Wife’s car - Advice needed

[djhiram]

So as the title of the thread reads, my wife’s lease with BMW is up in August and we are currently negotiating the terms for a new lease. She is currently driving a 2015 X1 in Mineral White with Terra (brown) interior. When we leased this car back in 2015, she did alot more driving. Despite this she is still 12k miles under the 36k allotment. The car is in fine shape other than for a small scratch on the front bumper. I believe the wife had given 2k down and is paying $492 per moth plus $20-$25 for tire replacement insurance (Which thankfully she had. We’ve ended up replacing 3 tires along the way)

Anyhow we came to the dealer today and began the enjoyable negotiating process. I am a personal banker with a major US bank and have a good understanding of the structuring of an auto loan which gives me better negotiating power, but I just don’t know how a lease is structured and what are the factors that influence the bottom line monthly payment. I was hoping the resident car sales folks could help with a crash course on leases and what are some tips that could help me better negotiate.

The way I see it, they tell you all about brand loyalty - this is our 4th BMW lease, incentives, cash rewards bla, bla, bla but it just doesn’t translate into the bottom line - dollars and cents. I am very frustrated because I know they are sticking it to us, just not sure where. Our monthly payment keeps rising and the sticker price is relatively close to the x1 we currently have. Any help is appreciated.

We just find it a bit hard to justify such a large monthly payment for a 2nd vehicle which is not really being used on a daily basis but more for leisure and emergencies.

Thank you all as always.

[Laszlo]

You could try another brand and maybe a cheaper car? Personally, I wouldn't put money down on a lease. You don't have to and it doesn't make much difference. Plus that money isn't really going towards anything equitable. Just helps lower your payments and allows the dealership to raise your MF or toy with residual. Considering BMW is trying very hard to keep vehicles moving (they don't sell as fast as they used to, although the X1 is an exception), I would assume they would have some attractive lease offers right now. Have you checked on Edmunds what the current MF/Residuals are for July on the X1? You can post the question and get the real numbers from insiders. Probably good to go with a 36/12. Would also try pitting at least 3 dealerships against each other. And personally, you may want to try another brand altogether. Trading in a lease is easy and they won't give a darn about mileage on the car, no penalties. Anyway, good luck.

[GradyPhilpott]

I admit to being ignorant about financial affairs, but I've never seen a lease that I thought benefited me in any way.

I'd just rather own the car outright.

[Etschell]

Originally Posted by GradyPhilpott

I admit to being ignorant about financial affairs, but I've never seen a lease that I thought benefited me in any way.

I'd just rather own the car outright.

not even a land lease????

[GradyPhilpott]

Originally Posted by Etschell

not even a land lease????

[DLRIDES]

Originally Posted by GradyPhilpott

I admit to being ignorant about financial affairs, but I've never seen a lease that I thought benefited me in any way.

I'd just rather own the car outright.

X 2

I can’t even imagine “leasing” an automobile.

[Wcdhtwn]

If possible for you, do a single pay lease. Basically the cost of the lease over the term, 3 years say, is amortized over that period. BMW Finance is loaning you the cost of the lease which you pay back, including interest. If you can do a single pay you can avoid paying the interest.

If you don't want to do the single pay lease then negotiate the overall price of the lease, not the monthly payments. You can also negotiate the interest rate, obviously the better your credit the lower you can negotiate. I learned this working on a pricing consulting engagement with BMW Finance, coincidentally: When you get financing the sales/finance people call BMW and get you the lowest rate they can, then turn around and charge you a higher rate. Example: BMW Finance gives the dealer a 2% rate for you, then they charge you 5% on the lease loan, and the dealer pockets the 3% difference. All car companies do this, but they'll deny it... I worked on similar projects for Toyota Financial, Honda, and Nissan.

I have to buy a car by December and am dreading it. I'm going to buy and not lease, I drive too many miles for a lease. Good luck.

[DanMdR]

Originally Posted by Wcdhtwn

If possible for you, do a single pay lease. Basically the cost of the lease over the term, 3 years say, is amortized over that period. BMW Finance is loaning you the cost of the lease which you pay back, including interest. If you can do a single pay you can avoid paying the interest.

