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      09-15-2020, 11:42 AM   #1
nzafi
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M2C Lease vs Finance Special Considerations

Folks,

I am very close to pulling the trigger on a M2C and I was 99% sure that I was going to finance the car due to the fact that lease payments would have been $1000-1100.

However, it looks like BMW is currently offering a money factor of .00099 which ~2.5%. This is crazy low. Additionally, I am in NJ which means I can do MSD which would then bring the money factor down to about 1.5%.

When you considering this low of a money factor, if you find a deal on a car you can get the lease payments in the low $800s and maybe even high $700s depending on what you like to pay upfront.

In comparison to financing, you will save a couple grand on interest , unless BMW decides to bring back the 0.9% financing.

I am using to leasing my cars, but M2C is definitely something I see potentially holding onto for more than 3 years. When I do the numbers it literally seems like its better to do the lease and then buy versus to just finance from the start. I get the added benefit of dropping the car after 3 years if I want.

I have never done a lease buyout, so I am curious if there is something I am missing here or some sort of hidden fees. To me, if the buyout is tied to the residual of 53%, the car could be a steal to buyout at lease end. If it isn't you just move on.

Thoughts or considerations?
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      09-15-2020, 11:46 AM   #2
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Quote:
Originally Posted by nzafi View Post
Folks,

I am very close to pulling the trigger on a M2C and I was 99% sure that I was going to finance the car due to the fact that lease payments would have been $1000-1100.

However, it looks like BMW is currently offering a money factor of .00099 which ~2.5%. This is crazy low. Additionally, I am in NJ which means I can do MSD which would then bring the money factor down to about 1.5%.

When you considering this low of a money factor, if you find a deal on a car you can get the lease payments in the low $800s and maybe even high $700s depending on what you like to pay upfront.

In comparison to financing, you will save a couple grand on interest , unless BMW decides to bring back the 0.9% financing.

I am using to leasing my cars, but M2C is definitely something I see potentially holding onto for more than 3 years. When I do the numbers it literally seems like its better to do the lease and then buy versus to just finance from the start. I get the added benefit of dropping the car after 3 years if I want.

I have never done a lease buyout, so I am curious if there is something I am missing here or some sort of hidden fees. To me, if the buyout is tied to the residual of 53%, the car could be a steal to buyout at lease end. If it isn't you just move on.

Thoughts or considerations?
You'd be paying a $925 lease acquisition fee that doesn't apply when financing. Finance rate is only 1.9%.
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      09-15-2020, 01:37 PM   #3
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How is 2.5% crazy low? MY2020 is financing for 0.9% and MY2021 is financing for 1.9%.
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      09-15-2020, 01:54 PM   #4
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Originally Posted by keylime503 View Post
How is 2.5% crazy low? MY2020 is financing for 0.9% and MY2021 is financing for 1.9%.
Typically, in leases the interest rate they provide is higher than they make available for financing. One of the areas that they make money. I often the interest rates over 3% as high as 4.5% before applying MSD. A couple dealers confirmed for me that this interest for leases is the lowest they have ever seen BMW offer.

I wish I could get the .9% financing. Free money!!
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      09-16-2020, 12:03 AM   #5
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Quote:
Originally Posted by nzafi View Post
Typically, in leases the interest rate they provide is higher than they make available for financing. One of the areas that they make money. I often the interest rates over 3% as high as 4.5% before applying MSD. A couple dealers confirmed for me that this interest for leases is the lowest they have ever seen BMW offer.

