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Could someone here explain to me what exactly owners choice is? Would this be a better option in TX, where you have to pay sales tax on the entire purchase price of the car when you lease? Has anyone actually done an owners choice deal?
 

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The Owner's Choice is a balloon note program wherein BMW guarantees the buyer that they will buy the vehicle back at the end of the term for the balloon note less any excess wear and tear and any excess mileage. This figure is the same dollar figure as the residual on a lease. There are different reasons to do a balloon over a lease, no personal property tax, no acquisition fee, easier to get out of early if you so decide. But the lease can provide write-off benefits if you qualify and free GAP insurance as well as lower lease charges with the multiple security deposit program. You should discuss the options with your dealer to figure out which is better for you.
 

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Owner's Choice

Do same MFs and residuals for leases apply to the Owner's Choice program? If so, and I do not write off my lease or put MSDs down, wouldn't this be a prudent option given there is no acquisition fee? Is there a security deposit? Thanks
 

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Discussion Starter · #4 · (Edited)
owners choice

To add on that question, how would I evaluate an owners choice deal? What are the factors that make up such a deal? I am wanting to lease a 525 here in TX, but the sales tax rules really sour me on the deal. Will an owners choice be a better deal for me?
 

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How is eligibility determined? Is it limited by the dealer's location or the customer's location? I.e., if I live in Texas but buy a car from a dealer elsewhere, can I still do Owner's Choice?
 

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With an Owner's Choice BMW use's standard interest rates because it is a simple interest loan with no pre-payment penalty. The residual and balloon precentage are the exact same.

Up until recently I thought the OC's were available in Texas and Illinois, but the new rate sheet I have states "Owner's Choice financing is only available for centers in TX" The customer's garaging address must be in Texas as well.

Ilans1, the only way the sales tax can hurt you on a lease is if you buy the vehicle at the end of the lease. You paid sales tax on behalf of the leasing company when you leased your car, since it is not in your name you will have to pay again on the residual to transfer it into your name. Is is like 150% taxation.

If you lease a vehicle and at the end of the term have equity the only way you can get a tax credit is by trading it in on another lease with the same lease company. You see, they own the vehicle, so they are actually trading in on their next purchase for you.

Of course none of this is an issue with the Owner's Choice, since you own it. Texas is a big consumer-friendly state, that's why we are the only ones with the OC.

Now...all you have to do is decide you want this Silver Grey one I still have, as opposed to trying to find a White one. ;-)
 

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SignHere said:
With an Owner's Choice BMW use's standard interest rates because it is a simple interest loan with no pre-payment penalty. The residual and balloon precentage are the exact same.

Up until recently I thought the OC's were available in Texas and Illinois, but the new rate sheet I have states "Owner's Choice financing is only available for centers in TX" The customer's garaging address must be in Texas as well.

Ilans1, the only way the sales tax can hurt you on a lease is if you buy the vehicle at the end of the lease. You paid sales tax on behalf of the leasing company when you leased your car, since it is not in your name you will have to pay again on the residual to transfer it into your name. Is is like 150% taxation.

If you lease a vehicle and at the end of the term have equity the only way you can get a tax credit is by trading it in on another lease with the same lease company. You see, they own the vehicle, so they are actually trading in on their next purchase for you.

Of course none of this is an issue with the Owner's Choice, since you own it. Texas is a big consumer-friendly state, that's why we are the only ones with the OC.

Now...all you have to do is decide you want this Silver Grey one I still have, as opposed to trying to find a White one. ;-)
So is the OC program kind of the best of both leasing/buying put together? In texas, is it a no-brainer to go with OC over a straight lease?
 

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Yes, Typically the OC is best for consumers and the straight lease is best for businesses or those who can write it off. The OC is a purchase and as such must be depreciated. The current IRS limits are ~$4500 1st year, $4000 2nd year and $3500 year 3 and beyond. With a lease you can write off what ever % business to personal usage you claim. So if you have a $600 per mo lease payment and you use it 75% for business then your write off is $5400 for each of the 3 years, or $4200 over the term more than if you did an OC.
 

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SignHere said:
Yes, Typically the OC is best for consumers and the straight lease is best for businesses or those who can write it off. The OC is a purchase and as such must be depreciated. The current IRS limits are ~$4500 1st year, $4000 2nd year and $3500 year 3 and beyond. With a lease you can write off what ever % business to personal usage you claim. So if you have a $600 per mo lease payment and you use it 75% for business then your write off is $5400 for each of the 3 years, or $4200 over the term more than if you did an OC.
I do have my own P.A., but I would not use this car for business purposes. So I don't think I can write off any lease expenses. At least not legitimately. :angel:

Is the APR for the OC programs similar to the lease rates that are published on this site?
 

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No, the rates can vary widely and are typically a little higher than lease rates, nt enough to complain about though. But there is no acquisition fee to worry about, you also don't get the free (Yeah right!) GAP insurance you get with a lease. Lease is better when there are tax credits like we had during the last few days of July.
 

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SignHere said:
Yes, Typically the OC is best for consumers and the straight lease is best for businesses or those who can write it off. The OC is a purchase and as such must be depreciated. The current IRS limits are ~$4500 1st year, $4000 2nd year and $3500 year 3 and beyond. With a lease you can write off what ever % business to personal usage you claim. So if you have a $600 per mo lease payment and you use it 75% for business then your write off is $5400 for each of the 3 years, or $4200 over the term more than if you did an OC.
I hesitate to mention this because you sure are a source of excellent information, but it seems to me there are luxury car limits on writing off lease payments, just like there are luxury car limits on writing off depreciation. (Or at least I know there used to be - my 2005 return is still on extension, so I'm not sure if the rules have changed).