If you don't want to do the single pay lease then negotiate the overall price of the lease, not the monthly payments. You can also negotiate the interest rate, obviously the better your credit the lower you can negotiate. I learned this working on a pricing consulting engagement with BMW Finance, coincidentally: When you get financing the sales/finance people call BMW and get you the lowest rate they can, then turn around and charge you a higher rate. Example: BMW Finance gives the dealer a 2% rate for you, then they charge you 5% on the lease loan, and the dealer pockets the 3% difference. All car companies do this, but they'll deny it... I worked on similar projects for Toyota Financial, Honda, and Nissan.

I have to buy a car by December and am dreading it. I'm going to buy and not lease, I drive too many miles for a lease. Good luck.

The single pay lease sounds like a good deal. My only concern would be if the vehicle was totaled you’d be out the entire sum of the lease, not just whatever you put down and the payments so far. Is there a way to insure against losing the entire “single payment” should the vehicle be totaled? If there was I’d definitely think about this as tend to lease my cars.

[scarlet knight]

At the end of the lease or the end of long ownership, the vehicle is worth basically nothing for the owner.

You pay less to buy a car for cash and ride it till it dies. But in years 5-10, you are driving an old, dated car that needs repairs or at least maintenance, such as brakes, tires and what used to be called a tune up.

You pay more for a lease, but you are driving an up to date model under warranty that is unlikely to require expensive repairs.

I did plan A during my career when I drove 17-20,000 miles a year, often to dubious areas.

Now retired and driving much less, I am trying plan B. Still grappling over the right decision, but thoroughly enjoying a brand new Audi A4 over my ten year old tired Honda Accord with 174K miles.

[Wcdhtwn]

Originally Posted by DanMdR

The single pay lease sounds like a good deal. My only concern would be if the vehicle was totaled you’d be out the entire sum of the lease, not just whatever you put down and the payments so far. Is there a way to insure against losing the entire “single payment” should the vehicle be totaled? If there was I’d definitely think about this as tend to lease my cars.

I’m not sure but I’d think your car insurance would cover the car’s value if totaled. It should work the same as a monthly payment lease, just you are making one payment instead of monthly. It’s a good question that I’m sure your insurance company can answer.


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[mjclark32]

I just went through this... I work from Home and don’t really “need” a car all the time. My wife, also a banker, needs one.
So we thought about just having one and me uber’ing everywhere. The thought was to test it for a month or two and see what it cost to do just that. And, if under the cost of a lease payment/insurance etc, just stick with Uber ‘ing...
Ultimately we didn’t even try it and ended up buying another car, but it was probably a good idea to I do, I’m just stubborn and would rather have my own... I don’t always make rational decisions

[Chewbacca]

Originally Posted by djhiram

So as the title of the thread reads, my wife’s lease with BMW is up in August and we are currently negotiating the terms for a new lease. She is currently driving a 2015 X1 in Mineral White with Terra (brown) interior. When we leased this car back in 2015, she did alot more driving. Despite this she is still 12k miles under the 36k allotment. The car is in fine shape other than for a small scratch on the front bumper. I believe the wife had given 2k down and is paying $492 per moth plus $20-$25 for tire replacement insurance (Which thankfully she had. We’ve ended up replacing 3 tires along the way)

Anyhow we came to the dealer today and began the enjoyable negotiating process. I am a personal banker with a major US bank and have a good understanding of the structuring of an auto loan which gives me better negotiating power, but I just don’t know how a lease is structured and what are the factors that influence the bottom line monthly payment. I was hoping the resident car sales folks could help with a crash course on leases and what are some tips that could help me better negotiate.

The way I see it, they tell you all about brand loyalty - this is our 4th BMW lease, incentives, cash rewards bla, bla, bla but it just doesn’t translate into the bottom line - dollars and cents. I am very frustrated because I know they are sticking it to us, just not sure where. Our monthly payment keeps rising and the sticker price is relatively close to the x1 we currently have. Any help is appreciated.

We just find it a bit hard to justify such a large monthly payment for a 2nd vehicle which is not really being used on a daily basis but more for leisure and emergencies.

Thank you all as always.

Dj, give back the BMW and get her a certified 4Runner or country man mini or Wrangler.

X1 has poorer residual and if the car is not used much, get something that’s depreciated already and is an easy sell.

