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F10 / F11 (2011 - Current)
The new chapter in the highly successful story of the BMW 5 Series Sedan (F10) and wagon (F11)

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  #26  
Old 09-25-2010, 10:06 PM
chrischeung chrischeung is offline
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Quote:
Originally Posted by Newmanium View Post
Overall average age of BMW owners = 49, with a median income of $170k

http://www.businessweek.com/magazine...8023174411.htm

170k sounds like a lot, but after you subtract college savings, tax, mortgage, 2 or 3 car payments, credit cards, 401k matching, etc. - you're not left with as much as you'd think. And for most people, 2.5% return isn't worth sinking 17k into a semi-risky investment.
OK - I've confused you. I shouldn't have said $180K. Focus instead on the $500K conservative net worth. The $180K figure came about from the marketing info I had seen, from which I derived/guestimated the net worth figure.

Naturally, if someone only had $50K in net worth, then the $17K downpayment is not for them. However, if I had $500K, or even $1M, were still relatively young (way ahead of my retirement/spending goals), then I would strongly consider putting down a big downpayment. The only reason I would not personally do it is because I wanted to invest the money in a business or investments that has an extremely large return for extremely large risk - in which case I would have already considered that money gone.

Other variables worth considering are depreciation of the USD. If we are to believe that the USD will depreciate over the next 3 years, then putting down a downpayment is unadvised (all things being equal).
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Last edited by chrischeung; 09-25-2010 at 11:02 PM.
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  #27  
Old 09-25-2010, 11:10 PM
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gregb10 gregb10 is offline
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Originally Posted by Financeman View Post
Essentially you are saying you would NEVER purchase a new car because the risk of an accident related loss is too high for you. I respect that and tend to agree that a lease is a good way to mitigate risk in this area.

New or a lease, your insurance company will pay what the car is worth if it is totalled. Gap insurance will make up the difference if you are upside down with your lease. If you were to pay cash for a new car, in the event of a total loss, you would lose the difference between the market value and what you paid. I've have done the large down payment leases several times....I have visited with my insurance rep about this issue....the financial risk of this type of lease is no different than if I made a cash purchase or a large downpayment credit purchase (except for the loss of the lease inception fee).

Concerning high income/high net worth buyers, I too was in the financial management area for a few years and very much agree with the comment that high earnings does not equal high net worth. By the way, $500,000 is not a high net worth in my opinion. It is simply amazing the number of people with good income who spend it all and never accumulate wealth. I suspect there are alot of BMW owners that fit this profile. An expensive car, lease or purchase, is a very poor investment.....but we all know that........
Yes, it is a poor investment. Im turning in an 08 535xi that I can buy for 35k so I can start a new lease at 770.00 a month. The lease in 3 years is going to cost me over 30k. Am I smart? Not sure,,, but getting a new car ever 2 1/2 to 3 years brings me a lot of joy.

The tax write off on a lease helps a little,,, but thats just rational I use to justify an impractical purchase.

With that being said, I cant wait for my nicely loaded 535I to arrive.
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  #28  
Old 09-26-2010, 11:50 AM
carnuts3 carnuts3 is offline
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Originally Posted by Newmanium View Post
Gap insurance is included in BMW leases - if you total the car, you won't have to pay a cent to walk away. If you put a downpayment down, you don't get a refund. I haven't totalled a car, but it happens. If you put $17k down, that's a chunk of change to worry about trying to claw back from your insurance or BMW's gap.

For me, a 2.5% return isn't worth tying up 17k in cash for 3 years. Also don't have to worry about losing the money if the car was totalled.
If you're going to put down this large amount of money, an alternative would be to use it to prepay the lease. This way, if you total the car, you are fully protected as if you were paying monthly.
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  #29  
Old 09-26-2010, 01:57 PM
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Originally Posted by carnuts3 View Post
If you're going to put down this large amount of money, an alternative would be to use it to prepay the lease. This way, if you total the car, you are fully protected as if you were paying monthly.
Okay, I'll bite. Let's say you plunk down $27,000 to prepay your lease ($750 x 36) and your car gets stolen or totalled 2 months in. What happens to the remaining 34 months of lease usage you paid for? Does the GAP insurance company cut you a check for $25,500?
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  #30  
Old 09-26-2010, 02:00 PM
smhoer smhoer is offline
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Originally Posted by quackbury View Post
Okay, I'll bite. Let's say you plunk down $27,000 to prepay your lease ($750 x 36) and your car gets stolen or totalled 2 months in. What happens to the remaining 34 months of lease usage you paid for? Does the GAP insurance company cut you a check for $25,500?
Nope!
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  #31  
Old 09-26-2010, 02:51 PM
chrischeung chrischeung is offline
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Originally Posted by quackbury View Post
Okay, I'll bite. Let's say you plunk down $27,000 to prepay your lease ($750 x 36) and your car gets stolen or totalled 2 months in. What happens to the remaining 34 months of lease usage you paid for? Does the GAP insurance company cut you a check for $25,500?
Likely your claim would be with your regular insurance company - you'd get the difference between market value and residual (BMWFS is only owed the residual). You may be made whole if the insurance company has a for new replacement policy within the first 12 months (I think Century 21) - but it may not apply to leases.

I also don't think prepay works by 36*regular payment. It's a discount off the base MF. Usually most folks find it better to do MSDs/downpayments than prepay - unless there are tax benefits at hand.
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  #32  
Old 09-26-2010, 04:00 PM
tunafish tunafish is offline
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Quote:
Originally Posted by Financeman View Post
Essentially you are saying you would NEVER purchase a new car because the risk of an accident related loss is too high for you. I respect that and tend to agree that a lease is a good way to mitigate risk in this area.

