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G30 (2017 - Current)
The next generation 5 Series, chassis code G30, arrives at dealers in February 2017. Looking like a scaled down 7 Series and riding on the CLAR platform, the new 5 Series will have a focus on lightweight and sporty performance. Engines options will come from BMW's new B family for the 530 and 540 and a turbocharged V8 for the M550i. Read more about the 2017 5 Series

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  #101  
Old 08-28-2018, 04:04 PM
yarens yarens is offline
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Costco

I have in the past used Costco's service for precisely this task. There is no negotiations. They have a table that lists the discount provided off the MSRP for each model, plus any other incentives. You choose the model and features you want from the BMW website, and that sets the price.

Worked well for me!
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  #102  
Old 08-28-2018, 04:07 PM
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I'm in over my head and need help/advise. Never leased before and this was offered to qualify for a $2K Loyalty Discount by BMWFS. The idea is to pay it off fully in 4 months when the prepay penalty period ends to own the car outright. Firstly, this dealer offered me a lower sales price on a straight purchase, $68,800, vs. the 71,017 Cap Cost on the lease. Second, I don't know if this is a good/bad/or unfair lease. Thirdly, wouldn't it be easier to finance a purchase rather than lease to qualify for a loyalty discount? Or doesn't it matter? Help!

75,390 MSRP
71,017 Cap Cost
2000 Cap Reduction
2000 rebate
2998 Cust. Cash
4988 Drive Off
36 mo.
0.001660 MF
45,897.90 Residual
925 Bank Aq
909.52/mo
This deal does not make sense given your stated objectives. There is a lease acquisition fee of 925 which you would have to pay on a lease, and not have to pay on a finance contract. That 925 erases 925 of any incentive you would get for leasing.

If the Leasing incentive was 4k or something it would make sense, but given the fact that they are not even offering the same cap cost on the lease as the finance (which makes zero sense, other than the 925 lease acquisition fee does not exist in the finance quote), it doesnt make sense for you to do this, this way, in my opinion.
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  #103  
Old 08-28-2018, 04:23 PM
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Originally Posted by jjrandorin View Post
This deal does not make sense given your stated objectives. There is a lease acquisition fee of 925 which you would have to pay on a lease, and not have to pay on a finance contract. That 925 erases 925 of any incentive you would get for leasing.

If the Leasing incentive was 4k or something it would make sense, but given the fact that they are not even offering the same cap cost on the lease as the finance (which makes zero sense, other than the 925 lease acquisition fee does not exist in the finance quote), it doesnt make sense for you to do this, this way, in my opinion.
Thanks for the info on the acquisition fee.

What doesn't make sense for you finally makes sense for me, haha!
Looking from the seller's point of view:
Cash sale - the cheapest is to just sell the car for cash
Financing - (on top of cash sale costs) cost of borrowed money (BMW FS borrows money to cover the sell price - downpayment), plus time spent on paperwork
Lease - (on top of financing costs) cost of borrowed money (full price of car), more administration, risk of used cars' prices variation, deal with fixing the car and selling it.
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  #104  
Old 08-28-2018, 04:25 PM
dclemmer dclemmer is offline
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Someone else may have more info (it may be different in CA), but it's my understanding that you can't simply "pay off" a lease as you would a loan. A lease includes a rent charge that is calculated by multiplying the MF by the Adjusted Cap Cost, which is then divided by the number of payments. This amount is added to the monthly depreciation and taxes to get your monthly payment. If you "pay off" the lease, you will still be responsible for this entire charge ... which, to BMWFS, is the full rent charge upfront in 4 months when you pay off the lease balance. The lease balance will basically be the residual, plus your remaining payments (inclusive of the rent charge). AND, if it were TX, the taxes would have been paid up front, but with transfer of ownership from BMWFS to the individual, taxes would be assessed again on the balance!

IMHO, this dealership is trying to pull a fast one.

