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F10 / F11 (2011 - Current)
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  #76  
Old 02-10-2013, 02:22 PM
PeterC4 PeterC4 is offline
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Let's say you put $4,000 down on a lease. A month after you take delivery, your car gets T-boned and is totaled. Your insurance adjuster says the car is totaled and the car lost $10k in value. He sends a check to BMW. BMW takes the payoff and says luckily we supplied you with GAP insurance, so you don't owes us another $6,000. You ask don't you mean $10k, nope you already put down $4k, so the GAP insurance only covers $6k. Your down payment is gone.

You are far better off using the $4k to put down Multiple Security Desposits. Each security deposit lowers your money factor by 0.0007. If you take care of your car, you will get all of the security deposits back at the end of the lease. The maximum of seven MSDs will lower your intersest by 1.176%, thus you will have lower payments. With my two leases, I have almost $18k "safely invested" with BMW earning an equivalent of 9% - tax free. In the same accident scenario as above, GAP insurance still covers the shortfall, but BMW sends you a check for $4k to return your security deposits.
Is the loss accumulated depreciation over the month? Regardless of who has the equity in the car, I would have thought it would be covered to a point. Say you make a one time lease payment for 36 months. The next week the car is hit by a falling piece of steel from a building. The car is totalled. Isn't it a question of accumulated depreciation? Surely you don't forfeit the balloon payment? Aren't you required to insure the car in the US?
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  #77  
Old 02-10-2013, 02:44 PM
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Originally Posted by SARAFIL View Post
BMWFS/BMWNA lease specials ARE NOT run at MSRP. They require significant dealer discount.

This comes up alot. There is no special MF or residual. To get the deal to "balance" out, adjust the selling price.
Remember that residuals are based on MSRP.
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  #78  
Old 02-10-2013, 03:02 PM
airportdoc airportdoc is offline
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Thanks to all for wealth of information. As suggested earlier, I did search and read on the concerns with different lease payment options.

Are there any financials concerns with a one-pay lease and availing a MF reduction of 0.0008 (1.92% APR) versus making a large down payment. I think risks are significantly lowered; however, would like to have a few words of assurance from forum members in case my thinking is faulty.
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  #79  
Old 02-10-2013, 03:05 PM
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Quote:
Originally Posted by PeterC4 View Post
Is the loss accumulated depreciation over the month? Regardless of who has the equity in the car, I would have thought it would be covered to a point. Say you make a one time lease payment for 36 months. The next week the car is hit by a falling piece of steel from a building. The car is totalled. Isn't it a question of accumulated depreciation? Surely you don't forfeit the balloon payment? Aren't you required to insure the car in the US?
There are some insurance policies that will replace your car if it is under a certain age, but more common are policies that cover only Fair Market Value. Once you drive a car off the lot, Fair Market Value plummets.

One a similar topic which often comes up in lease vs buy debates is diminshed value. That's when your car is damged in an accident, but not totaled. Although the car will be repaired to the original specs, in the age of CARFAX and other reports, a purchased car will suffered from a lower resale value due to the accident, whereas a leased car will turned at the end of the term with no cost impact.
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  #80  
Old 02-10-2013, 03:06 PM
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Lol, once again: This is why I used the advertised leasing program as the baseline.

The train quickly goes off the tracks when you don't compare apples to apples.

There is no right or perfect deal, only your opinion :-)

For example: another poster in another thread noted that he's been buying BMW's for years and he always "let's" his dealer make more than the 500 bucks most of the Internet Heros swear they never "allow" the dealer make off of them. 'Cuz Internet Heros is smart and we is dumb.

This poster walks into his dealer whenever he wants for service and they give him any test driver he wants to take home as a loaner. They install BMW performance parts for him for free. They change his oil whenever he wants, give him all sorts of comp stuff like floor mats and stuff, swap out stuff that isn't true warranty work, etc., etc.
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  #81  
Old 02-10-2013, 03:21 PM
PeterC4 PeterC4 is offline
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Originally Posted by dunderhi View Post
There are some insurance policies that will replace your car if it is under a certain age, but more common are policies that cover only Fair Market Value. Once you drive a car off the lot, Fair Market Value plummets.

