End of lease question

2017 BMW 440 xi Convertible, 23,000 miles (2 month old new tires)
Cold weather package, 19 inch premium wheels, rear, side/top view cameras, LED headlights, red leather bucket seats, M performance (brakes & suspension), Harmon Kardon speakers etc.

I am 5 months away from my lease expiration and the residual value of my car is set at $44,000 by BMWFS and they said that value is non-negotiable. I am thinking of purchasing the car but it doesn’t seem prudent from a value perspective especially given that warranty would expire. What do you guys think? Are there other considerations?

Please advise.

Originally Posted by cubsnlinux

2017 BMW 440 xi Convertible, 23,000 miles (2 month old new tires)
Cold weather package, 19 inch premium wheels, rear, side/top view cameras, LED headlights, red leather bucket seats, M performance (brakes & suspension), Harmon Kardon speakers etc.

I am 5 months away from my lease expiration and the residual value of my car is set at $44,000 by BMWFS and they said that value is non-negotiable. I am thinking of purchasing the car but it doesn’t seem prudent from a value perspective especially given that warranty would expire. What do you guys think? Are there other considerations?

Please advise.

Wait until you are less than 90 days out and call BMW FS and ask what the price of the car is again. They might offer a small discount off the residual (likely less than 1k).

If you are planning on buying the car, you will be likely paying close to residual. If there is any discount to be had it will be directly from BMW FS. Dealers no longer have the ability to negotiate on lease buyout.

They dont want to sell your car to you, they want to sell it to someone else (anyone else buy you) and they want YOU to buy a new BMW... right now preferably financing, not leasing, right now.

Yeah, $44K doesn't seem like a bargain, and they're not doing you any favors.

However, you should still have some warranty left, and you know the car and the history of it (unlike just any old used car that you might replace it with) so that should be worth something.

You do know that the car came with a 48 month/50K warranty, right?

As mentioned, BMWFS will likely offer a small discount off the residual, but not a huge amount. Your best bet is to talk to your dealer and see if they will take the car back and then re-sell it to you. There have been grumblings around the forums that dealers are not supposed to do this, but when I spoke with BMWFS (I am also coming to the end of my lease) they told my dealer that they could do "what ever they needed to do to close the deal", so you might have some wriggle room there.

Originally Posted by ksuderman

There have been grumblings around the forums that dealers are not supposed to do this, but when I spoke with BMWFS (I am also coming to the end of my lease) they told my dealer that they could do "what ever they needed to do to close the deal", so you might have some wriggle room there.

That is new info. Starting last July(2018) BMWFS policy is to disallow dealer to sell back lease return to original lessee for a price less than contracted RV minus BMWFS "allowance"(e.g. F30 was $4000). If dealer is caught doing that, BMWFS will charge back the difference of sales price, and contracted RV minus allowance, to the dealer.

Do keep us informed how your negotiation goes, and if you can get a lease buyout price significantly lower than RV(say, $8k+ off?).

Originally Posted by namelessman

That is new info. Starting last July(2018) BMWFS policy is to disallow dealer to sell back lease return to original lessee for a price less than contracted RV minus BMWFS "allowance"(e.g. F30 was $4000). If dealer is caught doing that, BMWFS will charge back the difference of sales price, and contracted RV minus allowance, to the dealer.

Do keep us informed how your negotiation goes, and if you can get a lease buyout price significantly lower than RV(say, $8k+ off?).

That is what I understood as well, which is why I thought BMWFS's remarks were interesting. However, it could also be that, "they can do what they need to do" is BMWFS-speak for "if they want to eat the chargeback." I also read an article somewhere (can't find it now) that said if a dealer buys the car, either directly from BMWFS or at auction, it is theirs to do with as they please. If the sale is not financed through BMWFS I am not sure what they would "chargeback" against as they are not a participant in the transaction.

But I never went further than that initial discussion as I ended up opting for a new M340i... My dealer also has cars similar to mine on the lot (minus a few key features) for not much less than my RV so I doubt I could get close to $8k if I did pursue it.

I am fairly certain I am the one who shared the original information last year about the changes in lease buyout here on Bimmerfest. I had the actual dealer facing bulletin sent to me (the entire thing) by a friendly BMW Sales Manager. I only posted excerpts from it here... the parts that were relevant to us as purchasers, not the dealer facing explanations.

