One pay leases - does it make sense?

I was told by a friend that one pay can be even better than MSDs.

I am not sure what are the risks of one pay leases.

(1) Does one-pay cause any financial risk if the car is totaled? I think the answer is no as the payoff of the note held by BMW Financial is NOT reduced by the one-pay as such prepayment is treated as a true prepayment that is returned if such an event would occur.

(2) What is the return on my money if I one-pay? I have done multiple security deposits with BMW and because of the MF reduction of .00049 (assuming max of 7 MSDs), the return on my money held by BMW is over 12% annually from the reduced montlhy lease payment. Yes...that is why it is a great deal. So what is the real ROI for one pay?

One added wrinkle with one pay. A few weeks ago, BMW Financial annouced a 3 month pull ahead program whereby 3 payments are waived on your old lease. I am not sure how that would apply if the lease is a one pay. Would they refund 3 months of unused lease prepayments?

Am I over thinking this program??

All I can says the the rate reduction of .00080 is nice, question is do you really want to tie up all that cash for 3 years....? I prefer the m.s.d. and keeping more cash in the bank and a regular monthly payment.

In this environment where you would be lucky to get 1% return on your deposits, it might actually make sense.

I think some folks in a rare situation have tax advantages by doing this, like business owners with variable income. But it is a very small slice of the population. Talk to a CPA.

Originally Posted by Greg@Pacific BMW

All I can says the the rate reduction of .00080 is nice, question is do you really want to tie up all that cash for 3 years....? I prefer the m.s.d. and keeping more cash in the bank and a regular monthly payment.

Wow, I didn't realize you get a .0008 rate reduction.

Originally Posted by mjsbmw

I was told by a friend that one pay can be even better than MSDs.

I am not sure what are the risks of one pay leases.

(1) Does one-pay cause any financial risk if the car is totaled? I think the answer is no as the payoff of the note held by BMW Financial is NOT reduced by the one-pay as such prepayment is treated as a true prepayment that is returned if such an event would occur.

(2) What is the return on my money if I one-pay? I have done multiple security deposits with BMW and because of the MF reduction of .00049 (assuming max of 7 MSDs), the return on my money held by BMW is over 12% annually from the reduced montlhy lease payment. Yes...that is why it is a great deal. So what is the real ROI for one pay?

One added wrinkle with one pay. A few weeks ago, BMW Financial annouced a 3 month pull ahead program whereby 3 payments are waived on your old lease. I am not sure how that would apply if the lease is a one pay. Would they refund 3 months of unused lease prepayments?

Am I over thinking this program??

Running the numbers on a $70k car, the .0008 rate reduction saves about $85/month or $3k over a 36 month lease. Doing the MSDs saves $53/month or about $1900. If you do both, wow, that's pretty good savings.

Originally Posted by NASA43

Running the numbers on a $70k car, the .0008 rate reduction saves about $85/month or $3k over a 36 month lease. Doing the MSDs saves $53/month or about $1900. If you do both, wow, that's pretty good savings.

Can't do both.

Originally Posted by JustinTJ

Can't do both.

Oh, that's too bad. I was just reading this thread and got excited over the potential savings with ED, MSD and one-pay lease.

The catch is the onepay deduction is off the standard base rate, which could be higher than the sales support MF depending on model.

Other unknowns:
2nd 'payment' ED discount?
Acquisition fee?

BMW still covers sales tax on one pay lease, could amount to quite a bit savings.

Originally Posted by ArtX5

BMW still covers sales tax on one pay lease, could amount to quite a bit savings.

Hmm, aren't you paying the sales tax either way? I don't see how BMW would "cover" it. Maybe I'm misunderstanding something.

No, having done one. If the car is a lemon or needs repair, or is a lemon, it's a tough battle to get rid of it. This is especially aggrevating if the dealership and BMW keeps coming back with (no trouble found, etc).

Unless you have some favorable reason to do a one-pay, i think it's a bad idea. BMW has GAP insurance in their leases, and make sure your own policy can handle a total. Either way, depending on compay you have to watch to see if you get nailed in case of a lemon, theft, or severe damage.

The interest rate reduction is small that on financial side it can beat you up. I'd rather keep my money in my pocket rather than give it upfront.

There are really no additional risks of one pay programs vs monthly pay leases. You are contractually obligated so if you have a dispute because of a recurring problem, not sure you are in a better place.

If you have a involuntary termination (a nice way of saying a totalled loss), the lease agreement specifically says you are refunded that proporationate amount of the unused period of months multiplied by the original one pay amount.

If there is a pull ahead program, although not in the lease agreement, I am told by the dealer that BMW financial would also refund the unused portion.

It is all about having the cash available to earn a 12.5% return on your money, tax free!
That return is based on the savings of one pay vs regular lease structured payments. Not unlike the return you get on MSDs but the amount you pay upfront is more but so is your savings.

I did a one-pay lease on my MINI Cooper S a few years back and it was a really good deal. There is really no additional risk on a one-pay, if the car is totaled you get back the "payments" for the unused months. It really comes down to how much you can save... you need to compare the one-pay rate, which is "standard rate" minus 0.0008, vs. whatever sales support rate is in place for the car you are looking at. When BMW is heavily subsidizing lease rates, the one-pay is not attractive. When they are close to or at the "standard" rate level on any given model, the one-pay could be a good option. There's no "it's always good" or "it's always bad" conclusion, it depends on the specific situation you are looking at.

Originally Posted by schnell525

No, having done one. If the car is a lemon or needs repair, or is a lemon, it's a tough battle to get rid of it. This is especially aggrevating if the dealership and BMW keeps coming back with (no trouble found, etc).

I don't follow your argument here. A one-pay is no different from a standard lease in this regard. You have the same odds either way of getting a ****back or lemon repurchase, or any other repair made. You have a contract for the full term of the lease, so BMW doesn't care one way or the other because they either have all your money upfront or they have a contract that obligates you to make all of the payments over the lease term. It's not like you have a "bargaining chip" on a standard lease to just tell them "I am going to stop paying the lease payments if you don't buy the car back!!"

Care you explain how having a standard lease puts you in a better position in the scenarios you described above?

Originally Posted by ArtX5

BMW still covers sales tax on one pay lease, could amount to quite a bit savings.

Is this correct? Even in Texas?