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Old 07-09-2018, 08:28 PM
jjrandorin jjrandorin is offline
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Big Changes in lease buyout pricing

Consider this an "INFORM" to anyone that is (like me) contemplating buying out their existing lease in the upcoming months.

The pricing for lease buyouts has changed, pretty drastically. In the past, we advised a savvy customer to approach their lease buyout with several dealers. We all knew that dealers get a special "market based" rate, and we could negotiate to buy the car for a markup from that rate, instead of the Residual. There was a "loyalty adder" that was added to the market price when selling back to the same person, that was added to the market price.

This ment that sometimes a person could save a lot of money off their RV price by negotiating the price of their car with a friendly dealer.

As of July program changes, this process will change for someone wanting to buy their OWN car off lease.

The basic change is, instead of a person being able to work with a dealer to buy the car for "an amount" over the dealers market price, now a customer only gets a few hundred dollars off the RV of the car.

Additionally, at least from how it was explained to me, if a center is found to have sold a car to the person leasing it, or the same household, etc, for less than the "RV minus the XXX discount given to someone buying their own car", the center would be charged back the difference between the "dynamic price" (market price) and the RV + 500.

In effect, this means that a center can not currently negotiate on a lease buyout, as there is nothing there for them to negotiate, when selling back to the same person. Its the "RV minus a couple hundred to a couple thousand depending on the vehicle".

Let me give you an example I was shown.

A BMW with a RV of 28,XXX has a discount of 8XX if sold to the original person who leased it. The BMW centers "market rate" on this car was 18,XXX. What does this actually mean?

This means that, for example, if the center decided to put this car on their used car lot for 25,XXX they would make a decent profit on it... as long as they did not sell it to the person who leased it. If the person who leased it bought it, the center would be charged "the difference between the market price and the RV +500".

These numbers were given to me as an example (its not my vehicle) but its not hard to imagine a situation where a person sees their own car advertised at a price THEY can not buy it at.

One other thing. I received this information from two different sources, and I trust both completely. I was looking into buying my own upcoming lease return, and received information on these changes from people I trust completely.

Figured I would share.
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Old 07-09-2018, 09:31 PM
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Big Changes in lease buyout pricing

Thanks JJ. What a blow to loyal customers. How can they justify charging $28k for a car thatís market-based value is $1000s less.

Clearly BMWNA doesnít care about the US market anymore.

The residual on my 15 X1 was $28300 and used ones this last March were being sold at less than $20,000. Why they hell would I pay $7000+ more for the car. What lender besides BMW financial would make that car loan?

What a shame.
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Old 07-09-2018, 09:50 PM
namelessman namelessman is offline
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This change pretty much eliminates the lease buyout discount options that many festers love to have.

In a way though this may pop up the resale values of used bimmers too.

JJ, what is your current strategy upon this buyout change?

Last edited by namelessman; 07-09-2018 at 09:54 PM.
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Old 07-09-2018, 09:54 PM
Autoputzer Autoputzer is online now
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BMW sales in the U.S. have increased drastically over the last ten years or so. Subsidized leasing is one of the ways they traded short-term profits for long term growth. I guess they've reached their sales goals, or their market share goals, and it's time for them to get back to making profit.

I don't lease, but I ended up using other rebates and incentives to get our last BMW for $2300 below "dealer invoice, and a 1.9%, 60-month for my total cost before taxes. I could have got another $1000 off, but I owed my BMW dealership a really big favor and I didn't mind paying them back.

Even with those subsidized leases, unless you were in a high tax bracket and can sneak a BMW lease in as a business expense, it was still cheaper to buy and keep a car six, seven, eight years. Now, it will be even more so.
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Old 07-09-2018, 10:02 PM
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Originally Posted by Autoputzer View Post
Even with those subsidized leases, unless you were in a high tax bracket and can sneak a BMW lease in as a business expense, it was still cheaper to buy and keep a car six, seven, eight years. Now, it will be even more so.
Lease rate is creeping past 4.5%, but the net delta to risk free rate is still around 2.5%-3%(holds true as far back as dotcom days).

With this 2.5%-3% rate delta, the cost of lease with 55% RV and 85% cap cost(wrt MSRP of $50k) is still around 9-10%.

Now that the RV is close to FMV, with no discount on lease buyout, the lease would be 10% extra cost on top of cash buy.

RobertA did consistently make good points that the costs of fund(e.g. opportunity costs) should be considered for cash buy.

