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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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  #1  
Old 08-25-2014, 12:45 AM
duberalles duberalles is offline
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Please school me on lease negotiation.

For the first time we are considering leasing for my wife's next car, we usually always buy...can you please explain to me the dynamics of a good car leasing negotiation?

I got the buying negotiation down to an art, I always buy below invoice (often significantly so), waiting for the end of the month and preferably end of the year, trying to figure out dealer holdback, etc...

How does it work with leasing?? I still negotiate down the price of the car just like a regular buy correct?? So can I push for under invoice like I always do??

Do I then negotiate the residual value after X amount of years?? Based on what info can i base my numbers??

Is the down payment negotiable??


In case of an accident your insurance cover the repair obviously but does that affect the final value of the car at the end of the lease?? How anal manufacturers are they on wear and tear, scratches, etc??

Any tips and tricks are greatly appreciated...thank you!!
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  #2  
Old 08-25-2014, 05:56 AM
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quackbury quackbury is offline
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There is no holdback with BMW. There are frequently incentives (like the build out credit on 2014's), but the details are readily available on www.BMWUSA.com and elsewhere.

Yes you can negotiate the price. Always negotiate UP from invoice, not DOWN from MSRP. Invoice can be found at Edmunds.com. $500 to $1,000 above invoice has historically been a good range. You may get a better deal on some less popular models, and a worse deal on ones in high demand (like the M3 and M4). It pays to shop around. A good place to start is a 'Fest sponsor like Jon Shafer, Greg Poland or Adrian Avila.

There is no negotiating the residual. It is cast in stone by BMWFS.

BMWFS also sets the Money Factor (MF), but dealers are allowed to mark it up. They cannot discount it.

By "down payment" you may mean a cap cost reduction. In 99.99% of the cases, this is a truly bad idea. Your drive away costs should consist of your first month's payment, taxes, license, and lease acq. fee, period. Sometimes Multiple Security Deposits are a good idea. Do a search on that topic.

BF used to have an outstanding "New To Leasing?" forum that offered all types of fabulous insider information. Unfortunately, it has been taken down.
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Last edited by quackbury; 08-25-2014 at 05:57 AM.
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  #3  
Old 08-25-2014, 08:03 AM
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WillInDenver WillInDenver is online now
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Please school me on lease negotiation.

There used to be all kinds of good information in the Ask-A-Dealer forum that isn't there anymore. Residuals by month, money factor information, easily available invoice data. I bet BMW cracked down on the use of their trade info.

Anyhow - Leasematic is a great app to download for your phone or iPad. It lets you do what-if analysis on lease deals based on changes in all the factors that they include. The first thing you'll notice is that you don't understand what all the factors are and how they affect the lease. That's a great indicator of what you need to learn before you do a lease deal. At the time you can reliably put together a lease using that app and have a casual understanding of all the data fields, you'll know as much as the finance guy and more than most CAs about leasing, and you will be ready to do a deal.

Also, hang out in the Ask-A-Dealer forum here on Bimmerfest for some good discussion on people's proposed lease deals, lease return information, and BMW's deals.

I'm a little more open minded about down payments than a lot of people here are. A lease is essentially just a different kind of debt vehicle, and lease down payments work exactly like down payments on traditional financing in terms of their effect on the payment, the risk they create as an investment in a depreciating asset, and such. It's all a matter of the buyer's priority.

Best luck!
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  #4  
Old 08-25-2014, 08:46 AM
grover432 grover432 is offline
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Quote:
Originally Posted by quackbury View Post
There is no holdback with BMW.
Are you sure about this? I think unless one of us is in management at a BMW dealership (or you are an accountant doing the books for a BMW dealership) it is pretty hard to know what incentives BMW has available for dealers that the costing services (Edmunds, etc.) don't see.

I've discovered this much (in Canada):

1. If you complete the BMW delivery survey with the answer of "outstanding" on all questions, the dealership will get $1,000.00 from BMW.

2. If a dealership meets a target volume of vehicle sales set by BMW, they get an additional percentage of the total purchases from BMW as a rebate. Some people call this a holdback. In the Canadian dealership I was dealing with (but ultimately didn't buy from), the salesman told me that "everything is now about market share to BMW" and that it was going to be a tough year for the dealership as they were not going to hit their sales target and wouldn't be getting their rebate for the year.