Otherwise, you make very good points (and a lot more succinctly than the rest of us!)

Just out of curiousity, does BMWFS use the same OC interest rate across the range? Or do they "subsidize" some models (like the current MF's on 530xiT's)?
 

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You are certainly not bothering me if you point out something I'm wrong about. (I'm not a 'Know-it-all'...but I play one on TV) I think if you do a little research or contact a CPA, you may find there are no posted lease limits like there are with depreciation.

I frequently advise customers who can do so to lease with no down payment (Cap cost reductions are not deductible), utilize the MSD program, and reduce the residual to 20% (The lowest % we can use in Texas and still be a lease). Then have sell the vehicle for a personal profit and the end of the term. (Ka-ching!) This works GREAT if you own your own business!

If you have the time (Or inclination...I have neither) You can read this extremely long and boring IRS document - http://www.irs.gov/publications/p463/ch04.html#d0e5522

In answer to your other question, yes, if there is a subvened lease rate there is a subvened OC rate. Like on e46 convertibles and Z4's right now. (Hmmm...wonder why?)
 

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SignHere said:
You are certainly not bothering me if you point out something I'm wrong about. (I'm not a 'Know-it-all'...but I play one on TV) I think if you do a little research or contact a CPA, you may find there are no posted lease limits like there are with depreciation.

I frequently advise customers who can do so to lease with no down payment (Cap cost reductions are not deductible), utilize the MSD program, and reduce the residual to 20% (The lowest % we can use in Texas and still be a lease). Then have sell the vehicle for a personal profit and the end of the term. (Ka-ching!) This works GREAT if you own your own business!

If you have the time (Or inclination...I have neither) You can read this extremely long and boring IRS document - http://www.irs.gov/publications/p463/ch04.html#d0e5522

In answer to your other question, yes, if there is a subvened lease rate there is a subvened OC rate. Like on e46 convertibles and Z4's right now. (Hmmm...wonder why?)
I had 10 minutes to give the IRS Pub a quick read, and unfortunately, I think it is saying I was right (though I had the terminology wrong).

What I was calling a "luxury car limit", the IRS calls an "inclusion amount". For 2005, it limits the write off on any car with a cap cost over $15,200, and any truck or van with a cap cost over $16,700. So it clearly applies to any BMW that gets leased.

To calculate the inclusion amount you need to turn to Appendix A or B of the Publication (which I could not locate quickly in the online version) Without that, I can't tell how significant - or insignificant - the impact will be, just that there is an impact.

Sorry.
 

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SignHere said:
Yes, specifically you are correct, realistically the 'inclusion amount' is the amount you must increase your income by these small amounts-

http://www.irs.gov/publications/p463/11081l45.html
Okay you and I are BOTH right. I was being more anal (though I will point out that YOU were the one to chase down the Appendix), while you were more "street smart". On a 3 year lease on a $60,000 vehicle, you lose a whopping +/- $1,350 of write off - and that's if the vehicle is used 100% for business. If, like me, your use is more like 50%, it's a $675 give up, so WTF cares?

You almost wonder why Congress went through the effort to write something so relaitively insignificant into the Tax Code....

Yes, you are the supreme omnipotent! Thanks for the good advice. (And I will look at the lowered residual angle next time around, even though I am guessing you get taxed on the resale as a short term gain - i.e. ordinary income). But I won't have to go through that anal exercise for 2 1/2 years.:D
 

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I look at Owners Choice as insurance on your car purchase, if you do not like it , after 3 years you get a set value back (residual). At the end of the OC term, If you like it and want to keep it refinance the balance or if you went over miles etc, you can try to sell it yourself for more money. I view it like a optional lease, at the end of three years you can decide to treat it like a lease or not. The biggest reason I went with OC is that if I move out of the country or want to get a different car I can trade in or sell the car with no worrries about breaking the lease, because the title is in my name not a leasing company's.
 

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chicagolab said:
I look at Owners Choice as insurance on your car purchase, if you do not like it , after 3 years you get a set value back (residual). At the end of the OC term, If you like it and want to keep it refinance the balance or if you went over miles etc, you can try to sell it yourself for more money. I view it like a optional lease, at the end of three years you can decide to treat it like a lease or not. The biggest reason I went with OC is that if I move out of the country or want to get a different car I can trade in or sell the car with no worrries about breaking the lease, because the title is in my name not a leasing company's.
You make some good points. OC's are great provided the rates are comparable to/or below what market rates are for traditional financing. Another way to think of it is that on an OC you already have a buyer for your car at the end of the term, for a dealer who is not the originating dealer to get your car and earn your business...you might ask him for a little more than the balloon. Couldn't hurt. The worst you can do is have to pay the $350 dsiposition fee and any excess wear and tear and mileage.

The bottom line is that you can profit from higher actual cash values, but can't be hurt by lower ones.
 

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Does anyone know the current rates for Owner's Choice? My OTD price is $51,500 and I want to estimate my monthly payments. Currently, the 335i residual is 0.58 for a 36mo/15K lease. Can I use a straight up lease calculator and convert the interest (%) into a MF and use the current residual figure?
 

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Unfortunately no, lease calculators will not work on a balloon note. Your post dosen't have enough info to run an OC.

Just ask you CA, he should be happy to run the figures for you.
 
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