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Discussion Starter · #1 ·
Ok, the dealer is now telling me that the residual on my order for an ED 545i is based on US MSRP and not on ED MSRP. So he says its $38,520 and I am thinking its $36,674. Its a big deal at the end if I decide to keep the car. Is he right? Why should I go to europe then if I am not leasing a ED priced car? please help.
 

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dylanand said:
Ok, the dealer is now telling me that the residual on my order for an ED 545i is based on US MSRP and not on ED MSRP. So he says its $38,520 and I am thinking its $36,674. Its a big deal at the end if I decide to keep the car. Is he right? Why should I go to europe then if I am not leasing a ED priced car? please help.
He's right, but you're the 1st person that I heard complain that the residual is being based on the higher US MSRP. :dunno: With the higher US MSRP, you pay less on the monthly rent payments.

It sounds like that you're planning to keep the car after the lease.
 

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The residual is calculated on the FULL US MSRP. And it's true that most of us WANT it that way to keep the lease payments lower. If you add up the payments plus residual for each of your 2 scenarios I bet you won't see a big difference. The higher residual is "cancelled out" by the lower lease payments.......more or less.
 

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Discussion Starter · #4 ·
Cool, thanks everyone, just learning this process. I was planning on keeping the car after lease if it was in good shape and so I was looking at residual but I am seeing the value of lower payments as well, so its not a deal killer. thanks again.
 

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If you're planning to buy the car at the end of the lease, the residual really doesn't matter. It's a question as to whether you want to make a big ballon payment at lease-end, or a smaller balloon payment at lease-end.

Consider the two extremes. Let's say you leased a car with a selling price of $50,000 (arbitrarily set to the same as MSRP in this example), and its residual value after 3 years is 100%. Your monthly payment would be simply the interest on the undepreciated portion of the vehicle, which in this extreme case, would be $50,000 throughout the lease. If you paid MSRP, and the rate is 4.8% (money factor 0.0020), your monthly payment would be $200 / month. At lease-end, you'd owe $50,000.

If, on the other hand, the car 100% after three years, your payment would be $50,000/36, or $1,388.89, plus $100 in interest charges, for a total of $1,488.89. This is the same as financing the car over three years with nothing down.

Which is preferable? If you have a below-market interest rate, as is currently available on new 545s, the higher residual the better, as less of the payment goes towards depreciation -- AS LONG AS interest rates remain low when it comes time to buy the car. (Of course, as a lessee, you have the option to turn in the vehicle, so the higher the residual, the better.)
 

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ED Leases are the best

The higher the residual the lower the payments will be. On ED leases, because the negotiated price is usually significantly lower than the US MSRP, the residual value will seem very high indeed when compared to the negotiated price. However, if you whish to purchase the car, simply buy it before the end of lease through the "payoff" option. At any given moment, you can terminate a BMW lease by paying off the car. The payoff amount is calculated based on the negotiated price, NOT based on the US MSRP. There might be a time window to exercise this option (i.e., I'm not sure if you can do it let's say a month before lease end). Based on this, ED leases offers the best of both worlds - low monthly payments, low purchase option. Just don't wait until the end of the lease if you want to buy the car! :thumbup:
 

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fgomesbr said:
The higher the residual the lower the payments will be. On ED leases, because the negotiated price is usually significantly lower than the US MSRP, the residual value will seem very high indeed when compared to the negotiated price. However, if you whish to purchase the car, simply buy it before the end of lease through the "payoff" option. At any given moment, you can terminate a BMW lease by paying off the car. The payoff amount is calculated based on the negotiated price, NOT based on the US MSRP. There might be a time window to exercise this option (i.e., I'm not sure if you can do it let's say a month before lease end). Based on this, ED leases offers the best of both worlds - low monthly payments, low purchase option. Just don't wait until the end of the lease if you want to buy the car! :thumbup:
Why don't you want to wait until the end? I didn't so I could sell it....but why?
 
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