the whole equation. Know the invoice price of the car you want. All negotiations should start from this number. Currently negotiating $1,000 over invoice (Dealer Markup) is a good deal, any thing under that just makes the deal that much sweeter. Also note that Invoice Price should also include the Destination Charge, currently $695.

Down payment This is an amount that you will give to the dealer to reduce the Cap Cost of the car. A Down Payment is not required but will reduce your monthly payment.

Cap Cost This is the negotiated price of the car. It is basically the Invoice Price plus Dealer Markup, MACO and any fees (see note 1) and less a Down Payment. There really isn't any negotiation that is done here but you should make sure to check this amount so that no unknown charges will make their way into the deal.

Inception Fees This is a fee charged by the dealer for paperwork, securing financing and the like. This number is often overlooked but there is room for negotiation here too. As with the Money Factor there is a minimum ($625) and a maximum ($825) that a dealer can charge you.

Security Deposit This amount is determined by your monthly payment, it is basically your monthly payment increased to the next higher $50 increment. (Example: if your monthly payment including tax is $524, then your security deposit will be $550). Security deposits are typically only imposed on new BMW customers, returning customers should not be charged this fee. Also note that your security deposit is refundable and will be refunded to you when the lease ends.

Due at Signing This is the amount you will have to give the dealer when all the paperwork is signed and are ready to take possession of the car. This can include various amounts depending on how you structure your lease. Amounts that can be included are first month's payment, down payment, license and registration, inception fees, security deposit and taxes. The ones I mentioned are the pricier items that can be included. There could be others, but they are typically small amounts. Question anything over $50.

A few additional notes
Note 1: Make sure you know when you will be paying the various fees you will be charged. With some fees you can pay them up front or you can roll them into the lease. If you roll them into the lease they will increase the cap cost thereby increasing your monthly payment. The advantage to rolling then into the lease is that you will have to pay less at the start of the lease (Due at Signing). Some fees that you can roll into the lease are inception fees and license and registration.

Note 2: Don't forget Sales Taxes. These will very depending on where you lease your car. Make sure to get your quote with sales taxes already included on your monthly payment amount or your may be in for a surprise when you go to sign the paperwork.

Note 3: A down payment is not required and most people would advise against giving one for a leased car. The logic behind this is that if you get into an accident and the car is totaled you will loose any down payment you have given. If you have extra money lying around and would like to lower you monthly payment, a better option would be to take advantage of the Multiple Security Deposit program described below.

Note 4: BMW's Multiple Security Deposit program allows you to give up to 7 extra security deposits for your car. These will not be used to lower the cap cost, but instead for every additional security deposit you give, your money factor will be dropped by 0.00007, thereby lowering your monthly payment. These security deposits are also refunded to you at the end of the lease.

Note 5: Remember to get your floor mats and a full tank of gas. Some dealers will try to charge an additional fee for these. Try to negotiate for them upfront, don't wait until you are about to leave the dealer to ask for them.

Note 6: If you would like to save even more money on your lease and have the time, try the European Delivery program offered by BMW. I don't know all the details about this program so I won,t go into it, but you can find out more about it on the BMW website.

Note 7: Some of the necessary figures like Invoice Prices, MRSP, Money Factors and Residuals can be found at the top of the Ask A Dealer forum of this great site. They are reffered to on this site as Sticky's.

I hope some of you find this useful.
 
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#27 ·
I did a little more investigating, and here's (hopefully) the definitive answer on taxation in the 17th state.

Ohio taxes are computed on the sum or all lease payments, and are payable upon lease inception.

It is possible to roll the cost of those taxes into the lease, but this does not change the fact that the State of Ohio gets paid up front. Therefore, when you choose this option, you are in essence financing the taxes, and will pay interest on this amount as a result.

Anecdotally, it appears there may be a problem if you move to another state during you lease, as you could be subject to double taxation, as the new state will collect sales taxes on payments, after having already paid up front to Ohio.
 
#28 ·
Do you know how the payoff amount is calculated on a lease if I want to pay off the lease early and buy the car?
 
#29 ·
I Love BMW's said:
Do you know how the payoff amount is calculated on a lease if I want to pay off the lease early and buy the car?
Approximately it is the price of the car ( not MSRP ) minus the number of payments made times the monthly depreciation minus the security deposits ( if any ).