I wish I could get the .9% financing. Free money!!
Your post makes it sounds like 2.5% APR on a lease is so low that it makes it worth leasing an M2C despite the abhorrent residuals. Yet the financing APR for either 2020 or 2021 is lower than 2.5%. So I'm confused what your point is.
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      09-16-2020, 12:29 AM   #6
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I like the idea of leasing to avoid $5-6k in sales tax, especially if I don't end up keeping the car. Does anyone know residuals on lease terms other than 36 mo?
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      09-16-2020, 07:30 AM   #7
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Quote:
Originally Posted by keylime503 View Post
Your post makes it sounds like 2.5% APR on a lease is so low that it makes it worth leasing an M2C despite the abhorrent residuals. Yet the financing APR for either 2020 or 2021 is lower than 2.5%. So I'm confused what your point is.
In the northeast you are allowed to do a security deposit/MSD that is 100% returned to you at the end of the lease. It lowers your money factor/interest on the lease. In this case, if I max out the security deposit (~$5600 - $6000) then my interest on the lease drops to 1.5%. The difference in that monthly interest is ~$40 a month. You are paying less interest on the lease than finance.

Financing is still cheaper though, because for a lease you pay a $925 acquisition fee, and if you buyout the car you will still have more interest to pay. Based on my calculations its probably about $2K cheaper over the 5-6 year period to finance instead of lease. The biggest factors I cannot account for are:
1) if something happens to the car in the first 3 years, the lease absorbs it versus you as the owner of the car
2) If the retains its value, your lease buyout will be a steal
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      09-16-2020, 01:36 PM   #8
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Quote:
Originally Posted by nzafi View Post
In the northeast you are allowed to do a security deposit/MSD that is 100% returned to you at the end of the lease. It lowers your money factor/interest on the lease. In this case, if I max out the security deposit (~$5600 - $6000) then my interest on the lease drops to 1.5%. The difference in that monthly interest is ~$40 a month. You are paying less interest on the lease than finance.

Financing is still cheaper though, because for a lease you pay a $925 acquisition fee, and if you buyout the car you will still have more interest to pay. Based on my calculations its probably about $2K cheaper over the 5-6 year period to finance instead of lease. The biggest factors I cannot account for are:
1) if something happens to the car in the first 3 years, the lease absorbs it versus you as the owner of the car
2) If the retains its value, your lease buyout will be a steal
I've leased my last 2 BMWs so please don't think I'm one of the "leasing is dumb" crowd. That being said, I really really don't see the point of leasing an M2.

As you rightly pointed out, there is the lease acquisition fee of $925. This is $26/mo extra, almost wiping out your $40/mo interest savings with MSDs.

For #2, I don't buy that argument. If the M2 retains it's value far above the residual after 3 years (which it almost certainly will), you're not getting "a steal". It means you way overpaid for the first 3 years of having the car and get to have a "steal" for the remaining time you pay it off. Either way you're paying the full sale price of the car. The only difference with leasing is that you pay a lot more of it in the first 3 years (not counting tax) and less of it after that. But if you buy the car out after the end of the lease, you end up paying *the exact same amount*.
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      09-16-2020, 01:44 PM   #9
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Quote:
Originally Posted by keylime503 View Post
I've leased my last 2 BMWs so please don't think I'm one of the "leasing is dumb" crowd. That being said, I really really don't see the point of leasing an M2.

As you rightly pointed out, there is the lease acquisition fee of $925. This is $26/mo extra, almost wiping out your $40/mo interest savings with MSDs.

For #2, I don't buy that argument. If the M2 retains it's value far above the residual after 3 years (which it almost certainly will), you're not getting "a steal". It means you way overpaid for the first 3 years of having the car and get to have a "steal" for the remaining time you pay it off. Either way you're paying the full sale price of the car. The only difference with leasing is that you pay a lot more of it in the first 3 years (not counting tax) and less of it after that. But if you buy the car out after the end of the lease, you end up paying *the exact same amount*.
Interesting point for sure..Here is another situation..What if by the end of the lease the car is worth more than the buyout amount? Given that you put down reasonable amount of money down for a lease and your mileage is still low. Couldn't you just buy it out, sell it privately for more $$ ??