My alternative perspective is that, even with rates heading above 2%+, the net delta that BMWFS tacks on is still the same 2.5-3%(not cheap), so, the lack of committed cash flow versus non-certain future cash flow is still worth it to me.
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Old 07-09-2018, 10:17 PM
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Originally Posted by kjboyd View Post
Thanks JJ. What a blow to loyal customers. How can they justify charging $28k for a car that's market-based value is $1000s less.

Clearly BMWNA doesn't care about the US market anymore.

The residual on my 15 X1 was $28300 and used ones this last March were being sold at less than $20,000. Why they hell would I pay $7000+ more for the car. What lender besides BMW financial would make that car loan?

What a shame.
My guess (and the guess of the person I got the information from) is that BMW is putting an emphasis on moving new metal. They dont expect YOU to buy it.. they are financially making that difficult. They want someone else to buy "your" car, and you to buy something else. Time will tell if that "something else" is BMW or not, though. /Shrug.

We always say "the factories have to run" etc. They need to sell cars, and with interest rates rising, etc maybe more were considering keeping their current car vs buying a new one? I dont know, but its likely they have number crunchers somewhere providing data.
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Old 07-09-2018, 10:22 PM
jjrandorin jjrandorin is offline
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Quote:
Originally Posted by namelessman View Post
This change pretty much eliminates the lease buyout discount options that many festers love to have.

In a way though this may pop up the resale values of used bimmers too.

JJ, what is your current strategy upon this buyout change?
Thats a good question, and I dont know yet. I am hoping that there is a change between now, and the time I HAVE to do something. If not, it would likely take purchasing my current lease car off the table.

I would then be deciding between a new BMW, other brands, or perhaps someone elses BMW (a used one) which I would likely be able to get for a decent price since they couldnt keep it either... rofl.


A part of me wonders if there are other drivers for this (and other) recent changes that have to do with the relationship between our countries... but I have no idea, and this is not the board for that discussion.
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Old 07-09-2018, 10:33 PM
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Did anyone really expect "BMW's loss is our gain" to last forever? First, the lease is discounted with a high RV, then we want to turn the tables on BMW when it comes to buying out our (cherry) car later on.
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Old 07-09-2018, 10:57 PM
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Originally Posted by jjrandorin View Post
A part of me wonders if there are other drivers for this (and other) recent changes that have to do with the relationship between our countries... but I have no idea, and this is not the board for that discussion.
My take is that the end of ZIRP and free money basically force everyone to play honest again and things revert to norm(just like clockwork).
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Old 07-09-2018, 10:58 PM
namelessman namelessman is offline
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Did anyone really expect "BMW's loss is our gain" to last forever? First, the lease is discounted with a high RV, then we want to turn the tables on BMW when it comes to buying out our (cherry) car later on.
The RV discount is not that crazy these days, like 55-60%, right?
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Old 07-10-2018, 07:23 AM
jjrandorin jjrandorin is offline
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Did anyone really expect "BMW's loss is our gain" to last forever? First, the lease is discounted with a high RV, then we want to turn the tables on BMW when it comes to buying out our (cherry) car later on.
They are going to sell it anyway, and its my opinion its a very bad "look" for a customer to be told, in effect "I can sell your car to anyone BUT you for 25,XXX. If I sell it to YOU, it will be 28,XXX".

Also, that first price of 25,XXX has thousands of dollars of profit in it for the dealer, while the sale to the previous leasee has none.

Its my hope that this policy change is a short term thing, but thats just a hope of mine personally, with no (zero) corroboration from anyone.

@Nameless, I believe the RVs of BMWs are still inflated, just not as much. A "typical" BMW (read non M) should probably have a RV closer to 50 percent for it to be "actual" RV. Not 55-60, but 50-53 or so would be my unscientific guess.

There is no way a BMW 3 series should have a RV of 60% in my opinion, yet a 2018 3 series currently has a 61% RV (in the last year of its existence no less). Obviously inflated.

2018 5 series RV is also 61 (both of those are 36/10). I also believe that is inflated, at least 5-6% but likely closer to 8%.
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Old 07-10-2018, 07:33 AM
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Originally Posted by Robert A View Post
Did anyone really expect "BMW's loss is our gain" to last forever? First, the lease is discounted with a high RV, then we want to turn the tables on BMW when it comes to buying out our (cherry) car later on.


Quote:
Originally Posted by jjrandorin View Post
They are going to sell it anyway, and its my opinion its a very bad "look" for a customer to be told, in effect "I can sell your car to anyone BUT you for 25,XXX. If I sell it to YOU, it will be 28,XXX".

Also, that first price of 25,XXX has thousands of dollars of profit in it for the dealer, while the sale to the previous leasee has none.

Its my hope that this policy change is a short term thing, but thats just a hope of mine personally, with no (zero) corroboration from anyone.

