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  #1  
Old 08-04-2011, 08:45 PM
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No profit for dealer for end of lease purchase? Come on....

I have about two months left on my lease for my 2008 550i. I have purchased 2 other BMW's in the past three years (08 535i and 08 M3) from my dealership before leasing my current 550i. I love the car so much that I am thinking about buying it at the end of next month. I went into my dealer yesterday and they plugged in my VIN and up came the residual ($41,275ish) and then below it was a price of ~$34k with a $1700 cost added to it bringing it to ~$36k. I was pondering what to do and the guy came back over and said that the GM told him that they would have to tack on another $1k so that the dealership could make "some" money on me. I am most likely not going to do CPO. Does that $36k price not include any profit at all for the dealer? Curious why the international BMW computer systems would spit out a number like that only for a dealership to break even on a deal. What do you think?

Also, two other quick questions....would this qualify for my rebate from BMW CCA and are there any other promotions/rate reductions/rebates I should be aware of it I purchase my car from my lease?

Thanks!
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Old 08-04-2011, 08:57 PM
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Quote:
Originally Posted by yahtzee5 View Post
I have about two months left on my lease for my 2008 550i. I have purchased 2 other BMW's in the past three years (08 535i and 08 M3) from my dealership before leasing my current 550i. I love the car so much that I am thinking about buying it at the end of next month. I went into my dealer yesterday and they plugged in my VIN and up came the residual ($41,275ish) and then below it was a price of ~$34k with a $1700 cost added to it bringing it to ~$36k. I was pondering what to do and the guy came back over and said that the GM told him that they would have to tack on another $1k so that the dealership could make "some" money on me. I am most likely not going to do CPO. Does that $36k price not include any profit at all for the dealer? Curious why the international BMW computer systems would spit out a number like that only for a dealership to break even on a deal. What do you think?

Also, two other quick questions....would this qualify for my rebate from BMW CCA and are there any other promotions/rate reductions/rebates I should be aware of it I purchase my car from my lease?

Thanks!
Well, they are not including profit for the dealer because the number that it spits out is the dealer's wholesale purchase price. If they sell it to you for your contracted residual, they'll have plenty of profit. They don't have to show you the purchase price just like they don't have to show you their factory invoice price (which also has no profit built into it because it is also the wholesale price).
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Old 08-04-2011, 09:51 PM
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The cca rebate is available.if you return it and then buy it from the dealer.

Whats the 1700 added to it for?
I think the 1k may be negotiated down a bit but I dont see a problem with them making a small profit. Otherwise you can just pay the residual or they can choose to not sell it to you and get someone off the street to pay more for it

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Old 08-05-2011, 12:55 AM
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That's interesting...the 34k is the oft disclaimed "dealer discount price"

The ever so helpful 'dealers' here always whine that "BMW doesnt cut us much slack in lease sales any more'...lo and behold, a 20% profit there, $7k.

As a note, the dealer participants here are quick to give you the party line, but when it really counts they are silent or actively disingenuous. Cant blame them of course, but people should not be so quick to fawn over their 'help'.


$1700 for the CPO I assume? ARE YOU NUTS?!?!? Buy it. The extended warranty is worth $3000-3500!

And $1000 seems reasonable, especially if they dont dick you over with the CPO inspection, tires, brakes, etc. (And if it does need those to pass, don't buy it from the dealer)
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Old 08-05-2011, 01:20 AM
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Originally Posted by ZoomVT View Post
The cca rebate is available.if you return it and then buy it from the dealer.
Don't think so. From the BMW CCA rebate site...

