[turbobeagle]

Lease buyouts are a somewhat lengthy topic on its own, but I would just caution that the cleanliness and value proposition of lease buyouts can depend on where you live. For example, in Texas, I believe lease buyouts tend to be bad due to double sales taxes. Also, the ability to sneak in clauses (extra fees, etc) can depend on state laws. For example, California generally doesn’t allow early payment fees on most consumer loans, but other states don’t prohibit it. There are also some states that won’t let you buy out leases without going through a dealership.

That said, I’ve done a couple lease buyouts myself now to take advantage of some crazy lease incentives ($15k on a Kia Stinger!) and find it to be straightforward. But definitely do your homework.

[X6DividedByTwo]

Originally Posted by jgreg12

What MSD program did you get? Were you down to 3.42% now? You are spot on with that logic. You could always buy it out — though my dealer told me they disincentivize that motion with fees and high interest rates on the loan + they will make you certify the car with BMW (tires, brakes, etc.).

I think your REAL benefit in this is when you turn the car around in the next lease after 3 years — you have positive equity? Make the dealer earn it.

Originally Posted by arRod1981

Why finance with the dealer during a buyout? You can get much cheaper rates through a CU. Also, your lease is through BMWFS, and not the dealer. They can't make you do anything. You literally go on to the BMWFS website to initiate the buyout. As far as extras and whatnot for buying out is crap. There was a couple of people on here who leased and were buying out, and the dealer tried to pull that crap. They got attorneys involved and they quickly got squashed. Because your contract through BMWFS does not include fees and whatnot when buying out. Those dealers were just trying to make money off of something they are not a part of.

Very good information to have available for the future!

[turbobeagle]

Originally Posted by X6DividedByTwo

This was my logic with lease to buy route, but you put it into words so eloquently! Should I trim back my $17k down and hold onto it? Use it to pay the higher monthly cost?

Yes. Definitely.

Put nothing down. Just fees, first payment, and MSDs (if you go that route).

Put the $17k somewhere where it can earn you a reasonable rate of return.

[X6DividedByTwo]

Originally Posted by turbobeagle

My transaction was set to be a finance, but at the very last minute, I switched it to a lease. I still plan to own this car long term, but my thought process was:

There was an extra $750 loyalty lease rebate which mostly made up for the $925 lease acquisition fee.
The lease gives me some insurance against certain scenarios. For example, the car could turn out to be a total turd (get unlucky with reliability), or maybe there's a big accident and insurance decides to fix it, and leaves me with diminished value. Or maybe I just end up hating the car.
The finance rate was 3.99% and the lease MF was 0.0018 (4.32%). So the cost of this "insurance" is about 0.33% per year, which is about $220 / year. It seemed like a small price to pay to keep my options open.
The residual sucks compared to past eras, but I don't care that much, since I plan to buy it out.


Now that I've had the car for a couple weeks, I'm loving it. I still fully intend to buy it out, but I see no reason to do that until lease maturity. May as well keep my options open.

My point here is not to defend leasing the car. Rather, if you're going to finance the car, run the numbers on what the added cost is of doing it as a lease + buyout instead. In fact, now that the MSD program has been enhanced, a lease + buyout may be cheaper than financing.

I will ask my sales guy about MSD option! Although I take it he won’t know much or be helpful as with everything else…

This was my original thought with lease to buy option (if car treats me well and doesn’t get extremely devalued through accidents that don’t result in total loss) I would buy it at the 3 year mark.

[X6DividedByTwo]

Originally Posted by turbobeagle

Yes. Definitely.

Put nothing down. Just fees, first payment, and MSDs (if you go that route).

Put the $17k somewhere where it can earn you a reasonable rate of return.

I’ll use the $17k to cover the fees and MSD’s and keep the rest of the money on hand to lessen the monthly payments further + in case of emergency (luckily my fiance and I are not strapped financially, we just aren’t into investing yet)

[R N M]

Originally Posted by X6DividedByTwo

If I choose to buy in three after the lease is up and value is higher than agreed amount price between me and BMW (because low miles and package + options) would lease to buy route make sense?

I’m not very good with new cars and finance vs lease… I am trading in my nearly paid off ‘17 4runner and starting with a lease w/ plans to own if the car treats us well (and trade in if our needs change for the larger x5)

Why the rush to get the X3 if you have a 4Runner thats paid off?

Right now is the worst time to buy /lease a car due to minimal discounts and high rates. I would wait another 6-9 months to see how economic conditions develop. The 4Runner holds value well so I’m sure you will be able to get same price for it in near future.

[bmwforme]

Originally Posted by X6DividedByTwo

Things happened, orders were changed…

updated link to m40i build

Great call in my opinion.