One a similar topic which often comes up in lease vs buy debates is diminshed value. That's when your car is damged in an accident, but not totaled. Although the car will be repaired to the original specs, in the age of CARFAX and other reports, a purchased car will suffered from a lower resale value due to the accident, whereas a leased car will turned at the end of the term with no cost impact.
I suppose the best way to describe it is that a downpayment may be at risk in an accident if the accident occurs near the beginning of the lease and you risk your deposit on depreciation. Near the end you are likely indifferent since the aggregate payments are the payments. This assumes that absence of a deposit the risk of depreciation is with the dealer and no pass through to the customer. Say Dunderhi, how do you get a yield of 9% on your security deposits? I assume they are at risk if you don't make your payments, or if you damage the car. At 9% you can parlay that into new cars more often !!! I have to get these deals in Canada.
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  #82  
Old 02-10-2013, 03:28 PM
PeterC4 PeterC4 is offline
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Originally Posted by airportdoc View Post
Thanks to all for wealth of information. As suggested earlier, I did search and read on the concerns with different lease payment options.

Are there any financials concerns with a one-pay lease and availing a MF reduction of 0.0008 (1.92% APR) versus making a large down payment. I think risks are significantly lowered; however, would like to have a few words of assurance from forum members in case my thinking is faulty.
Funny, the only lease I have ever contemplated is a one payment lease. I do not lease or finance as a rule, but I finance my cars personally in imaginative ways when I want to. I like to get the payments out of the way or not have them at all. I would say the real difference between leasing and owning - is the residual value risk, which has been discussed many times. With these deals you are better off to lease. When the residual value inherent in the lease goes say..as low as 50% or lower, you end up paying for so much of the car through lease payments, you know when you return it, the dealer has a big gain on his hands and you either buy it anyway, or just start all over.

Lease the car, do what is comfortable for you, keep the payments affordable. The lease deals are good.
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  #83  
Old 02-10-2013, 03:33 PM
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Funny, the only lease I have ever contemplated is a one payment lease. I do not lease or finance as a rule, but I finance my cars personally in imaginative ways when I want to. I like to get the payments out of the way or not have them at all. I would say the real difference between leasing and owning - is the residual value risk, which has been discussed many times. With these deals you are better off to lease. When the residual value inherent in the lease goes say..as low as 50% or lower, you end up paying for so much of the car through lease payments, you know when you return it, the dealer has a big gain on his hands and you either buy it anyway, or just start all over.

Lease the car, do what is comfortable for you, keep the payments affordable. The lease deals are good.
I think dunderhi meant 9% accumulated interest over 36 months.

*edit my reply was to meant for your prior post, PeterC4. Sorry - I'm tapping away in an IPhone

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  #84  
Old 02-10-2013, 03:52 PM
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Originally Posted by airportdoc View Post
Thanks to all for wealth of information. As suggested earlier, I did search and read on the concerns with different lease payment options.

Are there any financials concerns with a one-pay lease and availing a MF reduction of 0.0008 (1.92% APR) versus making a large down payment. I think risks are significantly lowered; however, would like to have a few words of assurance from forum members in case my thinking is faulty.
I would need to run the numbers when I'm back in the States, but at first glance I don't think it is as effective as MSDs. With the equivalent of 7 payments the interest is lowered by 1.176%, whereas the equivalent 36 (lower) payments only yields a reduction of 1.92%.

Quick someone with a spreadsheet jump in here. I think my savings might be too low for the single payment.
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  #85  
Old 02-10-2013, 04:10 PM
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Quote:
Originally Posted by PeterC4 View Post
Say Dunderhi, how do you get a yield of 9% on your security deposits? I assume they are at risk if you don't make your payments, or if you damage the car. At 9% you can parlay that into new cars more often !!! I have to get these deals in Canada.
I think dunderhi meant 9% accumulated interest over 36 months.
Since I am not physically collecting interest on my MSD's I have been using the word "equivalent." Let me know if you think this is B.S. or not, but by using the MSDs on my two leases, I have reduced my total payments by about $5k. So I put down $18k and I saved $5k. If I look at that as interest earned rather than payments reduced, one would need to have a 9% APR to earn $5k on an $18k investment in three years.

PeterC4, there is risk that if you return your car in a terrible condition it will be much easier for BMW to collect the funds from the MSDs, but please realize that if you return your car in a a terrible condition, BMW will demand payment period. Certainly it will be harder for them to collect if you never put down a security deposit, but be aware as a financial service they have the abilty to destroy your credit rating for non-payment.
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  #86  
Old 02-10-2013, 04:33 PM
PeterC4 PeterC4 is offline
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Since I am not physically collecting interest on my MSD's I have been using the word "equivalent." Let me know if you think this is B.S. or not, but by using the MSDs on my two leases, I have reduced my total payments by about $5k. So I put down $18k and I saved $5k. If I look at that as interest earned rather than payments reduced, one would need to have a 9% APR to earn $5k on an $18k investment in three years.