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  #105  
Old 08-28-2018, 04:37 PM
tgame80 tgame80 is offline
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My mom bought a homda a few years ago and she was going to pay cash. they offeted a $500 discount if she financed, so I had her finace entire amount and she paid it off about 3 months later.
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  #106  
Old 08-28-2018, 04:55 PM
wtmeyer wtmeyer is offline
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You are absolutely correct. Nobody leases a car and then buys it out of lease 4 months later. You still have to pay the full cost of the lease contract, plus the residual. You end up paying all (ot almost all)of the rent charge. Plus the MF on this lease is not that good. Equates to 3.84%, which on a $70K car adds up quickly. You are better off buying (financing) the car for the lwoest rate you can get from BMWFS and then paying it off in 4 months.
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  #107  
Old 08-28-2018, 05:00 PM
wtmeyer wtmeyer is offline
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You do NOT want to lease if you plan to pay off the car in 4 months. You would have to pay all the remaining payments plus the residual to get out of the lease. There might be a small discount available, but this is not the way to go. You should be able to get the Owner Loyalty rebate on a finance as well, and the overall cost is lower. You don;t have to pay the stupid $925 Lease Fee.
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  #108  
Old 08-28-2018, 05:04 PM
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the MF on this lease is not that good. Equates to 3.84%
just a thought on how the 3 month and 5 year treasury rate changed in the last year
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  #109  
Old 08-28-2018, 05:10 PM
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If you have the best credit score/rating, what is the best interest rate that BMW FS will offer on a car loan (purchase)? I suppose I could do better with a 3rd party lender, but then you lose the financing incentive I would think.
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  #110  
Old 08-28-2018, 05:39 PM
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If you have the best credit score/rating, what is the best interest rate that BMW FS will offer on a car loan (purchase)? I suppose I could do better with a 3rd party lender, but then you lose the financing incentive I would think.
It depends on your locale, the model and MY. In CA, for the 5-series, I think it's 4.9% for 36 to 60 mo term.
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  #111  
Old 08-28-2018, 05:54 PM
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It depends on your locale, the model and MY. In CA, for the 5-series, I think it's 4.9% for 36 to 60 mo term.
Wow that sounds pretty high. Even the BMWFS lease with a money factor of 0.00166 is at 3.98%. And with stellar credit I think rates from 3rd parties for car loans are as low as 3%, maybe a bit less. A friend of mine did that for a different brand car - will ask what his loan rate is.
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  #112  
Old 08-28-2018, 06:19 PM
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S. CA dealers

Iíve had a great experience (price and service) with Kwin Knight at Steve Thomas (Camarillo, CA). Heís the internet manager there.
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  #113  
Old 08-28-2018, 06:50 PM
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Quote:
Originally Posted by rtlee View Post
Wow that sounds pretty high. Even the BMWFS lease with a money factor of 0.00166 is at 3.98%. And with stellar credit I think rates from 3rd parties for car loans are as low as 3%, maybe a bit less. A friend of mine did that for a different brand car - will ask what his loan rate is.
Again look at the treasury rates. There is no way someone would loan money for 3% at the moment.

Just to give you an example:

Autonation's annual financial report 2017:

"Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new vehicle inventories"

"Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 2.6% during 2017 and 2.0% during 2016 "


So in 2017 Autonation borrowed money for 2.6% for buying new cars from manufacturers and selling it to customers. If the sold vehicle was financed by Autonation, the customer's rate should obviously exceed 2.6% by a good margin.
Based on the annual report Autonation's borrowing costs are around 0.8% higher than 5 year treasury rates. So their cost of borrowing in 2018 is around 3.2%.

BMW FS's borrowing costs should be similar. In this perspective BMW's 3.9% seems very good.
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  #114  
Old 08-28-2018, 06:57 PM
rtlee rtlee is offline
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Originally Posted by acoste View Post
Again look at the treasury rates. There is no way someone would loan money for 3% at the moment.

Just to give you an example:

Autonation's annual financial report 2017:

"Vehicle floorplan payable-trade reflects amounts borrowed to finance the purchase of specific new vehicle inventories"

"Our new vehicle floorplan facilities utilize LIBOR-based interest rates, which averaged 2.6% during 2017 and 2.0% during 2016 "


So in 2017 Autonation borrowed money for 2.6% for buying new cars from manufacturers and selling it to customers. If the sold vehicle was financed by Autonation, the customer's rate should obviously exceed 2.6% by a good margin.
Based on the annual report Autonation's borrowing costs are around 0.8% higher than 5 year treasury rates. So their cost of borrowing in 2018 is around 3.2%.

BMW FS's borrowing costs should be similar. In this perspective BMW's 3.9% seems very good.
Yes, my friend got back to me and said he got 3.74% for 72 months. So based on this the BMWFS rate seems fairly competitive. Surprisingly the lease rate at 3.984% being offered current is comparatively very good as well (I think this is the buy rate that most dealers seem willing to give) and the residual at a whooping 61% is fantastic. Audi for example is only 46% for a 2018 A6. Also as a side note, I'm not saying that someone may want to lease instead of buy due to these rates, but rather for someone who wants to lease for whatever reasons, the MF/rate and residual makes it attractive IMO as far as leases go (but again, not a reason alone for someone to lease vs buy).
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  #115  
Old 08-28-2018, 07:18 PM
jjrandorin jjrandorin is offline
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Again look at the treasury rates. There is no way someone would loan money for 3% at the moment.

.
BMW can lend money at whatever rates they want to. They currently are running a special at 0.9% interest for someone who wants to buy a demo / loaner car for example (for up to 60 months).