The policy MAY have changed, but if so, it was in place at least until January of this year when I turned in my wifes X5 and got her a X3.

One thing to remember is, BMW can not prevent the person from buying their car. They chargeback the DEALER. So, of course BMW FS is going to say "the dealer is free to do with whatever they want with the car"... because thats the truth. If the dealer was found to have marked down the car to the original owner, they would be charged "the stated residual + 500". They are not "prevented" from doing so. It just makes zero sense for them to sell a car at less than its stated residual, and risk that penalty. A person can pay stated residual to the dealer instead of BMW FS (maybe the dealer can help them find better firnancing, or maybe they are bundling it with extended warranty they want to finance etc.

There are reasons why someone might still buy from the dealer, even if the price is the same as through BMW FS. BMW FS is not wrong however... the dealer is free to do whatever they want... they are their own entity after all. If they want to lose that money its on them.

BMW FS is not going to tell ANYONE that "the dealer cant do that for you". They are always going to say "talk to your dealer" unless its about the terms of your in place contract with them on a specific car.

BMW can change plans at any time so its always worthwhile to check when in the process of executing (or planning to execute "soon") any transaction on a BMW. With that being said, I dont think this policy has changed but since I am not in the market I have not / will not be reaching out to my Sales Manager contact to see if the policy has changed as of this month.... I doubt it though, and BMW FS saying the dealer can do with whatever they want is no indication at all of any sort of change in this policy.

Originally Posted by jjrandorin

I am fairly certain I am the one who shared the original information last year about the changes in lease buyout here on Bimmerfest. I had the actual dealer facing bulletin sent to me (the entire thing) by a friendly BMW Sales Manager. I only posted excerpts from it here... the parts that were relevant to us as purchasers, not the dealer facing explanations.

The policy MAY have changed, but if so, it was in place at least until January of this year when I turned in my wifes X5 and got her a X3.

One thing to remember is, BMW can not prevent the person from buying their car. They chargeback the DEALER. So, of course BMW FS is going to say "the dealer is free to do with whatever they want with the car"... because thats the truth. If the dealer was found to have marked down the car to the original owner, they would be charged "the stated residual + 500". They are not "prevented" from doing so. It just makes zero sense for them to sell a car at less than its stated residual, and risk that penalty. A person can pay stated residual to the dealer instead of BMW FS (maybe the dealer can help them find better firnancing, or maybe they are bundling it with extended warranty they want to finance etc.

There are reasons why someone might still buy from the dealer, even if the price is the same as through BMW FS. BMW FS is not wrong however... the dealer is free to do whatever they want... they are their own entity after all. If they want to lose that money its on them.

BMW FS is not going to tell ANYONE that "the dealer cant do that for you". They are always going to say "talk to your dealer" unless its about the terms of your in place contract with them on a specific car.

BMW can change plans at any time so its always worthwhile to check when in the process of executing (or planning to execute "soon") any transaction on a BMW. With that being said, I dont think this policy has changed but since I am not in the market I have not / will not be reaching out to my Sales Manager contact to see if the policy has changed as of this month.... I doubt it though, and BMW FS saying the dealer can do with whatever they want is no indication at all of any sort of change in this policy.

Thanks for the clarifications. My lease (440i M sport convertible) is up in 6 1/2 months and the RV on the car is $40,000. I will have about 15,000 miles on it at that time. I made the mistake (in my opinion) of trading in my C5 Corvette when I leased this car and the dealers "gave" me $8,000 for it. So basically I put $8,000 down at lease inception. While I am not enamored with the car, there is nothing wrong with it, but as I said, I made the mistake of trading in my C5, or maybe I should say I made the mistake of not getting another Corvette.
If I ever get another car (I am now 74 years old), it will NOT be a BMW (maybe a Lexus?), but for now I will buy car for whatever (RV or some slight discount from that if they offer) and enjoy it.
It seems to me that if I just turned this car back in at the end of the lease it would be tantamount to throwing that $8,000 down the drain, so I am going to keep the car, buy it (don't know who I will have finance) and hope that it will provide me reliable service in the future.
Any comments??
Thanks
Luckstr



Sent from my iPad using Bimmerfest mobile app

Originally Posted by luckstr

It seems to me that if I just turned this car back in at the end of the lease it would be tantamount to throwing that $8,000 down the drain, so I am going to keep the car, buy it (don't know who I will have finance) and hope that it will provide me reliable service in the future.
Any comments??
Thanks
Luckstr

The $8000 was spent to reduce(or "buy down") the depreciation amount that BMWFS charges for the lease term.