BMW CCA Member is eligible to receive one reward, per member, per VIN. BMW CCA Member who purchases their off-lease vehicle via the CPO Program is not eligible for payment for same VIN as a CPO vehicle.
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  #6  
Old 08-05-2011, 05:40 AM
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What has not been mentioned is that dealers sometimes have been taking it in the rear with lease returns. Forced to take back and own cars they don't want because of the "Full Circle Purchase Program" they will unfortunately be force-fed some losses, and that's a bummer. So what if they make a little profit on a lease-to-retail conversion? As stated above, the lessee only has a legal option at the RV. They do deserve they opportunity to mitigate the damages every once in a while when the opportunity presents itself, right?
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Old 08-05-2011, 06:56 AM
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As stated above, the lessee only has a legal option at the RV.
But who is going to pay the RV to buyout his lease, consider that the residuals are usually artificially set high to attract new lease customers in the first place? On the other hand, I'd love to see a $7K off the RV on a 328i lease return, or even half as much off.

Does the 328i get such discount?

BTW, BMWFS used to sell directly to a lease customer at some "wholesale" price, didn't they?

Last edited by dtc100; 08-05-2011 at 07:08 AM.
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Old 08-05-2011, 07:53 AM
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Can't you just buy it directly from BMWFS?

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  #9  
Old 08-05-2011, 08:28 AM
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Can't you just buy it directly from BMWFS?

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Back in the 90's that's the way it worked. Now, they route you to the dealer..
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Old 08-05-2011, 08:53 AM
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Originally Posted by dtc100 View Post
But who is going to pay the RV to buyout his lease, consider that the residuals are usually artificially set high to attract new lease customers in the first place?
X5s are often beating residuals. Plus often cars that are new in their model life cycles will beat residuals. Otherwise, you're generally better of returning the car, and getting a new one. BMW doesn't mind that one little bit.
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  #11  
Old 08-05-2011, 09:44 AM
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X5s are often beating residuals. Plus often cars that are new in their model life cycles will beat residuals. Otherwise, you're generally better of returning the car, and getting a new one. BMW doesn't mind that one little bit.
X5 and X3 don't have high residuals last I checked, so the leasees are paying the price already, then you have the situation that the Chinese and Russians are hoarding them now, so yes I can see that.
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Old 08-05-2011, 10:17 AM
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IMO turn in the old car and buy new. We can split hairs all day I guess but it boils down to what you really love to drive. Talking residuals, russians, chinese, dealer profit, etc. is all fine. It appears all of us that are on this site just know so darn much about everything and everyone , we can't see the trees because of the forest.. or however it goes but my point is... oh yeah, buy the new one. Free maintenance, under warranty , new smell etc. I just try to avoid the dreaded day when your dash lights up like a Christmas tree and your service rep. says,..." come on in and we'll take care of you!" I bet you will...
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Old 08-05-2011, 01:23 PM
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Bot my lease-end 530i direct from BMWFS at a substantial discount from the residual. That was in late 2008. The rules at the time required no previous communication with a dealer.

BMWFS' price was slightly higher than from a dealer, but the dealer would have had to do a safety inspection. Dealer also couldn't offer the same financing terms as BMW.

Quote:
Originally Posted by Jon Shafer View Post
Back in the 90's that's the way it worked. Now, they route you to the dealer..
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Old 08-05-2011, 01:35 PM
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i am pretty sure i was offered a buy out opportunity while talking to a bmwfs rep by phone in january (returned my m5 in march). if one HAD to go thru a dealer, I doubt they would have done that, right?

regardless... there's a lot of funny money is these hills. my residual was 64k. i was offered 54k. i knew the car to be worth about 44k. indeed i found the car at an indy dealer in san diego listed at around 45k. which means that they wholesaled it for less than that. now, if the dealer can't get the deal that san diego loan sharky guys can get, something is a bit strange...
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Old 08-05-2011, 01:52 PM
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A dealership is a business, and, like every business, it has a cost of doing business. They have to sell a car somewhat more than they pay for it just to break even, so, of course they would want to add something on top of that to make a profit.
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Old 08-05-2011, 02:00 PM
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Which is why nobody with any financial sense would actually BUY these cars new.