You can get 1.9 for CPO vehicles (2013-2016): http://cpo.bmwusa.com/financing-and-...ffers/print/42

Mini (still BMW FS) is offering 1.9% for up to 72 months on 2018 and 2019 new mini's.

https://www.miniusa.com/tools/shoppi...rtible/2019///

BMW sets the rates however they want to move the cars they want to move. I am sure there are underlying principles, but saying "there is no way would loan money at 3%" is much too broad a statement, regardless of whatever the financial markets are doing.

With that being said, BWM does tend to move rates in step with the rates rising other places, so when rates rise, BMWs lease and loan rates generally rise with it, but there are always exceptions like above.
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  #116  
Old 08-28-2018, 07:40 PM
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Originally Posted by jjrandorin View Post
BMW can lend money at whatever rates they want to. They currently are running a special at 0.9% interest for someone who wants to buy a demo / loaner car for example (for up to 60 months).

You can get 1.9 for CPO vehicles (2013-2016): http://cpo.bmwusa.com/financing-and-...ffers/print/42

Mini (still BMW FS) is offering 1.9% for up to 72 months on 2018 and 2019 new mini's.

https://www.miniusa.com/tools/shoppi...rtible/2019///

BMW sets the rates however they want to move the cars they want to move. I am sure there are underlying principles, but saying "there is no way would loan money at 3%" is much too broad a statement, regardless of whatever the financial markets are doing.

With that being said, BWM does tend to move rates in step with the rates rising other places, so when rates rise, BMWs lease and loan rates generally rise with it, but there are always exceptions like above.
I should have added "financing for profit". Autonation can't go lower.

This could be related to getting rid of unsold inventories however BMW can put their profit wherever they want since it is one big company and their pricing strategy might involve tax optimization or marketing benefits.

BMW Germany owns BMW NA, who owns BMW FS. They can jack up the car's price and lose on financing or the other way around. Cumulative net profit goes to the same company.
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  #117  
Old 08-28-2018, 09:14 PM
jjrandorin jjrandorin is offline
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I should have added "financing for profit". Autonation can't go lower.

This could be related to getting rid of unsold inventories however BMW can put their profit wherever they want since it is one big company and their pricing strategy might involve tax optimization or marketing benefits.

BMW Germany owns BMW NA, who owns BMW FS. They can jack up the car's price and lose on financing or the other way around. Cumulative net profit goes to the same company.
Right, we totally agree on the above.

On your autonation example, "Autonation" is not lending to customers when they buy a car (so the rate they pay when they buy the cars is irrelevant for that discussion). Autonation pays interest at the rate you said above, and gets paid in full when they sell a car. They either arrange financing (through BMW FS or other banks) or accept straight cash from the customer (cash purchase) or cash on behalf of the customer (outside financing).

If autonation is arranging the financing, they have the opportunity to mark up the rates from whatever the "base rate" is at that time (advertised rates). In the example I stated above of 1.9 over 60 months, autonation ( or any other dealer) could mark up that rate by up to 1 percent.

Standard financing rates that BMW is advertising is 4.15 percent I believe (for tier 1 credit, on regular new cars, in my area of southern california). If someone rolled into the dealership to buy a car, they could get quoted at 5.15 percent, or anywhere between 4.15% and 5.15%. THAT profit would be for autonation, or any other dealer (using autonation simply because it was the example).

Same thing with leasing, they can mark up the rate on a lease a certain amount and that also becomes profit.

Neither of those have anything to do with their cost of buying their cars from a "what interest rate are they offering, though, because they dont finance cars, they arrange for financing.

I am not an economics major though, and do not track treasury notes etc, but I do know that main line dealers dont finance cars. "Buy here / pay here" places do, but those are not in the discussion (and are generally places to avoid).
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  #118  
Old 08-28-2018, 10:19 PM
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Autonation's cost of borrowing for cars is a pretty significant data. While they outsource financing, it shows how much it costs for a company to borrow money that are backed by depreciating cars at large scale.

Treasury notes are government borrowings. The buyer of the US treasury note (= treasury bill = T-bill = government bond) lends money to the US government. This is considered "risk free" loan since most likely the lender will get the money back. It is very unlikely that the US government goes bankrupt and can't pay it back.

Borrowing money to an individual for mortgage already has a lot more risk compared to a government. The individual can stop paying, house can burn down, economy changes, housing prices fall etc.. Therefore mortgages have higher risk than government bonds / treasury bills. Given the higher risk, lenders want higher rates as a compensation.

Borrowing money for a car has even higher risk since the car may not worth the book value at the time of liquidation, therefore lenders ask for even higher rates. Autonation's cost of borrowing shows the cost of risk of lending money for cars at a large scale. Borrowing to an individual has a lot more risk, that's where the credit score comes in.

Just imagine that, if all the US treasury, mortgage or car loans had the same interest rate, all the lenders would buy US treasury since that has the lowest risk of default and no one would lend money for homes, let alone cars.