@Nameless, I believe the RVs of BMWs are still inflated, just not as much. A "typical" BMW (read non M) should probably have a RV closer to 50 percent for it to be "actual" RV. Not 55-60, but 50-53 or so would be my unscientific guess.

There is no way a BMW 3 series should have a RV of 60% in my opinion, yet a 2018 3 series currently has a 61% RV (in the last year of its existence no less). Obviously inflated.

2018 5 series RV is also 61 (both of those are 36/10). I also believe that is inflated, at least 5-6% but likely closer to 8%.
JJ pretty well sums it up. The point is that the dealer will sell it to someone at a margin that the dealer finds worthwhile. The issue is that BMWFS is artificially manipulating the transaction to all but ensure that someone isn't you, the original lessee.
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Old 07-10-2018, 08:17 AM
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One thing I want to make clear, at least for me, I am not blaming the dealer, etc. They also have to play the hand that is dealt. They obviously have some influence with BMW, and if this hurts the bottom line of their business, I would guess they will address it with BMW. BMW has to make decisions based on their business desires, and I get to decide how I want to react to that.

As I said, I dont know what I will do, but in any case I wont be "raising a pitchfork" or anything. I will make my decision based on what I want, and what I am willing to pay for, or not.. but that doesnt mean I am going to go into a dealer and yell at them (or yell and scream here).
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Old 07-10-2018, 09:15 AM
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Looks like, BMWNA is testing the water trying to recoup more money out of lease returns.
If lesse is interested in buying the car at lease ends, well.... BMWNA wonder why? cause, most likely the car is in very good condition, trouble free etc. In short it's worth more than RV.

BMWNA is already adjusting everything, from MF and incentives based on hot market vs slow market regions in the US. So I am not surprise with this move. Every penny matters now in the slowing car market n high interest rates, either adept-n-survive or become dinosaur.
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Old 07-10-2018, 09:45 AM
Robert A Robert A is offline
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It's not that one shouldn't do everything possible to work within the system. I'm only saying that BMW doesn't want you to benefit from the inflated residual with a further discount on the buyout. They're taking losses on the residual so that customers will turn around and lease again. They're not trying to allow the few of us, who really understand how this system works, the ability to game the system.

You should see how Lexus/Toyota puts up an even more effective firewall against this type of thing. They won't provide a dealer with a buyout price until days after the car has been turned in.

Quote:
Originally Posted by jjrandorin View Post
They are going to sell it anyway, and its my opinion its a very bad "look" for a customer to be told, in effect "I can sell your car to anyone BUT you for 25,XXX. If I sell it to YOU, it will be 28,XXX".

Also, that first price of 25,XXX has thousands of dollars of profit in it for the dealer, while the sale to the previous leasee has none.

Its my hope that this policy change is a short term thing, but thats just a hope of mine personally, with no (zero) corroboration from anyone.

@Nameless, I believe the RVs of BMWs are still inflated, just not as much. A "typical" BMW (read non M) should probably have a RV closer to 50 percent for it to be "actual" RV. Not 55-60, but 50-53 or so would be my unscientific guess.

There is no way a BMW 3 series should have a RV of 60% in my opinion, yet a 2018 3 series currently has a 61% RV (in the last year of its existence no less). Obviously inflated.

2018 5 series RV is also 61 (both of those are 36/10). I also believe that is inflated, at least 5-6% but likely closer to 8%.
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Old 07-10-2018, 09:57 AM
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Big Changes in lease buyout pricing

FYI, I got this new policy confirmed from my CA on the east coast as well. He told me it was a total surprise to them and they donít understand why BMWFS wants to penalize the original leasee.

Itís a shame. I was for the 1st actually considering buying out my X5 at lease end. Well, maybe it will change by Feb 2020.
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Old 07-10-2018, 12:29 PM
KingpenM3 KingpenM3 is offline
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Well hell. Now I'm not sure what I should do. My '16 M3 is coming off of lease in November, and I only have 11000 miles on it. I was planning on keeping this car forever, but I can't justify paying full retail on the car as if it had the full 30000 miles that the lease allowed.

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Old 07-10-2018, 12:32 PM
Robert A Robert A is offline
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It may be full retail, but you're not being disadvantaged since you've only paid the car down to that figure. The residual is just the remainder that would be due if you considered the lease as a loan.

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Originally Posted by KingpenM3 View Post
Well hell. Now I'm not sure what I should do. My '16 M3 is coming off of lease in November, and I only have 11000 miles on it. I was planning on keeping this car forever, but I can't justify paying full retail on the car as if it had the full 30000 miles that the lease allowed.