Originally Posted by jgreg12

That would be 5 years ago but I’m glad you were able to snag that deal. I was curious so went back to the first page of this thread (2018 era). Here is the best deal I found:

2019 X3 M40i
MSRP $67170
Sell price $60487
Residue 56%
15k Miles a year
Money factor .00182
$0 down $0 driveoff
$843 plus tax a month

Residual: ~2% difference (since 15k lease)
MF: exact same rate as now.
Selling price disc: 10% ==> this is the major difference.
Rebates: similar

Looks like we’re used to getting double digit MSRP discounts. These dealerships have 8-10 cars on their lots. Tesla doesn’t even negotiate discounts.

I think the days of the “it’s on the lot so give it away to me” are long gone, at least for awhile now.

I think you got a good deal considering the current environment. Unfortunate the $1k lease cash from December is gone but hopefully it returns stronger in the near future.

I also agree that folks tend to exaggerate on how great the deals used to be pre-COVID so I'm glad you did some research to back your claim. Folks often mention 14-16% off MSRP with residuals in the low 60's but for the M40i, I question whether that was actually the rule rather than the exception.

I've been following the price of this car closely for a year now and the needle has barely moved. I think this is the new normal for at least the next few years.

Originally Posted by X6DividedByTwo

I’m a bit against anything interfering with me while I drive, especially with NYC driving/bumper to bumper & driving aggressivey against taxi’s and busses

As a fellow NYer, this is the right move. Between us barely having readable highway lanes and aggressive drivers that would constantly cut off the semi-autonomous computer driver, that package is a waste.

I will miss the dynamic cruise control that's bundled with that package but it is what it is

Originally Posted by jgreg12

What are you guys expecting? I leafed back in this thread to 2019, I am still not seeing numbers which are significantly different, unless $100/mo difference is significant to folks in this forum.

My thoughts exactly.

Originally Posted by jgreg12

I still don't believe in the buy side of this. A lease is still substantially less than buying. Over 4 years (when car is out of warranty) you spend $41000. A lease spends close to $33,000.

The fact you are being told in plain English by BMW Financial Services "your car will literally lose half its value in 3 years" should scare any reasonable person away from buying unless you plan to be buried with the car.

Who is actually going to keep an M40 for 6 years?

This was my exact thought process too. A high interest (relatively speaking to pre-COVID) loan for a fast depreciating car is bananas to me. Plus an accident can gobble up value as well... You can also get suck with a lemon (that is basically a lemon but isn't taken back by BMW because it's not a lemon by law). If you like the car, buy it out at the end. Mo need to rush into that decision now. Not many states have that punitive double tax structure someone mentioned that Texas has.

Originally Posted by turbobeagle

My transaction was set to be a finance, but at the very last minute, I switched it to a lease. I still plan to own this car long term, but my thought process was:

• There was an extra $750 loyalty lease rebate which mostly made up for the $925 lease acquisition fee.
• The lease gives me some insurance against certain scenarios. For example, the car could turn out to be a total turd (get unlucky with reliability), or maybe there's a big accident and insurance decides to fix it, and leaves me with diminished value. Or maybe I just end up hating the car.
• The finance rate was 3.99% and the lease MF was 0.0018 (4.32%). So the cost of this "insurance" is about 0.33% per year, which is about $220 / year. It seemed like a small price to pay to keep my options open.
• The residual sucks compared to past eras, but I don't care that much, since I plan to buy it out.

Now that I've had the car for a couple weeks, I'm loving it. I still fully intend to buy it out, but I see no reason to do that until lease maturity. May as well keep my options open.

My point here is not to defend leasing the car. Rather, if you're going to finance the car, run the numbers on what the added cost is of doing it as a lease + buyout instead. In fact, now that the MSD program has been enhanced, a lease + buyout may be cheaper than financing.

+1

Originally Posted by X6DividedByTwo

2017 sr5 4Runner w/ 50k miles on clock, fair condition & one accident on history report (no airbags deployed)

I'd sell 3P and park that cash in a high yield savings account, invest it or just stay close to cash. As others have noted, that down payment evaporates if you total your new car

[glennbk]

Not only taxes kill you in Texas, but so the value of Texas cars. Most winters are mild, hardly ever see road salt and low mileage. We get a huge pull at auctions by northern dealers.

[jgreg12]

Well Tesla just announced 10-20% reductions on MSRP......this should be interesting to see how BMW, Mercedes, Audi react...

[EWL5]

Just one more comment from me since a $24k trade-in is on the table:

Some states offer a tax advantage on a trade-in. If you trade-in a $24k car in NJ, you would save an additional $1590 in taxes on the new car. If the new car is financed/owned, then you get the full $1590. I'm not sure if you get any of the tax credit on a leased car since you never own it during the lease period.