If she loves you, she’ll stay.

Unless of course she’s a badge shopper.

Then get another BMW and keep playing those dope tunes!!!

[pilotjim]

Go at the end of the month when they are trying to get their factory incentive for selling/leasing a specified number of cars. Your power to negotiate is much better at the end of the month.

[bdex75]

A lease has 3 main parts that I think are important.
1. The purchase price. You need to negotiate the best deal you can. This is pretty obvious but so many people just assume it isn’t negotiable on a lease.
2. The residual value. This is what percentage of the price the leasing company thinks the car will be worth at the end of the lease term. This varies by leasing company and miles driven per year etc.
Not negotiable from what I know.

3. The money factor. This is the interest rate part. Being a banker surely you understand this part. Lower the better and negotiable most of the time.
Dealer has a buy rate just like an indirect auto loan. If it is a lease special this may not be negotiable.

Price-residual value+ money factor=base payment. Add tax and extras to get final payment.

BMW leases are very common because the free maintenance that comes along with them and the high residual values causing the payments to be much more reasonable than say a 60 month purchase payment.

If she wants a new car every couple/few years and drives less than 12k a year may be worth looking at another lease from someone.

I don’t mind leases. I have leased a lot of cars in the past including my truck I just traded yesterday on a wrangler. I only drive them for a couple years. The payment was $300 mo cheaper than a 60 month purchase payment and I am always able to easily trade out of a full size truck. I did purchase the Wrangler on a traditional loan. Don’t see it going anywhere but to my kids after a couple years.


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[droptopman]

Originally Posted by bdex75

A lease has 3 main parts that I think are important.
1. The purchase price. You need to negotiate the best deal you can. This is pretty obvious but so many people just assume it isn’t negotiable on a lease.
2. The residual value. This is what percentage of the price the leasing company thinks the car will be worth at the end of the lease term. This varies by leasing company and miles driven per year etc.
Not negotiable from what I know.

3. The money factor. This is the interest rate part. Being a banker surely you understand this part. Lower the better and negotiable most of the time.
Dealer has a buy rate just like an indirect auto loan. If it is a lease special this may not be negotiable.

Price-residual value+ money factor=base payment. Add tax and extras to get final payment.

BMW leases are very common because the free maintenance that comes along with them and the high residual values causing the payments to be much more reasonable than say a 60 month purchase payment.

If she wants a new car every couple/few years and drives less than 12k a year may be worth looking at another lease from someone.

I don’t mind leases. I have leased a lot of cars in the past including my truck I just traded yesterday on a wrangler. I only drive them for a couple years. The payment was $300 mo cheaper than a 60 month purchase payment and I am always able to easily trade out of a full size truck. I did purchase the Wrangler on a traditional loan. Don’t see it going anywhere but to my kids after a couple years.


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Good description of the lease process

Hiram, negotiate the money factor like you would an % rate on a loan.

[CamSLC]

The financing rate (money factor/interest) is likely higher now then in 2015, and the car may have a lower residual now. If you're looking for an explanation on why the monthly payment is higher.

I agree with what others have said as well.

[Seibei]

It is all too complicated for me. I usually buy cars outright and drive them till they are no longer worth much.

A BMW X1 costs $33,900. You can expect a car to lose half it's value in 3 years, $16,950.

You pay $2000 + (36 x $492) = $19,712

$19,712 - $16,950 = $2,762

That is how much they are sticking it to you.

My wife says that if I can't afford to pay cash for a consumable good like a car, then I can't afford the consumable good. I agree.

[Etschell]

Originally Posted by djhiram

So as the title of the thread reads, my wife’s lease with BMW is up in August and we are currently negotiating the terms for a new lease. She is currently driving a 2015 X1 in Mineral White with Terra (brown) interior. When we leased this car back in 2015, she did alot more driving. Despite this she is still 12k miles under the 36k allotment. The car is in fine shape other than for a small scratch on the front bumper. I believe the wife had given 2k down and is paying $492 per moth plus $20-$25 for tire replacement insurance (Which thankfully she had. We’ve ended up replacing 3 tires along the way)

Anyhow we came to the dealer today and began the enjoyable negotiating process. I am a personal banker with a major US bank and have a good understanding of the structuring of an auto loan which gives me better negotiating power, but I just don’t know how a lease is structured and what are the factors that influence the bottom line monthly payment. I was hoping the resident car sales folks could help with a crash course on leases and what are some tips that could help me better negotiate.