E.g. negotiated price is $50k(say, MSRP $60k), and RV is $30k.

The depreciation paid in the lease is $20k. The $8k reduces that $20k to $12k, and then in turn reduces monthly(principal + interest)

In short, the $8000 is not thrown down the drain. For a 36-month lease(e.g.), that $8000 is consumed $222 per month, and it is prudent to not exit lease early to fully utilize that pre-paid $8000.

Originally Posted by jjrandorin

If the dealer was found to have marked down the car to the original owner, they would be charged "the stated residual + 500".

Local President's guys said the chargeback = RV - sales price - $4000(for F30), back when the playbook to dealer says F30 discount was $4000.

Your thread says the same too, correct?

Or your document from trusted source say definitively as difference of sales price and "the stated residual + 500"?

Originally Posted by namelessman

Local President's guys said the chargeback = RV - sales price - $4000(for F30), back when the playbook to dealer says F30 discount was $4000.

Your thread says the same too, correct?

Or your document from trusted source say definitively as difference of sales price and "the stated residual + 500"?

Im surprised at your interest in the mechanics of this, as I dont remember you, or the friends and family you normally mention helping with car purchases having leases. In any case...




The actual verbiage from the bulleten was:

"If this VIN is sold back to the same customer or household, or to a business related party, then a $500 charge will be billed in addition to the difference between the Standard Option A Quote (Center price) and the Customer Purchase Quote"

And for reference if anyone including OP following this thread wants to see the original discussion that I and nameless mentioned, that thread is here:

https://www.bimmerfest.com/forums/sh....php?t=1281042

EDIT: I edited this post just now. It had an explanation that probably just confused things more than needed, and may not have been 100% accurate. In any case, the quote above is from the bulletin. "Standard option A quote" is the price the dealership pays for the car, and "Customer purchase quote" is the price BMW FS is offering the car to the end customer for, including any discounts they have attached to that specific vin... so its the price the customer will pay buying the car directly from BMW FS.

Originally Posted by jjrandorin

EDIT: I edited this post just now. It had an explanation that probably just confused things more than needed, and may not have been 100% accurate. In any case, the quote above is from the bulletin. "Standard option A quote" is the price the dealership pays for the car, and "Customer purchase quote" is the price BMW FS is offering the car to the end customer for, including any discounts they have attached to that specific vin... so its the price the customer will pay buying the car directly from BMW FS.

Thanks for clarification. Your description makes sense.

Lease buyouts are alternatives of purchases so the mechanics do catch my (and friends/family's) interest.

E.g. RobertA's past few BMW lease buyouts were expertly executed with $10k-ish haircut from RV, and those discounts handsomely paid the lease fees + interest and beat even cash buys(which made great sense with ZIRP).

BMW lease buyout is not too cost effective now given RV is lowered, and no lease buyout FMV pricing.

Originally Posted by luckstr

Thanks for the clarifications. My lease (440i M sport convertible) is up in 6 1/2 months and the RV on the car is $40,000. I will have about 15,000 miles on it at that time. I made the mistake (in my opinion) of trading in my C5 Corvette when I leased this car and the dealers "gave" me $8,000 for it. So basically I put $8,000 down at lease inception. While I am not enamored with the car, there is nothing wrong with it, but as I said, I made the mistake of trading in my C5, or maybe I should say I made the mistake of not getting another Corvette.
If I ever get another car (I am now 74 years old), it will NOT be a BMW (maybe a Lexus?), but for now I will buy car for whatever (RV or some slight discount from that if they offer) and enjoy it.
It seems to me that if I just turned this car back in at the end of the lease it would be tantamount to throwing that $8,000 down the drain, so I am going to keep the car, buy it (don't know who I will have finance) and hope that it will provide me reliable service in the future.
Any comments??
Thanks
Luckstr



Sent from my iPad using Bimmerfest mobile app

As namelessman mentioned, when you put money down on a lease, it goes to reduce the lease charges.

think of it this way. I am going to make up numbers.