I bet you can sell a 5-6 year old M2 no problem.
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      09-16-2020, 02:07 PM   #10
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Quote:
Originally Posted by keylime503 View Post
I've leased my last 2 BMWs so please don't think I'm one of the "leasing is dumb" crowd. That being said, I really really don't see the point of leasing an M2.

As you rightly pointed out, there is the lease acquisition fee of $925. This is $26/mo extra, almost wiping out your $40/mo interest savings with MSDs.

For #2, I don't buy that argument. If the M2 retains it's value far above the residual after 3 years (which it almost certainly will), you're not getting "a steal". It means you way overpaid for the first 3 years of having the car and get to have a "steal" for the remaining time you pay it off. Either way you're paying the full sale price of the car. The only difference with leasing is that you pay a lot more of it in the first 3 years (not counting tax) and less of it after that. But if you buy the car out after the end of the lease, you end up paying *the exact same amount*.
Don't think you are being dumb at all actually. I was hoping someone would respond and challenge my logic. The nicest thing about a lease is that if you get into a car accident or something happens to it, the finance company takes the loss and you just walk away from the lease. Unfortunately, I have actually lost 2 cars to hurricanes and both were leases so I walked away clean.

From a pure numbers standpoint and if I did my math correctly, I come up with the following:
1) Cost of lease over first 3 years is much lower than financing (obviously because you are only paying for part of the car, i.e., usage of car).
2) If you assume you lease the car, and then buy it out after 3 years, then the least is only about $350 more than financing. This is based on assumed prices I have negotiated but also that I fully pay off the car after 3 years. If I finance that remaining amount I will spent about $1K more because of extra interest.

Ultimate conclusion is that lease payments will be much lower the first 3 years which is convenient, and I will pay anywhere between $350 - $1000 more for my decision to lease over financing. However, I will get that extra piece of mind.

Biggest downside is that I will not be able to do anything extra to the car due to leasing.
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      09-16-2020, 02:11 PM   #11
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Quote:
Originally Posted by cmirandabu View Post
Interesting point for sure..Here is another situation..What if by the end of the lease the car is worth more than the buyout amount? Given that you put down reasonable amount of money down for a lease and your mileage is still low. Couldn't you just buy it out, sell it privately for more $$ ??

I bet you can sell a 5-6 year old M2 no problem.
Exactly my thought. Based on the MSRP for my configuration, the car is only going to be worth about $32,700 (does not include taxes) after 3 years. Pretty sure I could buy out the car, and sell for more than that amount. Hence, I would have been paying less than financing for 3 years and I could get back some of my money for selling the car for more than the buyout amount.

Is the buyout amount purely based on the residual or is it different?
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      09-16-2020, 03:58 PM   #12
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Quote:
Originally Posted by nzafi View Post
Exactly my thought. Based on the MSRP for my configuration, the car is only going to be worth about $32,700 (does not include taxes) after 3 years. Pretty sure I could buy out the car, and sell for more than that amount. Hence, I would have been paying less than financing for 3 years and I could get back some of my money for selling the car for more than the buyout amount.

Is the buyout amount purely based on the residual or is it different?
Also note that the online configurator for the lease looks nothing like the one the dealer will build...There is like $200-$300 difference in monthly payment because of taxes, which starts to look way too close to financing at that point and not worth it...
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      09-16-2020, 06:05 PM   #13
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Quote:
Originally Posted by cmirandabu View Post
Also note that the online configurator for the lease looks nothing like the one the dealer will build...There is like $200-$300 difference in monthly payment because of taxes, which starts to look way too close to financing at that point and not worth it...
I take into account taxes, acquisition fees, doc fees, registration, etc. not hard to do.
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      09-16-2020, 09:50 PM   #14
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Im in the same boat, not sure yet what to decide
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      09-16-2020, 10:06 PM   #15
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You may already be considering this: If you decide to buy the car at else end, how long do you expect to finance the balance? If more than 2 years, it is less likely to be worth it. I have leased a lot too and have found it is best for cars more likely to depreciate, that I am not likely to modify in any meaningful way, or that fit a particular need (my last F31 328i for example). For me, modifying the car makes it more personal and I love it more for that reason. I bought mine in May of last year with 3,500 miles at almost 8k less than MSRP. That may be something to consider too.
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      09-17-2020, 01:25 PM   #16
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Quote:
Originally Posted by cmirandabu View Post
Interesting point for sure..Here is another situation..What if by the end of the lease the car is worth more than the buyout amount? Given that you put down reasonable amount of money down for a lease and your mileage is still low. Couldn't you just buy it out, sell it privately for more $$ ??