It is available on BMW owners circle exactly if you used BMWFS.:)
 
#32 ·
I have a question about damage to a leased car..

My mother leased an x5 and a chain hit the car on the highway and went up over the hood and roof. Damage is estimated at like 3000. Can we take it some place to get it fixed, or do we have to take it to BMW and have it fixed through them?
 
#34 ·
Leasing

While I think it's important to be aware and knowledgeable of all the various factors (mf, residual, etc...) to determine what you should offer the dealer, in the end doesn't it come down to the bottom line?

Bottom Line = Money down + (# of payments x Amount) + any costs at end of lease?

I'm not a fan of Money Down...so if you negotiate a monthly price x # of payments do you really need to negotiate the variables? Just figure out what "Bottom Line" # is a good deal to you and offer that to the dealer...let them figure out where they want to put their profit....maybe they give you a great Cap Cost and a high MF, or a low MF and a high cap cost....make sense??? (assuming you don't plan on buying the vehicle after the lease ends)

Cheers.
 
#35 ·
While I think it's important to be aware and knowledgeable of all the various factors (mf, residual, etc...) to determine what you should offer the dealer, in the end doesn't it come down to the bottom line?

Bottom Line = Money down + (# of payments x Amount) + any costs at end of lease?

I'm not a fan of Money Down...so if you negotiate a monthly price x # of payments do you really need to negotiate the variables? Just figure out what "Bottom Line" # is a good deal to you and offer that to the dealer...let them figure out where they want to put their profit....maybe they give you a great Cap Cost and a high MF, or a low MF and a high cap cost....make sense??? (assuming you don't plan on buying the vehicle after the lease ends)

Cheers.
Your offer makes sense as long as you know the numbers if after you run the numbers with acceptable levels of dealer markup (if any) in MF and acquistion fee combined with the amount over invoice you are willing ot accept. Once you find that number for say

1k over invoice
825 acquistion fee
buy rate

then offer them that for a monthly payment is OK, however be on the lookout for other extras.

I always build in an option for the dealer and let them select.

1k over invoice, 625 acquistion, buy rate
800 over invoice, 825 acquistion, buy rate
800 over invoice, 625 acquistion, .0002 mf mark up
600 over invoice, 825 acquistion, .0002 mf mark up

this is an example but the premise is exactly the same.
 
#36 ·
Random question, and if this has been answered elsewhere on the forum, then I apologize... for ED Leasing, is the end of lease residual calculated on the MSRP of ED or MSRP of US delivery?
 
#39 ·
how does the 7 multiple security deposti work? sorry, I'm a newbie here. I've leased about 4 different cars in the past 5 yrs. sounds like I've been screwed on all of them..
 
#42 ·
good job on the info....

If the buy rate on the e93 for example is .0032 and the dealer is quoting .0035, the dealer is getting .0002 of profit. (or .48% cost of money)

So if I can buy down the rate with 7 deposits by .00049, then I can get the rate from .0035 to .00301. Am I correct? (assuming I can't negotiate the rate any lower than the retail rate).

So instead of paying 8.4 % cost of money (.0035x2400), I pay 7.22% cost of money (.00301x2400) with 7 security deposits.

And that 1.18% interest rate reduction is worth the 7 times deposit increase? (Depends on the opportunity cost of that security deposit money I suspect).

Also, is a 24 month lease generally better or worse than a 36 month lease assuming the same money factor (like on the e93)?

Finally, are the lease (money factors) on the e93 just too high to make sense (.0032 to .0035)? [According to the May lease rate thread] - they seem to be the highest on the list - I suspect it has to do with the demand for the e93 relative to the supply.

If you haven't guessed already, I ordered an e93 and I only negotiated a dollar amount less than MSRP - I haven't decided if I will lease or buy - I could do either, but I would opt for a lease if it is competitive.

If this post is out of bounds please tell me and I'll delete it.
 
#43 ·
yea...if you can't get the buy rate, then its .00301... there is actually 8 deposits you can do...
the 1st SD actually keeps it from going the standard .00015 if you are a 1st time BMW buyer... then just do the add'l 7 to drop it .00049
and not only is the 1.18 reduction not bad, its the deposit money you get back when your done on the lease...
just found out that the SD is rounded to the higher $50...
the residual is a factor in determining you monthly so you may want the lower residual on a 36 month..
not sure why the MFs are higher on the e93, but your explanation sounds right..
just renegotiate on your order, if they don't budge...go to the ask a dealer thread... the guys on here are pretty good...ask for what you want, and they'll do their best.. I'm currently doing just that..less hassle..
 