Lets say the numbers of your lease work out that you will be paying 23,400 for the 36 month term, including taxes etc. That works out to 650 a month, so your monthly payment is 650 a month if you didnt put anything "down" for cap cost reduction.

Now, in this fictitious example, you traded in your 'vette, and got 8k credit for it. That 8k credit goes toward the cost of your lease, to pre pay part of it. So, now your 23,400 lease cost over 36 months has now been reduced to 15,400... because you have PRE PAID part of it.

So, your month payment is now 427.77 a month. You get to tell everyone what a great deal you have on your car, saying "im only paying $428 a month for this baby!" with a knowing nod and wink, and say " I drove a hard bargain".

On a lease, just like a purchase, you can make the monthly payment whatever you want it to be, by putting enough money down. The difference is, on a purchase the money goes to reduce the loan on something you will own at the end. On a lease, it just pre pays part of your charges.


The example I always go to, to explain, is lets say you rented an apartment for 1000 a month, and the lease term of the apartment was 3 years (36 months). The apartment costs 12k a year, or 36k total. If you choose to give the landlord 20k of that up front, then your monthly rent for the apartment is 444.44 a month. You are still paying 36k for it total, you just changed WHEN you pay it.

So, the residual is the residual, and the 8k you "put down" on it did not change how much the car is worth or not worth at the end of the lease. It just changed your monthly payment. Buying the car or not, should be a decision you make that has nothing to do with that 8k you "put down" because you were going to pay that money either way on that lease. You would have just been paying a higher monthly to do so. Its not like you have "credit" (equity) or something in it.

That 8k was gone, and was going to be spent anyway by you in monthly payments regardless. You got to drive the car you have now for a lower monthly payment but I always tell people its NOT a good idea to trade in a car to lease one. Would be better to sell the car to the dealer, have them cut you a check, then lease the car without that cap reduction (or take it to carmax or something to separate the transaction).

On a loan, its not the same because the money is going toward something you will eventually own (probably), if you keep paying for it.

Originally Posted by jjrandorin

As namelessman mentioned, when you put money down on a lease, it goes to reduce the lease charges.

think of it this way. I am going to make up numbers.

Lets say the numbers of your lease work out that you will be paying 23,400 for the 36 month term, including taxes etc. That works out to 650 a month, so your monthly payment is 650 a month if you didnt put anything "down" for cap cost reduction.

Now, in this fictitious example, you traded in your 'vette, and got 8k credit for it. That 8k credit goes toward the cost of your lease, to pre pay part of it. So, now your 23,400 lease cost over 36 months has now been reduced to 15,400... because you have PRE PAID part of it.

So, your month payment is now 427.77 a month. You get to tell everyone what a great deal you have on your car, saying "im only paying $428 a month for this baby!" with a knowing nod and wink, and say " I drove a hard bargain".

On a lease, just like a purchase, you can make the monthly payment whatever you want it to be, by putting enough money down. The difference is, on a purchase the money goes to reduce the loan on something you will own at the end. On a lease, it just pre pays part of your charges.


The example I always go to, to explain, is lets say you rented an apartment for 1000 a month, and the lease term of the apartment was 3 years (36 months). The apartment costs 12k a year, or 36k total. If you choose to give the landlord 20k of that up front, then your monthly rent for the apartment is 444.44 a month. You are still paying 36k for it total, you just changed WHEN you pay it.

So, the residual is the residual, and the 8k you "put down" on it did not change how much the car is worth or not worth at the end of the lease. It just changed your monthly payment. Buying the car or not, should be a decision you make that has nothing to do with that 8k you "put down" because you were going to pay that money either way on that lease. You would have just been paying a higher monthly to do so. Its not like you have "credit" (equity) or something in it.

That 8k was gone, and was going to be spent anyway by you in monthly payments regardless. You got to drive the car you have now for a lower monthly payment but I always tell people its NOT a good idea to trade in a car to lease one. Would be better to sell the car to the dealer, have them cut you a check, then lease the car without that cap reduction (or take it to carmax or something to separate the transaction).

On a loan, its not the same because the money is going toward something you will eventually own (probably), if you keep paying for it.