It seems difficult to understand why many US dealers would sell cars (even early in the new model year) below "invoice" if invoice was their true "cost" unless it would help them reach a sales level that would unlock some additional revenue from BMW.

To answer the OPs question, I have always tried to negotiate the lease as if it was a sale, to get the lowest cap cost for the lease. Beyond that, in Canada if you are using BMW financial services, you are stuck with the rate published on the web site. You are also stuck with the residual value. I've been able to get rid of the "administration fee", which isn't really a big cost in the overall scheme.

Can't think of anything else.
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Last edited by grover432; 08-25-2014 at 08:48 AM.
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  #5  
Old 08-26-2014, 04:54 AM
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The CSI and volume bonuses are not technically hold backs. Since the dealer isn't assured of getting them, the OP can't factor them into his negotiations.

Obviously, the dealer can make more than $XXX over invoice. Do you really think the sales department could turn a profit if they didn't? But the OP asked about hold back, not CSI or bonuses.

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  #6  
Old 08-26-2014, 11:50 AM
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A few do's and dont's:

DO use a site like Edmunds.com to find out what people are paying for the car in your area, including fees and incentives.

DO negotiate up from the invoice price.
DON'T negotiate down from the MSRP.

DO negotiate the price of the car independent of the lease.
DON'T negotiate the lease payment.

DO put down maximum (7) security deposits (MSD) to reduce your money factor.
DON'T put a down payment (capital cost reduction) unless it is a very small one in order to reduce your security deposit to the nearest $50.

DO buy only the miles you intend to drive.
DON'T pay extra for miles that you may not use (you can always buy miles later).

DON'T accept any dealer markup of the money factor (MF) or acquisition fee.
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  #7  
Old 08-26-2014, 01:18 PM
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WillInDenver WillInDenver is online now
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Quote:
Originally Posted by RaveD View Post
DO put down maximum (7) security deposits (MSD) to reduce your money factor.
DON'T put a down payment (capital cost reduction) unless it is a very small one in order to reduce your security deposit to the nearest $50.
I don't necessarily disagree, but:
  1. Either of these will get you stuck in the lease for the duration unless you're willing to let them go in a lease assumption deal. MSDs are the worse of the two in this regard because you don't get a little of them back in every payment like you do with a CCR.
  2. Setting aside mechanics and risk of CCRs, down payments always shift cost from "operational" to "capital" even though individuals don't usually think of it that way. Sometimes it's better for someone to spend some cash to lower a payment or reduce a debt obligation - if they are buying a home and need to optimize their ratios, for example. It's effective to look at the larger financial situation before ruling for or against a down payment - whether in a lease or traditional financing.
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  #8  
Old 08-26-2014, 03:44 PM
tonyscv tonyscv is offline
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MSDs = locking you into your lease for the entire term. Don't do it unless you're 100% certain you're able to see the lease through to full term (and I would argue very few people fit in that 100% certain category). BMW offers one of the most flexible and efficient lease transfer options that exists in the auto industry. You're effectively giving up that option by putting down MSD's as no one is going to front you thousands of dollars to reimburse you for MSD's as a condition of a lease transfer.

I would never advise anyone to give up the flexibility of having the ability to exit your lease early.
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Old 08-26-2014, 06:17 PM
namelessman namelessman is online now
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Does one lease payment also limit the lease transfer flexibility(lock in until lease end)?
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Old 08-26-2014, 06:42 PM
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Quote:
Originally Posted by tonyscv View Post
MSDs = locking you into your lease for the entire term. Don't do it unless you're 100% certain you're able to see the lease through to full term (and I would argue very few people fit in that 100% certain category). BMW offers one of the most flexible and efficient lease transfer options that exists in the auto industry. You're effectively giving up that option by putting down MSD's as no one is going to front you thousands of dollars to reimburse you for MSD's as a condition of a lease transfer.