PeterC4, there is risk that if you return your car in a terrible condition it will be much easier for BMW to collect the funds from the MSDs, but please realize that if you return your car in a a terrible condition, BMW will demand payment period. Certainly it will be harder for them to collect if you never put down a security deposit, but be aware as a financial service they have the abilty to destroy your credit rating for non-payment.
I'd have to think about it a little more, but yes, assuming the 18k is returned, then the reduced payments would make up the yield (the IRR is 9.7% actually over 36 months - I'm rounding up). I guess you could consider the opportunity cost of leaving 18k with BMW but its tough to make a yield of 9%. Mind you if the leases payments are tax deductible then you go into a whole different set of considerations. Regardless, its good.
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  #87  
Old 02-10-2013, 04:44 PM
PeterC4 PeterC4 is offline
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I would need to run the numbers when I'm back in the States, but at first glance I don't think it is as effective as MSDs. With the equivalent of 7 payments the interest is lowered by 1.176%, whereas the equivalent 36 (lower) payments only yields a reduction of 1.92%.

Quick someone with a spreadsheet jump in here. I think my savings might be too low for the single payment.
I'm not sure I understand the question. But if its the difference between making one payment to lower the payments versus posting extra security to lower the interest like Dunderhi is doing then the latter is better without running the numbers. I'd even try to credit enhance the lease with a letter of credit...man I'm getting into the U.S. swing of things. It's because you are enhancing the credit with cash collateral and effectively lowering the interest rate. You get the money back (theoretically if you keep the car in shape). Of course if you are running a hedge fund on the side and you can yield 30% then..., well heck, if we could all do that we'd have six or seven cars.

You know, I wonder what I could lower the interest rate to if I posted a letter of credit against my lease..I wonder what the arbitrage is in that? Hmmm. In Canada our lease rates our higher, but the killer is the residual regardless. They are low in Canada.
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  #88  
Old 02-10-2013, 05:51 PM
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Originally Posted by dunderhi View Post
Since I am not physically collecting interest on my MSD's I have been using the word "equivalent." Let me know if you think this is B.S. or not, but by using the MSDs on my two leases, I have reduced my total payments by about $5k. So I put down $18k and I saved $5k. If I look at that as interest earned rather than payments reduced, one would need to have a 9% APR to earn $5k on an $18k investment in three years.

PeterC4, there is risk that if you return your car in a terrible condition it will be much easier for BMW to collect the funds from the MSDs, but please realize that if you return your car in a a terrible condition, BMW will demand payment period. Certainly it will be harder for them to collect if you never put down a security deposit, but be aware as a financial service they have the abilty to destroy your credit rating for non-payment.

I think the 9% saving is very conservative estimate. In California, tax is calculated base on monthly payment so we also get some tax saving as well. And it is tax free and since I am paying myself, it is AAA risk.


In December, I took advantage of the 2 year 535 Western special lease and I put in $4550 multiple deposit and the monthly lease payment including tax went from 675.51 to 618.79. A saving of $56.72 a month. Rent went from $133.91 a month down to $81.42 a month and tax went from $51.48 a month down to 47.15 a month. the saving works out to 14.9% annualized rate. I don't think there is an AAA debt that is tax free and 2 years in duration anywhere to be found in the current investment universe with close to 15% yield.
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Old 02-10-2013, 06:51 PM
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I think the 9% saving is very conservative estimate. In California, tax is calculated base on monthly payment so we also get some tax saving as well. And it is tax free and since I am paying myself, it is AAA risk.


In December, I took advantage of the 2 year 535 Western special lease and I put in $4550 multiple deposit and the monthly lease payment including tax went from 675.51 to 618.79. A saving of $56.72 a month. Rent went from $133.91 a month down to $81.42 a month and tax went from $51.48 a month down to 47.15 a month. the saving works out to 14.9% annualized rate. I don't think there is an AAA debt that is tax free and 2 years in duration anywhere to be found in the current investment universe with close to 15% yield.
That is very good. Don't know about AAA - you do have to get the money back and deliver the car in good shape. It's still very good. If you get in an accident, will you incur an "adjustment" upon return?
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Old 02-10-2013, 06:56 PM
rparik01 rparik01 is offline
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Another +1 for MSDs. I'm saving $52 a month for 39 months on a $3,850 deposit. That equates to a 16.2% "return." I believe the return is maxed out when you create a payment that is just below a number divisible by fifty as the MSDs are 7x your monthly payment rounded up to the nearest fifty.
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  #91  
Old 02-10-2013, 07:15 PM
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That is very good. Don't know about AAA - you do have to get the money back and deliver the car in good shape. It's still very good. If you get in an accident, will you incur an "adjustment" upon return?
Gap insurance take care of the scenario where the car get whip out and insurance pay out is not enough to to cover early termination payment. For all other return, the inspector doesn't know any of the financial arrangement. So there is no different than any other car. I had done 7 MSDs with Lexus and 1 with Infinity that I got all my MSD money back with no incident (include a few times when i terminated the lease earliy). and I have 2 Infinity and 1 BMW with MSD currently. Infinity has the best program hand down (9 deposit with 0 .0001 for each deposit but resiual suck.Lexus is 9 deposit and each deposit is worth 0.00008. Don't know about Mercedes and Jaguar program).