Hey jj, thanks for taking the time to respond. Think I have a better understanding of issue. Thanks to you also, nameless.
Luckstr


Sent from my iPad using Bimmerfest mobile app

Originally Posted by luckstr

Hey jj, thanks for taking the time to respond. Think I have a better understanding of issue. Thanks to you also, nameless.
Luckstr


Sent from my iPad using Bimmerfest mobile app

Welcome

Originally Posted by jjrandorin

As namelessman mentioned, when you put money down on a lease, it goes to reduce the lease charges.

think of it this way. I am going to make up numbers.

<>

This is an excellent answer that also leaves out two additional considerations:

1. Most leases have gap insurance included. So if you were to lose your car in an accident/theft/disaster the insurance would pay the difference between what you owe and the value of the car. Any money that you put down would be lost.
2. You are not earning any interest on that down payment, nor does it typically reduce the interest (money factor) on the lease.

Originally Posted by luckstr

Thanks for the clarifications. My lease (440i M sport convertible) is up in 6 1/2 months and the RV on the car is $40,000. I will have about 15,000 miles on it at that time. I made the mistake (in my opinion) of trading in my C5 Corvette when I leased this car and the dealers "gave" me $8,000 for it. So basically I put $8,000 down at lease inception. While I am not enamored with the car, there is nothing wrong with it, but as I said, I made the mistake of trading in my C5, or maybe I should say I made the mistake of not getting another Corvette.
If I ever get another car (I am now 74 years old), it will NOT be a BMW (maybe a Lexus?), but for now I will buy car for whatever (RV or some slight discount from that if they offer) and enjoy it.
It seems to me that if I just turned this car back in at the end of the lease it would be tantamount to throwing that $8,000 down the drain, so I am going to keep the car, buy it (don't know who I will have finance) and hope that it will provide me reliable service in the future.
Any comments??
Thanks
Luckstr



Sent from my iPad using Bimmerfest mobile app

Not clear to me why you are so unhappy with BMW but, regardless, if you are that unhappy, why would you buy the car? As many have noted, the BMW residual is set very aggressively by BMW to encourage leases so it is rarely a good deal to buy your car after a lease. If you wanted to do that, you could speak with your dealership about other cars that are in their inventory or about to come back and see if they have complete service histories for you.

But...again...buy/lease whatever car makes you happy.

Originally Posted by BeemerGuy

This is an excellent answer that also leaves out two additional considerations:

1. Most leases have gap insurance included. So if you were to lose your car in an accident/theft/disaster the insurance would pay the difference between what you owe and the value of the car. Any money that you put down would be lost.
2. You are not earning any interest on that down payment, nor does it typically reduce the interest (money factor) on the lease.

A couple points here to clarify.

While down payment will not be refunded upon total loss, the down payment itself is lost only if insurance payout is smaller than down payment + amount owed to BMWFS. And since down payment is "consumed" during the lease term, the closer the total loss occurs to lease end, the less the "loss" of down payment.

The second point is that, while down payment does not affect interest rate(MF), it does reduce total interest paid. JJ's comment of "prepaid" has 2 types:

1. Prepaying depreciation, in the form of reduced cap cost. This reduces the amount of money owed upfront, hence the total interest paid is reduced. That is how OP's $8k is used. Just think of cap cost and RV as inputs to lease payment calculation. The $8k reduces cap cost used in calculation.

2. Prepaying of lease monthly In this type, the cap cost is not reduced, hence total interest paid is higher than with cap cost reduction. BMWFS does allow one-pay on certain products. This is not the preferred form of "prepaying".

Originally Posted by SteveinArizona

Not clear to me why you are so unhappy with BMW but, regardless, if you are that unhappy, why would you buy the car? As many have noted, the BMW residual is set very aggressively by BMW to encourage leases so it is rarely a good deal to buy your car after a lease. If you wanted to do that, you could speak with your dealership about other cars that are in their inventory or about to come back and see if they have complete service histories for you.



But...again...buy/lease whatever car makes you happy.