The way I see it, they tell you all about brand loyalty - this is our 4th BMW lease, incentives, cash rewards bla, bla, bla but it just doesn’t translate into the bottom line - dollars and cents. I am very frustrated because I know they are sticking it to us, just not sure where. Our monthly payment keeps rising and the sticker price is relatively close to the x1 we currently have. Any help is appreciated.

We just find it a bit hard to justify such a large monthly payment for a 2nd vehicle which is not really being used on a daily basis but more for leisure and emergencies.

Thank you all as always.

my honest advice is to not lease a bmw if it is not justified.

its probably the interest rate you are paying. in a lease you are buying the vehicle. you just have the option to return it and forgo the option to buy it outright at the end.

[enjoythemusic]

Some dealers are also better than others. Try a diff BMW dealer and make them EARN your business.

[Ferdelious]

Try Swap A Lease, it's a great way to find leased cars for much cheaper than you could getting it new. Someone has already put the money down for you and usually has put enough to have lower monthly payments. A lot of people are car flippers just like some of us like to flip watches, so most will actually incentivize the deal because they just want out.

[V25V]

Originally Posted by djhiram

I believe the wife had given 2k down and is paying $492 per moth plus $20-$25 for tire replacement insurance (Which thankfully she had. We’ve ended up replacing 3 tires along the way)

I just had a chuckle at this.

[cdmorenot]

What are you trying to get into?

The X1 may not have the same resid that perhaps a 3 series does. BMW artificially inflates resids to make lease offers more attractive.

I wouldn't bother going into a dealership. Try finding out the internet department for every single BMW dealership in your area and let them duke it out.

You want to ask what the current resid of the car you want is and get the MF (Money Factor) as low as you can. Avoid installing any accessories as those are not residualized - Try a one payment lease also.

What I usually do (I was on my 5th BMW lease before I left the US)

Find a car I am OK with from their inventory, avoid ordering something or a dealer trade - Call up internet department, ask for a top sales guy or the manager. Tell them you want the highest residual authorized by BMWFS, once you get the MF where you want it, put in MSD (Multiple Security Deposits) for additional MF reduction you can do up to 7. Tell the guy you're going to shop around his offer, and actually do it.

I've pinned Paul Miller, Open Road, Tenafly and Park Ave BMW against each other more times than I care to admit and I was probably one of the only few people driving 335s and 340s for Honda Civic money.

Good luck OP.

[djhiram]

Originally Posted by cdmorenot

Find a car I am OK with from their inventory, avoid ordering something or a dealer trade - Call up internet department, ask for a top sales guy or the manager. Tell them you want the highest residual authorized by BMWFS, once you get the MF where you want it, put in MSD (Multiple Security Deposits) for additional MF reduction you can do up to 7. Tell the guy you're going to shop around his offer, and actually do it.

I've pinned Paul Miller, Open Road, Tenafly and Park Ave BMW against each other more times than I care to admit and I was probably one of the only few people driving 335s and 340s for Honda Civic money.

Good luck OP.

Thanks for the heads up! Can you elaborate on MSD? What does this actually mean and how does that affect the money factor? Is money factor like the APR on a standard auto loan, which is usually tiered based on credit worthiness?

Is the MSD essentially the loyalty cash, any BMW lease credit etc?

How does one know what a “good” money factor number should be? Is there a way to fact check their numbers?

THANK YOU!

[cdmorenot]

Originally Posted by djhiram

Thanks for the heads up! Can you elaborate on MSD? What does this actually mean and how does that affect the money factor? Is money factor like the APR on a standard auto loan, which is usually tiered based on credit worthiness?

Is the MSD essentially the loyalty cash, any BMW lease credit etc?

How does one know what a “good” money factor number should be? Is there a way to fact check their numbers?

THANK YOU!

Sure! So basically the money factor is your APR (Multiply whatever MF you're being offered by 2400 and you have your APR)

Your BMW dealership will have MF tables that are authorized by BMWFS and they are tiered based on credit worthiness. For example, back in May, for a 330xi the MF was .00156 and 61% residual.