I bet you can sell a 5-6 year old M2 no problem.
If the car is worth more than the buyout at the end of the lease, that means you paid more for the depreciation than necessary over the course of the lease. So you get a "deal" at the 3 year mark, but you paid for the "deal" over the first 3 years. It's a wash.
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      09-17-2020, 03:35 PM   #17
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Quote:
Originally Posted by keylime503 View Post
If the car is worth more than the buyout at the end of the lease, that means you paid more for the depreciation than necessary over the course of the lease. So you get a "deal" at the 3 year mark, but you paid for the "deal" over the first 3 years. It's a wash.
Its the same if you finance. In fact, when you finance you will have spent $8-9K more on financing over 3 years than if you leased. You will have less on the loan left to pay off than if you did a lease buyout, but your cost for those 3 years is higher.
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      09-17-2020, 06:20 PM   #18
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Quote:
Originally Posted by nzafi View Post
Its the same if you finance. In fact, when you finance you will have spent $8-9K more on financing over 3 years than if you leased. You will have less on the loan left to pay off than if you did a lease buyout, but your cost for those 3 years is higher.
100%. I'm just pointing out that it's the same either way. There is no "deal" when the lease buyout is way below the market value. One way or the other, lease or finance, you're paying for the entire sale price of the car.
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      09-21-2021, 03:39 AM   #19
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When I bought my BMW, I paid the whole sum to the auto salon. In my opinion, leasing it is not such a good idea. I am spending too much on the car monthly. This is why I got a loan from remonttilainaa.com to pay the whole sum of the vehicle. I got my car in 2016, and I am still driving it. I have two more months to pay for the loan, and I calculated that I had to spend additional two thousand dollars above the price of the car because I got the loan. In my opinion, it is a good deal and better than leasing the vehicle.

Last edited by ismaelyork; 09-23-2021 at 02:55 AM..
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      10-20-2021, 05:54 AM   #20
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Quote:
Originally Posted by keylime503 View Post
I've leased my last 2 BMWs so please don't think I'm one of the "leasing is dumb" crowd. That being said, I really really don't see the point of leasing an M2.

As you rightly pointed out, there is the lease acquisition fee of $925. This is $26/mo extra, almost wiping out your $40/mo interest savings with MSDs.

For #2, I don't buy that argument. If the M2 retains it's value far above the residual after 3 years (which it almost certainly will), you're not getting "a steal". It means you way overpaid for the first 3 years of having the car and get to have a "steal" for the remaining time you pay it off. Either way you're paying the full sale price of the car. The only difference with leasing is that you pay a lot more of it in the first 3 years (not counting tax) and less of it after that. But if you buy the car out after the end of the lease, you end up paying *the exact same amount*.
I agree with this logic. I wouldn't lease an M2. My experience steers me in the direction of finding the best deal for a lease. What gets me the most car for the buck. Example. I was one of the lucky ones that was able to get a 2017 ftype svr convertible with a 138k sticker, no money down 30mo/10k for 840/mo all in. Those days are gone at the moment. I wasn't shopping for that car, but that was the deal that was around. No regrets. I'd see what you can get for the same money. I'd rather drive a Jeep gladiator that's a smoking deal than overpay on an M2. Buy the M2 used down to he road and save a few dollars or see what the G series brings.
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