New or a lease, your insurance company will pay what the car is worth if it is totalled. Gap insurance will make up the difference if you are upside down with your lease. If you were to pay cash for a new car, in the event of a total loss, you would lose the difference between the market value and what you paid. I've have done the large down payment leases several times....I have visited with my insurance rep about this issue....the financial risk of this type of lease is no different than if I made a cash purchase or a large downpayment credit purchase (except for the loss of the lease inception fee).

Concerning high income/high net worth buyers, I too was in the financial management area for a few years and very much agree with the comment that high earnings does not equal high net worth. By the way, $500,000 is not a high net worth in my opinion. It is simply amazing the number of people with good income who spend it all and never accumulate wealth. I suspect there are alot of BMW owners that fit this profile. An expensive car, lease or purchase, is a very poor investment.....but we all know that........
I paid cash for a 2011 535i with lots of options, and am paying an extra $84/yr for gap insurance (only available for 1st 3 years). So, a lease in not the only practical way to avoid a loss in case the car is totaled.
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  #33  
Old 09-26-2010, 04:16 PM
Newmanium Newmanium is offline
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Quote:
Originally Posted by tunafish View Post
I paid cash for a 2011 535i with lots of options, and am paying an extra $84/yr for gap insurance (only available for 1st 3 years). So, a lease in not the only practical way to avoid a loss in case the car is totaled.
Hmm, they do gap on a car where you own it outright? Does that essentially cover the difference between replacement cost and "Market Value" from your insurance company?

I've normally heard about gap insurance used with lenders, interesting to see another use for it.
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  #34  
Old 09-26-2010, 04:19 PM
Financeman Financeman is offline
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Quote:
Originally Posted by tunafish View Post
I paid cash for a 2011 535i with lots of options, and am paying an extra $84/yr for gap insurance (only available for 1st 3 years). So, a lease in not the only practical way to avoid a loss in case the car is totaled.
In your situation if you totalled your car would the insurance company simply purchase you a new replacement any time during the first three years? I alway thought gap insurance would simply cover the deficiency between what you owe on a lease or a purchase and the market value of the totaled vehicle.
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  #35  
Old 09-26-2010, 04:19 PM
tunafish tunafish is offline
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Originally Posted by Newmanium View Post
Hmm, they do gap on a car where you own it outright? Does that essentially cover the difference between replacement cost and "Market Value" from your insurance company?

I've normally heard about gap insurance used with lenders, interesting to see another use for it.
Exactly. I own the car outright. If I total it in the next 3 years, I get the full purchase price back (less deductible).
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  #36  
Old 09-26-2010, 04:23 PM
Newmanium Newmanium is offline
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Wait, full purchase price? Even in 3 years?

Gap insurance on a lease covers the difference between what BMW is owed, and market value. So one month in, the gap insurance would probably have to pay out 5-8k. But after 35 months, the difference between market value and what BMW is owed will probably be negligible. Gap insurance just allows you to walk away from the lease, that's it.

Do you have some hybrid gap insurance that allows you to buy a brand new replacement car at 35 months?
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  #37  
Old 09-26-2010, 04:40 PM
tunafish tunafish is offline
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Originally Posted by Newmanium View Post
Wait, full purchase price? Even in 3 years?

Gap insurance on a lease covers the difference between what BMW is owed, and market value. So one month in, the gap insurance would probably have to pay out 5-8k. But after 35 months, the difference between market value and what BMW is owed will probably be negligible. Gap insurance just allows you to walk away from the lease, that's it.

Do you have some hybrid gap insurance that allows you to buy a brand new replacement car at 35 months?
That is correct. I get the full purchase price back even if it is totaled after 35 months. Actually, this is not that different from what people with collector cars do. They insure their cars for a fixed amount which does not change over time.
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  #38  
Old 09-26-2010, 04:49 PM
Financeman Financeman is offline
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Originally Posted by tunafish View Post
That is correct. I get the full purchase price back even if it is totaled after 35 months. Actually, this is not that different from what people with collector cars do. They insure their cars for a fixed amount which does not change over time.
That's what I like about these blogs....learn something new every day. I am surprised at the low price of this coverage. Certainly takes the risk out of "buy down" leases or new car purchases.
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  #39  
Old 09-26-2010, 06:03 PM
smhoer smhoer is offline
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MMMmm. I will have to ask my insurance agent to check the fixed value coverage for me. Would definitely take the worry about prepaying reducing cap cost. Have to find out the additional cost of this coverage.
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  #40  
Old 09-26-2010, 06:48 PM
Newmanium Newmanium is offline
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Originally Posted by tunafish View Post
That is correct. I get the full purchase price back even if it is totaled after 35 months. Actually, this is not that different from what people with collector cars do. They insure their cars for a fixed amount which does not change over time.
Ahh, interesting - not really gap insurance, but a good idea.
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  #41  
Old 09-28-2010, 03:08 PM
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Quote:
Originally Posted by Newmanium View Post
Overall average age of BMW owners = 49, with a median income of $170k

http://www.businessweek.com/magazine...8023174411.htm

170k sounds like a lot, but after you subtract college savings, tax, mortgage, 2 or 3 car payments, credit cards, 401k matching, etc. - you're not left with as much as you'd think. And for most people, 2.5% return isn't worth sinking 17k into a semi-risky investment.
Interesting. In reality a new 5 series purchase is kind of spendy on $170K unless you're older or live in a low cost area.
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