#44 ·
yea...if you can't get the buy rate, then its .00301... there is actually 8 deposits you can do...
the 1st SD actually keeps it from going the standard .00015 if you are a 1st time BMW buyer... then just do the add'l 7 to drop it .00049
and not only is the 1.18 reduction not bad, its the deposit money you get back when your done on the lease...
Except that I can do a lot better than 1.18% on my money...

A
 
#46 ·
the ED wiki didn't really address this point (they did talk generally about issues with financing a ED vehicle) ---- is it possible to use another bank (i.e. not BMW FS) to do the lease ... the monthly payments (via leasecompare) are clearly better elsewhere (largely due to a more reasonable money factor) .... is there a problem with leasing from elsewhere due to European Delivery??

Thanls.
 
#47 ·
is it possible to use another bank (i.e. not BMW FS) to do the lease ... the monthly payments (via leasecompare) are clearly better elsewhere (largely due to a more reasonable money factor) .... is there a problem with leasing from elsewhere due to European Delivery??
Thanls.
The issue is a bank lease cannot be activated until the car is in the States. We are working on a program for this where we would temporarily finance the vehicle until the vehicle arrives.

This needs to be done to save on double taxation.
 
#56 ·
Questions on "returning customer" and MSD's

I'm about to take delivery on a 535xi. 2 questions please:

#1 - Can I be considered a returning BMWFS customer (and potenitally get a better lease deal / lower MF) even though I haven't leased a BMW in 2 years? I have leased several in the past but am now turning in a Land Rover and going back to a BMW. My SA initially said I would be eligible, then was unsure...I'm wondering if he's trying to keep the difference as profit. Queston 1A - is there currently incentives for returnin customers?

#2 - is multiple security deposits available to all customers, or is it regulated by state? When I mentioned it my SA acted like he knew nothing about it.

Thanks in advance - I would greatly appreciate a quick response since my 5er is due in any day.
 
#57 · (Edited)
#2 - is multiple security deposits available to all customers, or is it regulated by state? When I mentioned it my SA acted like he knew nothing about it.
It is available to all customers, but some states impose limits on the amount you can deposit.

MSD's are not a common practice by a vast majority lessee's (Bimmerfest, et al, excluded), thus, some SA's no nothing about it.

Also, it's not an advertised program, at all. The only official BMW reference I could find was on BMW's Canadian website: http://www.bmw.ca/finservices/leasing_multiple.asp?lang=en. Also, there is no reference to this program on http://www.bmwusa.com

Ask your SA to call the Retail Communications Center at "1-877-BMW-DLRS (1-877-269-3577), option #6." If you search the net for "Retail Communications Center" you'll find a link, which has the number.

This post details how it works: http://www.bimmerfest.com/forums/showthread.php?t=221741
 
#59 ·
I locked in the July base rate of .00285, knowing that it could only go down if BMWFS changed it in Aug or Sept (I see it went down to .0026 in Aug). When we were negotiating my SA said there was some sort of lease incentive for returning customers (I assume it was a lower MF)...I've just read some other threads and it looks like once you're 6+months out of a lease you're no longer considered a returning customer. It also looks like multiple SD's don't fly in NYS. I think as a new customer, one SD is required anyway...just don't know if this gets me down to the base rate or if it will get me a reduction of .00007 on the MF
 
#62 ·
Awesome job on the lease spreadsheet. Used it during lease negotiation over weekend. I actually had the spreadsheet open on my laptop on the CAs desk during the negotiation and was able to use it to reach fair agreement with dealer tweaking the deal parameters while ensuring there was fair profit in it for dealer and good value in deal for myself.

Nice job!
 
#63 ·
Great Info for Future Lessee

To all who have posted good info on leasing...

Valuable Information on this forum. Thank you for spending the time to provide new lessees with such valuable information on getting into leasing.

I forgot what commercial it was from that said "An educated consumer is our best customer". Was it Syms?

Thank you guys...

:thumbup::thumbup::thumbup:
 
#64 ·
Great information here. Keep up the good work. Two quick questions:

1) When you pay tax, I assume you pay on what you are using. So it would be the Cap Cost - Residual. Is this correct? Because a dealer said I would pay tax on the depreciation as well as the interest, here in Georgia. In that case, there wouldn't be any benefit of paying the tax upfront vs. rolling the tax into the monthly payment.