Therefore the interest rate on car loans will be = treasury notes rate + administrative costs + cost of risk + bank's profit + dealer's commissions and markup.

If you see an interest rate lower than the US treasury notes + margin, that means the lender loses money on the financing and has other motivation to still offer those rates (get rid of inventories or get the profit through hidden fees or higher sales price or some marketing reason).

Also a company can't do whatever they want with their cash. The cash is given by investors who want higher returns than treasury bills (since they want compensation for the added risk). No investor would give money, accept the higher risks and lower than risk-free returns.
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  #119  
Old 08-29-2018, 09:39 AM
buckrboy6 buckrboy6 is offline
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Buying Strategy

Recommend you ask the dealer you choose about European delivery. I priced out my 440i at the Pensacola Florida dealership...and I tried to squeeze out the last nickel using every discount I could think of...dealer suggested I use European delivery which would cost about $3000 less. I took it. Got a vacation in Germany, treated like a king by BMW delivery in Munich...who then let me drive it for two weeks before shipping it to Pensacola for final delivery...all for the same cost I would have paid had I just taken delivery in Pensacola without the vacation. Vacation cost + new car order = about the same $ as just buying it.

Oh yeah, congratulations...know you'll love it
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  #120  
Old 08-29-2018, 09:58 AM
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Originally Posted by jjrandorin View Post
This deal does not make sense given your stated objectives. There is a lease acquisition fee of 925 which you would have to pay on a lease, and not have to pay on a finance contract. That 925 erases 925 of any incentive you would get for leasing.

If the Leasing incentive was 4k or something it would make sense, but given the fact that they are not even offering the same cap cost on the lease as the finance (which makes zero sense, other than the 925 lease acquisition fee does not exist in the finance quote), it doesnt make sense for you to do this, this way, in my opinion.
Appreciate all your comments! Since the salesman who submitted the lease knew my buyout strategy, I consider his offer tricky and sketchy. The CA who I test drove with has gone radio silent and I was leaning toward giving them the sale. Stupid! I got all the time in the world and I may just start over. I'm going to get a good deal! Car salesmen/dealers have a well earned reputation of shooting themselves in the foot.
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  #121  
Old 08-29-2018, 11:19 AM
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Appreciate all your comments! Since the salesman who submitted the lease knew my buyout strategy, I consider his offer tricky and sketchy. The CA who I test drove with has gone radio silent and I was leaning toward giving them the sale. Stupid! I got all the time in the world and I may just start over. I'm going to get a good deal! Car salesmen/dealers have a well earned reputation of shooting themselves in the foot.
You are trying to hack their system, they are defending themselves and then you call them stupid.
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  #122  
Old 08-29-2018, 12:28 PM
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You are trying to hack their system, they are defending themselves and then you call them stupid.
I don't understand you. I'm trying to get the best deal, not "hacking" anything. How would you describe a salesperson who walks away from a close? I call that stupid!
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  #123  
Old 08-29-2018, 12:58 PM
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I don't understand you. I'm trying to get the best deal, not "hacking" anything. How would you describe a salesperson who walks away from a close? I call that stupid!
What I consider hacking is trying to get the rebate for financing and paying off the loan as soon as possible.
The rebate for financing is there to lurk the customer into a deal where he would pay more in total for the car over the years (even with the discount) than if he would have bought the car for cash.
It is clearly not a winning deal for them to offer you the rebate but also give up on future income from your monthly payments. I read that they can't deny a customer's pay off request. It can be paid off even after one month. So they can't protect themselves against that.

Where I agree with you, they should have offered a finance deal instead of a lease deal. I don't know what was their motivation there.
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  #124  
Old 08-29-2018, 05:37 PM
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You are not taking into account that Autonation only holds the car for a month or two. A typical car buyer holds the note for 60 months. The dollar amounts of financing are vastly different. Also, Autonation makes money by selling loans for their lenders. When I bought my last BMW, BMWFS was the hghest rate. I had lines up financing through my Credit Union about 1% below BMWFS best offer. THe Finance guy quoted me a rate through one of his lender 0.10% lower than my credit union. WHne I told him I would rather pay my credit union an extra 0.10%, he lowered the rate about 0.5% below the credit union rate. That saved me about $500 over the course of the loan, so I went with his financing. He made money and I saved money. Win-Win for both of us. The point is, everything is negotiable.
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  #125  
Old 08-29-2018, 05:41 PM
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Mein Auto: 550i GT
The dealership and salesman was right to walk away from the deal since you told them you were going to pay of the car in 4 months. The dealership can get in trouble with BMWFS if they know you are going to do this. My advice, don't tell the next dealer anything about paying off the note quickly. You now know the rebates and incentives available. Use that knowledge to negotiate your best deal, and then pay off the loan 4-6 months after you have the car.
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