I would never advise anyone to give up the flexibility of having the ability to exit your lease early.
The MF reduction from the max MSD strategy, is so compelling, that to skip it (especially when you get 0% on savings in the bank) - you really better be sure you want to be able to exit that lease, and are willing to pay up for that flexibility.
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Old 08-26-2014, 09:00 PM
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Quote:
Originally Posted by tonyscv View Post
MSDs = locking you into your lease for the entire term. Don't do it unless you're 100% certain you're able to see the lease through to full term (and I would argue very few people fit in that 100% certain category). BMW offers one of the most flexible and efficient lease transfer options that exists in the auto industry. You're effectively giving up that option by putting down MSD's as no one is going to front you thousands of dollars to reimburse you for MSD's as a condition of a lease transfer.

I would never advise anyone to give up the flexibility of having the ability to exit your lease early.
Great point. However, what if BMW provides you with a chance to turn in your car early via a "pull-ahead" special offer, where you can lease another BMW and not have to make the remaining payments on your current one? In this scenario, doesn't BMW return your MSDs as soon as you start your new lease on the new car (and your previous lease is now officially over)?
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  #12  
Old 08-27-2014, 12:15 AM
BudFox007 BudFox007 is offline
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Originally Posted by namelessman View Post
Does one lease payment also limit the lease transfer flexibility(lock in until lease end)?

I think this gives more flex in a lease transfer vs the MSD scenario. You could present the remaining payment on a monthly basis in the negotiation to show the advantage of the one lease payment vs traditional lease. Not everyone can afford to pay up front, but at least the implied monthly payments should be lower than competing lease swap offers, assuming you started with a good deal, which should help in the marketing of the swap.


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Old 08-27-2014, 12:33 AM
swajames swajames is offline
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The only thing to add to the other good advice in the thread is that I've always taken a simple view on this and it's never let me down - regardless of whether you're paying cash, leasing or financing, focus *solely* on the price of the new car at the outset and do not discuss how you later intend to fund the deal until the price of the car is locked down. Only then discuss financing, if you need it, and whether you have a trade-in etc. Other golden rule is *never* share any info on your budget or your payment tolerance - if it's higher than it needed to be, the deal will magically end up at your indicated payment threshold. At this point, I'm then willing to revisit the price paid for the car - but only if the price drops further to seal the deal.

It's also very important to be aware of any incentives, trunk money and dealer incentives etc that may apply, and one of the tests I like to use is if the sales guy brings it up without me having to ask. I've generally found that the ones that are upfront about these things - and in particular any dealer incentives that can be applied to sweeten the deal - are the ones to deal with.
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Old 08-27-2014, 07:02 AM
Art234 Art234 is offline
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As one who was in the business, albeit a long time ago, one thing that leasing neophytes get confused on is "money down" vs. "cash due at inception". They are not the same thing. One is a component of the other.

A downpayment, or cap cost reduction, is cash which reduces the net capitalized cost in the lease....so if you agreed on a price of $53000 for a car, then used a $3000 cap cost reduction as part of the cash due at inception, the amount used to capitalize the lease is $50000. The inception costs include the down payment if any, but also include fees and deposits, such as taxes, which in NY must be paid in full at inception (either part of the up front or capped in the lease), bank or acquisition fee, and security deposit(s) if applicable... So a "no money down" lease does NOT mean that it's a sign and drive transaction.

Otherwise, I agree with the premise that you negotiate the price of the car in the transaction before dealing with the funding method. I usually put on any contract "all incentives to customer", meaning that buildout credits and other over the table incentives (not holdbacks or CSI incentives) go to me. I have always been aware of money factors and interest rates, and have always insisted on no reserve (markup on rates). I insist on seeing the factory or bank rate sheet before signing. A good dealer will do that. If not, it raises red flags. If you give the impression that you are not putting your hand in the dealer's pocket, and acknowledge that he has to make SOME profit, I think you will wind up with a much better deal in the long run.

Good luck and let us know how you make out.
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Last edited by Art234; 08-27-2014 at 07:04 AM.
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Old 08-27-2014, 08:13 AM
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A person who leases should be prepared to keep the car the for the duration of the lease. Swapping leases is easier today, but one shouldn't go into a lease planning.g to swap it out. It's usually a money losing exchange.