2) Is the inception fee the same as the acquisition fee of $625?

Thanks,
Lee
 
#65 ·
1) When you pay tax, I assume you pay on what you are using. So it would be the Cap Cost - Residual. Is this correct? Because a dealer said I would pay tax on the depreciation as well as the interest, here in Georgia. In that case, there wouldn't be any benefit of paying the tax upfront vs. rolling the tax into the monthly payment.

2) Is the inception fee the same as the acquisition fee of $625?

Thanks,
Lee
1) In GA you pay sales tax on the monthly payment, monthly. There is no option to pay it all up front.

2) Yes
 
#66 ·
Damn...

I just got my new Z4 on Friday, and I saw this thread today. I didn't know all this stuff was negotiable...

Well...My monthly payment is $427 before tax and I paid $1,700 at the lease signing. All for a car with an MSRP of $38,900.00

How do you think that is?
 
#72 · (Edited)
Lease Calculations by total cost

I would like to thank all the great posters who contribute to this thread and this board. As a newbie considering his first Z4, this really is immensely helpful. I have read the strings on lease calculations, downloaded the lease spreadsheet, and communicated directly with BMWFS on getting 7 or 8 MSDs on my lease. I think I understand money factors, residuals cap costs and other innovative terminology.

Now I have a simplistic question. When trying to figure out the best deal can I use just one number, my total expense over the term of the lease, divided by the MSRP (or dealer cost) to determine that? For example, I am considering leasing my Z4 at $369 per month for 36 months, with a $2500 down payment. This is simply $369x36+2500 = $15784 total cost.

Using Ed103's numbers, his total cost is $427*36+1700=$17,072. Ed, I assumed you had 36 months, please correct.
So If Ed and I were looking at identically configured cars driven the same number of miles, I have the lower cost. I really don't need to know the money factor, residual, cap cost, acquisition, inception fee, etc. Of course sales tax must be added.

I just got my new Z4 on Friday, and I saw this thread today. I didn't know all this stuff was negotiable... Well...My monthly payment is $427 before tax and I paid $1,700 at the lease signing. All for a car with an MSRP of $38,900.00 How do you think that is?
By the way, the MSRP on my Z4 is $41,950; it has the sport package, xenon, heated seats and automatic top. Whaddaya think, should I go for it? :banana:
 
#67 ·
Great info. Question though....

Cap Cost This is the negotiated price of the car. It is basically the Invoice Price plus Dealer Markup, MACO and any fees (see note 1) and less a Down Payment. There really isn't any negotiation that is done here but you should make sure to check this amount so that no unknown charges will make their way into the deal.
Is this a valid formula for the Cap Cost? Just wanted to make 100% sure so I knew my spreadsheet was correct:
((Invoice + Dealer Markup + MACO&Fees) - Down Payment)
 
#68 ·
Great info. Question though....

Is this a valid formula for the Cap Cost? Just wanted to make 100% sure so I knew my spreadsheet was correct:
((Invoice + Dealer Markup + MACO&Fees) - Down Payment)
You would need to make sure that these fees aren't any that are being paid up front. I would also refer to this amount as adjusted cap cost, based on the BMW FS agreement. (cap cost alone would be without the down payment, or "cap cost reduction")

Quark
 
#70 ·
I apologize, I'm new to bimmerfest and I see several of you mentioning the leasing spreadsheet. Where is this located, is it on this thread somewhere to download? Thanks for all the previous info that as been posted its very useful as I plan to lease a '08 328i within the next month
 
#71 ·
#74 ·
For all those still new to leasing it is very helpful to do your homework before you even go to the dealership to sign the lease. Here are two forms that i've created which are almost similar to the lease forms you'll see when you go to sign your lease. I recommend you get all the information on the form from your CA. If your CA cannot provide the information, request to speak with someone from finance. If you're able to get all these information and prices you can calculate your entire lease at home and when you go to sign your lease it should be the same as you calculated at home.

***WARNING*** DO NOT SIGN THE LEASE UNLESS YOU UNDERSTAND IT AND YOU ARE COMFORTABLE WITH IT. IF NOT THEN WALK AWAY AND REDO YOUR HOME WORK.
 

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