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Old 02-10-2013, 07:23 PM
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That is very good. Don't know about AAA - you do have to get the money back and deliver the car in good shape. It's still very good. If you get in an accident, will you incur an "adjustment" upon return?
My guess is that these large deposits will be used as leverage to get leasees to lease or buy new cars.

Currently, BMW looks the other way on items like tires if you lease or buy another BMW. If they've got a bunch of your money they may be less inclined to look the other way.

A reasonable person must agree that you lose leverage when they hold such a large deposit.
.
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.

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Old 02-10-2013, 07:36 PM
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My guess is that these large deposits will be used as leverage to get leasees to lease or buy new cars.

Currently, BMW looks the other way on items like tires if you lease or buy another BMW. If they've got a bunch of your money they may be less inclined to look the other way.

A reasonable person must agree that you lose leverage when they hold such a large deposit.
.
.
.
This is one very bad guess. out of the 8 leases with MSD that I complete, no one other than the financial department know the arrangement. I never get special treatment When returning my cars or buying/leasing my next car. All my previous lease return inspection are done by independent contractors hired by the company and not the dealer staff. If BMW ask their dealer to do lease return inspection, it is very stupid on their part. A reasonable person will find out more before leveling an accusation that has no base. 8-)

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Old 02-10-2013, 07:45 PM
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Soooo a bit lost here, which is better, MSD's or the one-payment lease? Which one saves you more money (excluding any abnormal activity that would create havoc upon return of the car at lease end)? V/r, Tim
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Old 02-10-2013, 07:50 PM
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Soooo a bit lost here, which is better, MSD's or the one-payment lease? Which one saves you more money (excluding any abnormal activity that would create havoc upon return of the car at lease end)? V/r, Tim
From a financial point of view MSD
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Old 02-10-2013, 07:53 PM
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From a financial point of view MSD
Gracias good sir!
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Old 02-10-2013, 08:26 PM
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This is one very bad guess. out of the 8 leases with MSD that I complete, no one other than the financial department know the arrangement. I never get special treatment When returning my cars or buying/leasing my next car. All my previous lease return inspection are done by independent contractors hired by the company and not the dealer staff. If BMW ask their dealer to do lease return inspection, it is very stupid on their part. A reasonable person will find out more before leveling an accusation that has no base. 8-)
BMW was going to ring my brother up for tires and lease return damage until I called the dealer and told them I'd never buy another car from BMW if they did that to him. I looked at his car before he turned it in and it was fine for a lease return.

I've bought or leased over a million dollars of cars from this dealer. Maybe closer to a million and half if I added it up.

They never sent him a bill. I'm reasonably comfortable making my "accusation".

BTW - it's tough to read your writing.
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Old 02-10-2013, 08:35 PM
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BMW was going to ring my brother up for tires and lease return damage until I called the dealer and told them I'd never buy another car from BMW if they did that to him. I looked at his car before he turned it in and it was fine for a lease return.

I've bought or leased over a million dollars of cars from this dealer. Maybe closer to a million and half if I added it up.

They never sent him a bill. I'm reasonably comfortable making my "accusation".

BTW - it's tough to read your writing.
Where is the correlation? Did your brother leave a "large deposit?" It seems like your pull/loyalty to the dealership took care of any potential charges.
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Old 02-10-2013, 09:01 PM
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Originally Posted by rparik01 View Post
Where is the correlation? Did your brother leave a "large deposit?" It seems like your pull/loyalty to the dealership took care of any potential charges.
I'm not sure correlation would be the right word since there was definitely a mutual relation between my brother not getting hit with lease return charges and my association with BMW and the dealer.

But, I understand your point. You're claiming that my brother would not have paid a lease return charge even if he had a large deposit on the car, because of my leverage, right?

I addressed this in an earlier post. If BMW has a lot of your money, they may be disinclined to help you out if you don't spend any more money with them. In essence, you lose leverage. Leverage is a key component in any negotiation.

Last edited by mryakanisachoad; 02-10-2013 at 09:06 PM.
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Old 02-10-2013, 09:04 PM
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mryakanisachoad mryakanisachoad is offline
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Further: my brother decided he wasn't getting another BMW upon his lease return. I assert that this fact contributed to BMW looking to charge him what appeared to be an unreasonable lease return charge.

Another poster in this thread made my identical point.
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