That said, I usually go with 7 MSDs and put absolutely nothing else out of pocket. The upfront out pocket expenses should be covered by BMW incentives, which are almost always available. In this method, if I were to total the car after leaving the dealers lot, I would have not lost a penny. Any money paid out of pocket other than MSDs would have been lost under this scenario.
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Old 08-27-2014, 12:06 PM
tonyscv tonyscv is offline
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Quote:
Originally Posted by namelessman View Post
Does one lease payment also limit the lease transfer flexibility(lock in until lease end)?
Essentially yes... you've already paid for the entire lease, so you'd be asking someone to pay you the entire balance of remaining payments "back" to you at the time of the transfer. VERY few people are going to want to do that. People only care about monthly payment in leases. They aren't going to reimburse you for MSD's, or money back for pre-paid leases.

Just be sure that you're doing a "one pay" lease and not a "pre-paid" lease. Two VERY different things.

"One Pay" leases are a special lease product offered by BMW that have a specific provision to pay you back any remaining lease "payments" if the car is stolen or totaled in an accident. Make 100% certain you're looking at a one pay lease and the lease contract has that provision.

"Pre-paying" is basically just paying all your payments ahead of time on a standard lease. You don't get any of your money back if the car is stolen or totaled in an accident. It's basically the worst thing you can ever do when leasing.
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Old 08-27-2014, 01:02 PM
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Quote:
Originally Posted by duberalles View Post
For the first time we are considering leasing for my wife's next car, we usually always buy...can you please explain to me the dynamics of a good car leasing negotiation?

I got the buying negotiation down to an art, I always buy below invoice (often significantly so), waiting for the end of the month and preferably end of the year, trying to figure out dealer holdback, etc...

How does it work with leasing?? I still negotiate down the price of the car just like a regular buy correct?? So can I push for under invoice like I always do??

Do I then negotiate the residual value after X amount of years?? Based on what info can i base my numbers??

Is the down payment negotiable??


In case of an accident your insurance cover the repair obviously but does that affect the final value of the car at the end of the lease?? How anal manufacturers are they on wear and tear, scratches, etc??

Any tips and tricks are greatly appreciated...thank you!!
Negotiating the price is still most important since the finance cost from the money factor is based on residual value and the residual value stays the up the same when you negotiate buying price.

The dealer will typically try to get money back from you via setting the MF higher than BMWFS has it and by upping random fees such as acquisition fee which should be $725 and often is listed as $925. That is money going directly back to the dealer and leaks off your base price negotiations. There is also an end-of-lease fee which should be $350. They might try to fold other upcharged fees into the "due at lease" payment hoping you don't notice they charge you $300 for the RMV work.

They are anal on the return. I would be tempted to go alpine white because it is easiest/cheapest to fix.

There is my favorite trick, tires. You must turn it in with tires with so-and-so profile left and it must be the original tire type. Sometimes the original tires become very expensive in the sizes needed for common lease returns. I just had that with my wife's car which isn't leased but the new tires on her 36 month old car were upchanged hugely in her size on tirerack. I could put other tires I liked better anyway but you won't be.

What I would do is measure thread depth regularly and when you are still good inside the limit, have somebody put on new tires for the remainder of the lease, then change back as you turn them in. That way you end up with almost new tires you can sell or maybe even reuse. Only works if you have a reliable and cheap tires place but not impossible to do. The change cost can easily be cheaper than being ripped off with those requirements.
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Old 08-27-2014, 02:28 PM
tonyscv tonyscv is offline
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Originally Posted by nyca View Post
The MF reduction from the max MSD strategy, is so compelling, that to skip it (especially when you get 0% on savings in the bank) - you really better be sure you want to be able to exit that lease, and are willing to pay up for that flexibility.
Fair point.

For the benefit of others FYI, each security deposit is your monthly payment rounded up to the next $50 increment (e.g. a $720 payment requires a $750 security deposit). Each MSD payment (up to a max of 7) gets you a 0.168% reduction in MF (.00007). Doing the max of 7 gives you .00049, or 1.176% off of your lease interest rate (money factor). In an example scenario of a 36 month lease, 58% residual, a price of $65,500, a .00130MF, that would be a ~$750/mo + tax payment. Putting down 7 MSD's would save you ~$50 a month.

In this example it would be $5,250 total tied up in security deposits until lease-end to save $1,800 on lease payments. With it, an effective loss of the ability to transfer out of the lease early. Whether that's worth it to you or not is entirely up to you.