Quote:
Originally Posted by soupcon View Post
i am pretty sure i was offered a buy out opportunity while talking to a bmwfs rep by phone in january (returned my m5 in march). if one HAD to go thru a dealer, I doubt they would have done that, right?

regardless... there's a lot of funny money is these hills. my residual was 64k. i was offered 54k. i knew the car to be worth about 44k. indeed i found the car at an indy dealer in san diego listed at around 45k. which means that they wholesaled it for less than that. now, if the dealer can't get the deal that san diego loan sharky guys can get, something is a bit strange...
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Old 08-05-2011, 02:23 PM
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Which is why nobody with any financial sense would actually BUY these cars new.
i wouldn't even buy them used.... it's exactly why i lease them.
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Old 08-05-2011, 03:13 PM
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Originally Posted by yahtzee5 View Post
I have about two months left on my lease for my 2008 550i. I have purchased 2 other BMW's in the past three years (08 535i and 08 M3) from my dealership before leasing my current 550i. I love the car so much that I am thinking about buying it at the end of next month. I went into my dealer yesterday and they plugged in my VIN and up came the residual ($41,275ish) and then below it was a price of ~$34k with a $1700 cost added to it bringing it to ~$36k. I was pondering what to do and the guy came back over and said that the GM told him that they would have to tack on another $1k so that the dealership could make "some" money on me. I am most likely not going to do CPO. Does that $36k price not include any profit at all for the dealer? Curious why the international BMW computer systems would spit out a number like that only for a dealership to break even on a deal. What do you think?

Also, two other quick questions....would this qualify for my rebate from BMW CCA and are there any other promotions/rate reductions/rebates I should be aware of it I purchase my car from my lease?

Thanks!
Actually, if they wanted to try and make money, they'd tell you residual and no less. But it looks like they're cutting to the chase and using the buy figure from BMW FS of $36k and adding $1k profit. The $1,700 is BMW FS' money, not dealer's.

The number the computer system is using Mannheim's, not BMW's. It's not pretty for the dealer actually. To be frank, I'd rather you drop it off and lease a new one and give us a chance to "retail" your leased BMW rather than basically "wholesaling" it to you. This effectively gives us two sales rather than one. We retail the leased car as a CPO to somone else and lease you another new BMW. That's how it ideally works.
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Old 08-05-2011, 03:51 PM
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Actually, if they wanted to try and make money, they'd tell you residual and no less. But it looks like they're cutting to the chase and using the buy figure from BMW FS of $36k and adding $1k profit. The $1,700 is BMW FS' money, not dealer's.

The number the computer system is using Mannheim's, not BMW's. It's not pretty for the dealer actually. To be frank, I'd rather you drop it off and lease a new one and give us a chance to "retail" your leased BMW rather than basically "wholesaling" it to you. This effectively gives us two sales rather than one. We retail the leased car as a CPO to somone else and lease you another new BMW. That's how it ideally works.
+1 I agree with Adrian. The dealer didn't have to tell you their buyout and they could have not been honest. If I could pay 1K to save 6K then sounds like a win-win.
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Old 08-05-2011, 04:50 PM
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That's interesting...the 34k is the oft disclaimed "dealer discount price"

The ever so helpful 'dealers' here always whine that "BMW doesnt cut us much slack in lease sales any more'...lo and behold, a 20% profit there, $7k.

As a note, the dealer participants here are quick to give you the party line, but when it really counts they are silent or actively disingenuous. Cant blame them of course, but people should not be so quick to fawn over their 'help'.
You seem like a pretty smart guy, so I figured you would understand it a bit better. There is not an automatic 20% discount. There isn't even any "automatic" discount. The dealer gets a purchase price that is based on a formula combining the adjusted Manheim wholesale value (MMR) and the residual value. In some cases, the dealer will have literally no profit built in to the price and will have to pay residual. In other cases, they might have a 10%, 15% or 20% discount. There is no correlation between the MMR and residual, the MMR is just driven by what the current auction prices are for that year and model.