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Old 07-10-2018, 01:03 PM
KingpenM3 KingpenM3 is offline
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It may be full retail, but you're not being disadvantaged since you've only paid the car down to that figure. The residual is just the remainder that would be due if you considered the lease as a loan.
Makes sense, but my RV is $47k. Looks like comparable cars are selling in the low 40's.
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Old 07-10-2018, 01:32 PM
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Makes sense, but my RV is $47k. Looks like comparable cars are selling in the low 40's.
I did a quick search and most of the 16 M3s I saw were priced in the 50s. did not look into options, etc. so no idea how that compares to your car...also KBB puts trade value at just under $50k with standard options. Fully understand these are just arbitrary data points, but maybe you're not as upside down as you think. Best way to know (absent access to Mannheim data) is to take it to a CarMax and do a KBB cash offer and see what comes up. That should give you a good ballpark of what a dealer would pay for your car.

There is some value in knowing EXACTLY what you are buying when you get your car off lease.

Plus at RV of $47k minus the discount (lets say it is $500 for argument sake) you're getting the car for $46.5K. I'd be willing to bet that by the time the dealer bought your car and CPO'd it, the price would be at least that much if you were to buy your vehicle. Even if it's value was $43k, I would feel a lot better spending an extra couple of grand and know how my car was cared for rather than save a couple grand on a crap shoot, but that is just me.
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Old 07-10-2018, 01:35 PM
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If your numbers are correct, it is unlikely that anyone will pay the residual value for your car. If you wish to buy it, you can always make an offer of the current market value. If the dealer declines to sell, move on to another car.
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Old 07-10-2018, 01:42 PM
Alpine300ZHP Alpine300ZHP is offline
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My guess (and the guess of the person I got the information from) is that BMW is putting an emphasis on moving new metal. They dont expect YOU to buy it.. they are financially making that difficult. They want someone else to buy "your" car, and you to buy something else. Time will tell if that "something else" is BMW or not, though. /Shrug.

We always say "the factories have to run" etc. They need to sell cars, and with interest rates rising, etc maybe more were considering keeping their current car vs buying a new one? I dont know, but its likely they have number crunchers somewhere providing data.


JJ. You hit the nail on the head. They want the lease returns to come back into the fold so that they can be resold as CPO cars to a customer who wonít or canít buy/lease a new car. I suspect that BMW envisions a CPO buyer is different buyer from a new car buyer and envisions that having a new car buyer purchase his/her off-lease car is taking a new car buyer out of the market and keeping a CPO buyer away because of one less CPO car being available. I have doubts that this strategy is a good idea, but I think the intent is to keep the leasing people on the leasing wheel. So, now you have to see if you can get a local dealer (Greg P.?) to make a new 440 come closer to what you paid for your 435 or jump ship to something more competitive in pricing. For a loyalist like yourself, I imagine someone somewhere is going to move earth to keep you driving new BMWís.


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Old 07-10-2018, 01:45 PM
Alpine300ZHP Alpine300ZHP is offline
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The RV discount is not that crazy these days, like 55-60%, right?


Right. But back when JJ leased his car, the RV was much higher. Low 60ís for 10k miles per year IIRC.


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Old 07-10-2018, 01:49 PM
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Originally Posted by CTSoxFan View Post
I did a quick search and most of the 16 M3s I saw were priced in the 50s. did not look into options, etc. so no idea how that compares to your car...also KBB puts trade value at just under $50k with standard options. Fully understand these are just arbitrary data points, but maybe you're not as upside down as you think. Best way to know (absent access to Mannheim data) is to take it to a CarMax and do a KBB cash offer and see what comes up. That should give you a good ballpark of what a dealer would pay for your car.



There is some value in knowing EXACTLY what you are buying when you get your car off lease.



Plus at RV of $47k minus the discount (lets say it is $500 for argument sake) you're getting the car for $46.5K. I'd be willing to bet that by the time the dealer bought your car and CPO'd it, the price would be at least that much if you were to buy your vehicle. Even if it's value was $43k, I would feel a lot better spending an extra couple of grand and know how my car was cared for rather than save a couple grand on a crap shoot, but that is just me.


This is spot on. For some people, the RV will be close to market value and, for those people, buying out the lease will still make sense if that is what they wish to do. This scenario is most likely to happen on F80ís since they are currently BMWís best car for value retention.


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Old 07-10-2018, 03:05 PM
Greg @ East Bay BMW Greg @ East Bay BMW is offline
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Just had this happen to me today.

Customer wanted to buy his 3 Series.

RV is $33k

Market Value is 22k

Needless to say I didn't make a sale today.

Greg
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