Last edited by tonyscv; 08-27-2014 at 02:54 PM.
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Old 08-27-2014, 07:42 PM
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I really don't think that it will be impossible to pass MSDs on. Many people trolling leasetrader and smaller sites understand what it does and what it did to the money factor. Those are not dumb regular cars buyers that treat every piece of upfront money the same regardless of whether it is refundable or not.

You will have to find somebody who has the cash in the first place but it isn't that big a sum.
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Old 08-27-2014, 08:35 PM
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Quote:
Originally Posted by tonyscv View Post
In this example it would be $5,250 total tied up in security deposits until lease-end to save $1,800 on lease payments. With it, an effective loss of the ability to transfer out of the lease early. Whether that's worth it to you or not is entirely up to you.
$1,800 interest on $5250 over a 3 year period equates to a 10.3% APR. Not a bad fixed interest rate.

I currently have $17,150 in MSDs "tied-up" with BMWFS and I couldn't be happier. Personally, I wish I could have put down more MSDs. As a comparison, Mercedes allows 10 MSDs. It works for me, since I have no desire to get out of any lease early. Personally, I don't think three years is that long of a time to make and then fulfill a commitment. Heck, my Navy enlistment was longer than three years.
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Old 08-28-2014, 01:48 PM
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Originally Posted by Cal View Post
Great point. However, what if BMW provides you with a chance to turn in your car early via a "pull-ahead" special offer, where you can lease another BMW and not have to make the remaining payments on your current one? In this scenario, doesn't BMW return your MSDs as soon as you start your new lease on the new car (and your previous lease is now officially over)?
I did the pull-ahead offer, turning in my car 2 months ahead of time. The full MSD was returned.

I agree with dunderhi that you should not consider a lease if you have any inclination to terminate or transfer the lease prior to the term. If you have any reason to believe that you cannot comfortably afford the lease payment for the duration, then you should not consider that lease.

If you are forced to transfer for some emergency reason, then you should collect the MSDs from the person assuming the lease since they will get it back at the end.
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Old 08-28-2014, 01:53 PM
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Originally Posted by tonyscv View Post
...Putting down 7 MSD's would save you ~$50 a month.
... Whether that's worth it to you or not is entirely up to you.
$50/month is a very expensive insurance policy for the very unlikely scenario where you need to end the lease early. If you do not consider it to be a very rare possibility, then leasing might not be for you. In addition, if you cannot afford to have $6K "tied up" for 3 years earning an effective APR over 10%, then you probably can't afford a BMW in the first place
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Old 08-28-2014, 03:08 PM
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Please school me on lease negotiation.

Quote:
Originally Posted by RaveD View Post
If you are forced to transfer for some emergency reason, then you should collect the MSDs from the person assuming the lease since they will get it back at the end.
Logically, yes. The reality of the lease transfer market is that 19 of 20 "buyers" - or more - are there to get into a lease quickly with no cash out of pocket.

My F10 has been on LeaseTrader for 4 months. It's a $430 payment for a well-optioned M-Sport 535, so it gets lots of bites. Even though my ad clearly states that I need to get some of my CCR out of the deal, every single dialogue I've had stopped on a dime when I brought that up.
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2013 535i xDrive M-Sport | 2005 545i Sport (Retired and Missed) | 2001 X5 3.0 Sport (Retired)

Last edited by WillInDenver; 08-28-2014 at 03:17 PM.
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  #24  
Old 08-28-2014, 03:49 PM
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Squiddie Squiddie is online now
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Quote:
Originally Posted by WillInDenver View Post
Logically, yes. The reality of the lease transfer market is that 19 of 20 "buyers" - or more - are there to get into a lease quickly with no cash out of pocket.

My F10 has been on LeaseTrader for 4 months. It's a $430 payment for a well-optioned M-Sport 535, so it gets lots of bites. Even though my ad clearly states that I need to get some of my CCR out of the deal, every single dialogue I've had stopped on a dime when I brought that up.
Did you make clear (enough) that the money is refunded at the end of the lease?
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Old 08-28-2014, 03:57 PM
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WillInDenver WillInDenver is online now
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Originally Posted by Squiddie View Post
Did you make clear (enough) that the money is refunded at the end of the lease?

My case was a down payment, not an MSD. As the lessee, I get a little of it back in each payment.


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