When I was in the business, I had off-lease cars where the MMR was $10k or more below residual but more often I had cars where the MMR was within 5% of the residual. The cars that typically have a huge spread are the 6ers and 7ers, and there is typically little spread on 3ers and X3/X5 models. The 5ers vary based on how aggressive BMW was when they set the residual.
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Old 08-05-2011, 07:03 PM
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...and there is typically little spread on 3ers ...
That is what I feared. Also the fact the OP got such a discount on his 5, might have some to do with the fact the new gen 5 had made the old style 5 less appealing. This being the case, a few years down the road the same might happen to my current 3
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Old 08-05-2011, 08:29 PM
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That is what I feared. Also the fact the OP got such a discount on his 5, might have some to do with the fact the new gen 5 had made the old style 5 less appealing. This being the case, a few years down the road the same might happen to my current 3
You just need to apply some common sense. On a 328i/328xi the payoff will probably be very close to residual. On a 335i/335xi, there might be a bit more room but still don't expect a huge discount. Of course, it's easy to tell... just look at your residual and compare it to trade-in/wholesale values to get an idea of what your dealer would probably have to pay for it.
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Old 08-05-2011, 10:13 PM
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Originally Posted by SARAFIL View Post
You just need to apply some common sense. On a 328i/328xi the payoff will probably be very close to residual. On a 335i/335xi, there might be a bit more room but still don't expect a huge discount. Of course, it's easy to tell... just look at your residual and compare it to trade-in/wholesale values to get an idea of what your dealer would probably have to pay for it.
It is not rare that in the few years during the lease term, the car's market value takes a negative turn, which may offer the lease customer a good opportunity to buy it out at a very attractive price (way below the residual) at the end of lease.

Other factors will help too, if the car turns out to be very reliable durnig the lease term, and there is still quite a bit of the original warranty left, and of course the buyer really loves the car, doesn't mind continue to drive it.

On the opposite end, some cars can be so popular that their market values far exceed the residuals, in such case people often pay off the car at the end of the lease, then sell it to a private party for a profit.
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Old 08-06-2011, 11:16 AM
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Originally Posted by SARAFIL View Post
You seem like a pretty smart guy, so I figured you would understand it a bit better. There is not an automatic 20% discount. There isn't even any "automatic" discount. The dealer gets a purchase price that is based on a formula combining the adjusted Manheim wholesale value (MMR) and the residual value. In some cases, the dealer will have literally no profit built in to the price and will have to pay residual. In other cases, they might have a 10%, 15% or 20% discount. There is no correlation between the MMR and residual, the MMR is just driven by what the current auction prices are for that year and model.

When I was in the business, I had off-lease cars where the MMR was $10k or more below residual but more often I had cars where the MMR was within 5% of the residual. The cars that typically have a huge spread are the 6ers and 7ers, and there is typically little spread on 3ers and X3/X5 models. The 5ers vary based on how aggressive BMW was when they set the residual.
My times have changed. What's been frequent for quite some time is there being NO room between residual and the buy figure especially after "loyalty" is added. Not to mention cases where the car is worth $1000's more than residual (this happened recently on an 08 M3 lease buy out.) So now the client has the opportunity to make a profit if they chose to do a private sale- oh, wait, it's okay for the lessee to enjoy a healthy profit, but not the dealer when the situation is reversed?
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Old 08-06-2011, 12:12 PM
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My times have changed. What's been frequent for quite some time is there being NO room between residual and the buy figure especially after "loyalty" is added. Not to mention cases where the car is worth $1000's more than residual (this happened recently on an 08 M3 lease buy out.) So now the client has the opportunity to make a profit if they chose to do a private sale- oh, wait, it's okay for the lessee to enjoy a healthy profit, but not the dealer when the situation is reversed?
Whenever you have a market, be it a stock market, a bond market, a housing market, a car market, whatever, there is one truism: the market is what the market is. When it goes against someone, many times that person feels very put upon, and it happens to buyers and sellers both.
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