The MSD is different from rebates, lease credits, equal to one monthly payment and a maximum of 7 are allowed (Thinking of it as a security deposit) each MSD would lower your MF by .00007

So that number above would be .00107 MF with 7 MSDs

Remember to ask if there are any CURRENT lease credits which are BMW to consumer rebates applied to CAP cost and will vary by ZIP code. Also, BMW hosts BMW DRIVE events in the summer. Where you go in and drive a beemer and you get a $1K rebate voucher. If there isn't one locally, try to see if there is one within driving distance.

I drove to Cherry Hill from Paramus (About 2 hours) and came back with my voucher. Every bit helps !!

Your absolute best bet is to join something like Bimmerfest and post a thread asking what the current MF, rebates and residuals are for the car you're looking at - Be sure to let people know where you're located so others can chime in with local numbers. Dealerships often hang around there and you'll likely get a PM with an offer before you know it.

Everything that I am telling you is based off my previous experiences with BMW with my most recent being in June 2016 and the best way to know if you're getting a good deal is making sure the dealership isn't marking up the MF by a single digit.

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[djhiram]

Originally Posted by cdmorenot

Sure! So basically the money factor is your APR (Multiply whatever MF you're being offered by 2400 and you have your APR)

Your BMW dealership will have MF tables that are authorized by BMWFS and they are tiered based on credit worthiness. For example, back in May, for a 330xi the MF was .00156 and 61% residual.

The MSD is different from rebates, lease credits, equal to one monthly payment and a maximum of 7 are allowed (Thinking of it as a security deposit) each MSD would lower your MF by .00007

So that number above would be .00107 MF with 7 MSDs

Remember to ask if there are any CURRENT lease credits which are BMW to consumer rebates applied to CAP cost and will vary by ZIP code. Also, BMW hosts BMW DRIVE events in the summer. Where you go in and drive a beemer and you get a $1K rebate voucher. If there isn't one locally, try to see if there is one within driving distance.

I drove to Cherry Hill from Paramus (About 2 hours) and came back with my voucher. Every bit helps !!

Your absolute best bet is to join something like Bimmerfest and post a thread asking what the current MF, rebates and residuals are for the car you're looking at - Be sure to let people know where you're located so others can chime in with local numbers. Dealerships often hang around there and you'll likely get a PM with an offer before you know it.

Everything that I am telling you is based off my previous experiences with BMW with my most recent being in June 2016 and the best way to know if you're getting a good deal is making sure the dealership isn't marking up the MF by a single digit.

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How is the MSD different from down payment?

Great info btw!

[cdmorenot]

Originally Posted by djhiram

How is the MSD different from down payment?

Great info btw!

MSDs are returned at lease end as long as the car is in good shape as per the lease agreement. Only downside is your money is tied up for the term of the lease.

Please, whatever you do. Don't EVER put down money on a lease - It is basically the same thing as taking your hard earned money and flushing it down the toilet.

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[Runnin' Rebel]

Well this was a great thread
Thanks

[Ballzzz]

Believe msd’s only reduce by .00005 now since the program was re-released.

[djhiram]

As an update, I tried a different approach and walked in to another dealer and asked to speak directly to a top sales guy or GM. Ended up speaking to the GM and letting him know what I do for a living and how my attempt to work with the previous dealer has been very frustrating.

He said he understood and was very honest and up front about money factor and residual and invited me to shop the deal and bring him anything that beats it. He would be glad to beat it.

His estimate came in almost $75 lower with zero negotiating. I was amazed. I’m planning to go in this weekend to futher discuss.

Thanks for the great advice on here!

[zengineer]

You can also ask multiple dealers what they will sell you the current car for including a CPO warranty. BMW has a set price they will sell to a dealer and different dealers look at what they need to make on a quick flip and how much to mark up the warranty differently.

You have a low mileage car you know the history of. Unless she dislikes it or treated it badly, you may want to get off the lease merry-go-round and buy the one you've been driving.

Unless that $2000 down included one of the monthly payments or something refundable, that's another $60/month. With the tire policy that pushes $600 a month for that thing and the next one will be more.

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