[gohawks23]

Originally Posted by turbobeagle

That's fair, definitely a personal decision. 25% guaranteed tax-free over 3 years is about 7.5% compounding annually. I would take that as a guaranteed return. You gotta pay tax on the 4% interest from the HYSA.

New MSD program definitely makes good financial return sense! Good old days even better when return was like 11%.

[gohawks23]

Originally Posted by jgreg12

So I put down roughly $6k in order to save roughly $1500 over 3 years (60/mo). I am not sure that is worth it with current high-yield savings accounts paying 4% interest...

Simple math using your numbers...4% HYSA will return about 750 over 3 years on the 6K...so the 1500 will be double that with MSDs! I'd say pretty decent!

[jgreg12]

You guys made a good point. Just talked to the dealer -- $6300 in MSD (7) will take my payment from 899 to 859. $40 savings, $1440 over the lease. Pretty significant...

[nyalpine90]

$6k down on a lease?
why not just finance at that point...you wont get that money back.

[turbobeagle]

Originally Posted by nyalpine90

$6k down on a lease?
why not just finance at that point...you wont get that money back.

You get the money back at the end of the lease. It’s not a “down”, it’s a security deposit. You can think of it as a loan to BMWFS. You lend them $6k, they give you ~$40 per month for three years, and then they give you back the $6k.

[X6DividedByTwo]

Originally Posted by turbobeagle

You get the money back at the end of the lease. It’s not a “down”, it’s a security deposit. You can think of it as a loan to BMWFS. You lend them $6k, they give you ~$40 per month for three years, and then they give you back the $6k.

Can you detail under which circumstances you would lose your 6k? Does that scenario exist?

[turbobeagle]

Originally Posted by X6DividedByTwo

Can you detail under which circumstances you would lose your 6k? Does that scenario exist?

It’s a security deposit so I would assume it’s like a rent deposit on a house. You could lose it if you stop making payments or fail to return the vehicle in adequate condition. I didn’t look that up, just a guess.

[glennbk]

Originally Posted by turbobeagle

It’s a security deposit so I would assume it’s like a rent deposit on a house. You could lose it if you stop making payments or fail to return the vehicle in adequate condition. I didn’t look that up, just a guess.

Yes, delinquency can facilitate the usage of the MSD along with the interest reduction. Last I read, you have to be 90DPD to have this happen. It saves BMW from foreclosing of the lease for a few months. But once the MSDs are exhausted, you can be sure Bubba is going to come around with his flatbed.

[X6DividedByTwo]

Anyone know if the MSD reduction would benefit me more if I gave less down (currently $17k trade bringing my 30i payment to $440ish /mo) my train of thought may be dumb, just thinking that maybe since the payments would be higher, then the discount would be deeper. I’m not much of a finance/lease guy… apologies in advance

[jgreg12]

The effect of MSD is no different from the interest rate effect on anything you buy with leverage (house, car, boat). Lower rate = lower payments = more money in your pocket month to month. It certainly would have a positive effect on your deal. In fact, BMW probably instituted this MSD improvement to grease the wheels a bit on moving cars because lower payment = more enticing.

[turbobeagle]

Originally Posted by X6DividedByTwo

Anyone know if the MSD reduction would benefit me more if I gave less down (currently $17k trade bringing my 30i payment to $440ish /mo) my train of thought may be dumb, just thinking that maybe since the payments would be higher, then the discount would be deeper. I’m not much of a finance/lease guy… apologies in advance

This starts to become much more of a personal finance question, and these forums may not be best for that. The big question would be what you plan to do with the $17k if you don’t put it into the car.

To your question, sure it will increase the reduction of the monthly payments, but at the end of the day, you’re still taking a bigger loan and paying more interest. And that’s where the question of whether you can invest that $17k to earn at least the MF comes into play. And then your income tax rate, and level of discipline starts to come into play, and that’s why I say it becomes much more of a personal finance question, and less about “the deal”.

[X6DividedByTwo]

Originally Posted by turbobeagle

This starts to become much more of a personal finance question, and these forums may not be best for that. The big question would be what you plan to do with the $17k if you don’t put it into the car.

To your question, sure it will increase the reduction of the monthly payments, but at the end of the day, you’re still taking a bigger loan and paying more interest. And that’s where the question of whether you can invest that $17k to earn at least the MF comes into play. And then your income tax rate, and level of discipline starts to come into play, and that’s why I say it becomes much more of a personal finance question, and less about “the deal”.

Yea the 17k would sit in the bank for now as we are not yet prepared to take the dive into investments. One of my goals for next year is to become a bit more financialy literate, but this year it’s mainly work (staying afloat as a junior Software Engineer) and wedding in July. Thank you for dropping knowledge!!!