I am buying car because it makes most financial sense. And I never said I was unhappy with car, I said " I am not enamored with car, but there is Nothing wrong with it". I am not enamored with it because it is NOT a Corvette, nor should I have expected it to be, but that is my problem, not BMW. I was told, before I had my Corvette, that once I drive one I will not want to drive any other car, and in my case that is very true. At this stage of my life I do not want to spend $65-70k on a new car, I have many better things on which to spend my money.
Thanks for input


Sent from my iPad using Bimmerfest mobile app

[QUOTE=luckstr;13007047]I am buying car because it makes most financial sense. And I never said I was unhappy with car, I said " I am not enamored with car, but there is Nothing wrong with it". I am not enamored with it because it is NOT a Corvette, nor should I have expected it to be, but that is my problem, not BMW. I was told, before I had my Corvette, that once I drive one I will not want to drive any other car, and in my case that is very true. At this stage of my life I do not want to spend $65-70k on a new car, I have many better things on which to spend my money.
Thanks for input

I hear you - I traded my 2006 C6 in on a 2013 550i that I subsequently traded (when the warranty was about to expire) for a 2017 540i (leased). The BMWs are/were great and I particularly enjoy driving my 540i. However, I still miss my Monterey Red C6 which I kept for 7 years - the longest I've ever kept any car. I'm not saying it was a mistake to go BMW, but the C6 was the best car I've ever owned, and I've owned a lot of cars in my 75 years.

Originally Posted by luckstr

I was told, before I had my Corvette, that once I drive one I will not want to drive any other car, and in my case that is very true. At this stage of my life I do not want to spend $65-70k on a new car, I have many better things on which to spend my money.

Well, if it will make you feel better, that is like saying "once you get an umbrella for walking in the rain, no trench coat and hat combo will do it after that". The problem is that you have to carry unwieldy contraption called "umbrella" with you all the time and that has its own downsides, too. HOWEVER, when it rains, you will be smiling.

BMWs notoriously became compromises between luxury and driving engagement and, even before they did blatantly so and were still very engaging to drive (E46/E39 era and before), it would have been utterly unfair to compare a USELESS ground-up sports car with a USEFUL vehicle that can do grocery-getting, vet trips, dropping kids off at whatever practice, taking whole family out to dinner ... and so on.

I, fortunately, learned my lesson in time (even if it was completely opposite of yours) and decided to ramp up in sports dept and lose in "everyday luxury" dept and am very happy now to own two cars where each does what it was meant to do and does it exceptionally well. I have a cheap VW hatchback for grocery-getter duties and 2-seater for track driving and spirited driving on weekends.

As you said (and I fully agree with it), at 74, cars should be the last thing a person should be worrying to spend the money on. I wish you all the best whether you keep BMW or not.

Originally Posted by luckstr

I am buying car because it makes most financial sense. And I never said I was unhappy with car, I said " I am not enamored with car, but there is Nothing wrong with it". I am not enamored with it because it is NOT a Corvette, nor should I have expected it to be, but that is my problem, not BMW. I was told, before I had my Corvette, that once I drive one I will not want to drive any other car, and in my case that is very true. At this stage of my life I do not want to spend $65-70k on a new car, I have many better things on which to spend my money.
Thanks for input


Sent from my iPad using Bimmerfest mobile app

Don't forget that you have already made a considerable down payment through the lease. That plus the residual is a chunk of money. It would make more financial sense to buy something like a lease return CPO Honda Civic, Accord, etc.

Originally Posted by luckstr

I am buying car because it makes most financial sense. And I never said I was unhappy with car, I said " I am not enamored with car, but there is Nothing wrong with it". I am not enamored with it because it is NOT a Corvette, nor should I have expected it to be, but that is my problem, not BMW. I was told, before I had my Corvette, that once I drive one I will not want to drive any other car, and in my case that is very true. At this stage of my life I do not want to spend $65-70k on a new car, I have many better things on which to spend my money.
Thanks for input


Sent from my iPad using Bimmerfest mobile app

Then I would go for it. You might also look for an M240i to give you an experience more akin to your former Corvette.

Originally Posted by John MS

Don't forget that you have already made a considerable down payment through the lease. That plus the residual is a chunk of money. It would make more financial sense to buy something like a lease return CPO Honda Civic, Accord, etc.

Yes, I know this. Except that there are ONLY 14,500 miles on car, I have had it since there were 3 miles on it, i.e., new, and I know exactly what I am buying. As I have said, there is nothing wrong with car, just not a Corvette.
Don't have to be concerned about buying "someone else's headache", and in my opinion, buying CPO is a hit & miss proposition.
Thanks for input(s).