Lease End: The Decision

[DrtyJrze]

Hello All,

Looking for the advice of the leasing gurus on here. MY15 M3. MSRP was 76k. Residual is $44k. Car will have about 24k miles give or take at lease end (September). With taxes it would be roughly $47k to buy (I think? NJ).

Car is clean, garage kept, hand washed, zero mechanical issues/rattles/etc. I still love the car and honestly don't see anything else out there that grabs my attention. My question is should I:

A) Keep the car and continue enjoying it. The longest I would keep is until the next generation M is released.

B) Sell to dealer and rollover difference into new M3 (with ZCP). Not sure if that is a viable option or how it would work.

C) Private sale, but my lack of experience with the financing with this option make me wary.

D) Turn it in and start over fresh.

If you need anymore info with the finance part or anything else let me know. Or if there is a thread similar already posted I'd appreciate a link. Thanks.

[jjrandorin]

In option B, what do you mean by pocket the difference. Is your expectation that your car will be worth more than 44k at lease turn in?

[supsup]

Originally Posted by jjrandorin

In option B, what do you mean by pocket the difference. Is your expectation that your car will be worth more than 44k at lease turn in?

At auction they are doing between 48,400 and 56,500.

Cars with OPs mileage are doing $54,000 and up in May. Manheim is actually predicting that next month prices at the auction on these will rise $500. So OP should be in pretty good shape come September.

These are real numbers straight from the BMW end of lease and dealer trade auctions, not speculation (besides next months prediction of course).

[jjrandorin]

Thats pretty awesome! Completely different than "regular" BMWs. The easiest would be selling to a dealer, if you are not keeping it.

There is no reason to just "turn it in" if its worth more than your residual. The dealer would buy it anyway, you just wouldnt get any money from it.

[DrtyJrze]

Originally Posted by joao

At auction they are doing between 48,400 and 56,500.

Cars with OPs mileage are doing $54,000 and up in May. Manheim is actually predicting that next month prices at the auction on these will rise $500. So OP should be in pretty good shape come September.

These are real numbers straight from the BMW end of lease and dealer trade auctions, not speculation (besides next months prediction of course).

Thanks for the real world feedback. I understand price is subject to change based on demand/car condition at end/etc.

[DrtyJrze]

Originally Posted by jjrandorin

In option B, what do you mean by pocket the difference. Is your expectation that your car will be worth more than 44k at lease turn in?

Yea turning it in outright is probably a 5% chance of happening.

Or a 100% if something happens to the car in the next 3 months, hahaha.

[HighlyMedicated]

I turned my car in 6 months early back in March 2017 sale, bmw paid 3 months of payments since I got another bmw and rolled over 3 months payment into the new lease. Some dealerships actually said no help from bmw so try another dealership or keep telling them to call bmw cause I doubt they even called in the first place. Some salesman are not the most honest people. My lease only went up one hundred and they paid for my remaining balance on the 2015...I had 36k miles on it and the process was super easy at the dealership. Paid zero down just first months payment, taxes, and fees. Appraising my bmw 2015 took less than 5 minutes and off to sign papers. Time is money sometimes and the hassle of letting others test drive or posting online and waiting wasn't sounding fun for me so i sold it to the dealership. About 47k left to buy out. If your M is 2015 or first year model of any car you kno they still working out all the little details that come from consumer reviews, and service departments. My friends are bmw mechanics and they even tell me they aren't built to last, too many moving parts and high performance makes many items on the car wear and tear. I could already feel my old M4 not as good as when it only had 7 miles on it. If you keep it, your payments might be less and you will sell in 3 years anyways and get a newer car! I'm paying more than financing for 5 years but its another brand new M4 ZCP for lower than my first cars payments! So start looking for the M4 you want with the color and options you want then start negotiating to that dealership! I may not beat my car like some track vehicles but i push it hard everyday! Why not its an M4, newer is better and zcp is worth every penny!

[HighlyMedicated]

When I looked on autotrader barely any M's out there, called carmax only 1 was available in So Cal. So used M's are in demand for sure but extended warranties from bmw are not offered to 2nd buyers only the first and non transferable, crucial european cars cost a lot to fix and many problems higher than 50k or so miles. But your in luck with new because so many M's at dealerships these days that you will get a discount for sure, they were firm first year and rare but now they just want the sale!! Go to truecar.com or edmunds and get a quote , then send to dealerships and ask if they will honor it with your trade in, gave them vin and credit report over email and everything was easy when I came into bmw. Good luck, it took a while to find the right options and color but thats the fun in buying new...choices!!!

[WadeM]

I'm in the same boat, residual on my car in October is $41k. Just ordered a 2018 tanzanite blue M4 ZCP with euro delivery on August 7. I'm going to turn my car in early and use the equity in my current lease to lower the payment on my new lease.

[gatorfast]

I would buy it at lease end if I were you. You obviously love it, its low mileage, and it has given you no issues so why not hang on to it?

[dkhm3]

actually i will need the same advice, i plan on buying out my x5m when the lease is up- and there is "equity" of about 5-10k based on what i see 2015's selling for now.

[MN2///M]

I'm a buy it kind of guy anyway, so I say go with option A and buy your car.

You'll have another year of factory warranty/maintenance and likely put yourself in a better financial position when you are ready to buy the next one. Only real question is whether you take the risk for 1 to 2 years without warranty. Given your low mileage, I think that is a safe gamble. We are not hearing a lot about major issues with these cars and many have 50-70K miles at this point. I think these cars will stay pretty solid right up to 100K miles unless you are tracking the car, then it's all about maintenance, wear and tear.

Private sales are hard when financing is involved and there is some risk in today's world unless you get the check at the buyer's bank. People who can afford to pay $50k for a car cash, typically will not as their money is probably making them more than what financing the car will cost them.

Some banks evidently (Chase for one) will not even finance a private deal now a days. I sold my last SUV last December and the buyer tried to finance through Chase who said no, even despite the car was financed with them. I called Chase and confirmed.

Option B & D to me are virtually the same and are your worse options IMO. On my 4 year old SUV, I made $6k more on the private sale than the $25k trade offer the dealer was willing to do; course the private sale required more effort on my part.

[dantm3]

Originally Posted by DrtyJrze

Hello All,

Looking for the advice of the leasing gurus on here. MY15 M3. MSRP was 76k. Residual is $44k. Car will have about 24k miles give or take at lease end (September). With taxes it would be roughly $47k to buy (I think? NJ).

Car is clean, garage kept, hand washed, zero mechanical issues/rattles/etc. I still love the car and honestly don't see anything else out there that grabs my attention. My question is should I:

A) Keep the car and continue enjoying it. The longest I would keep is until the next generation M is released.

B) Sell to dealer and rollover difference into new M3 (with ZCP). Not sure if that is a viable option or how it would work.


C) Private sale, but my lack of experience with the financing with this option make me wary.

D) Turn it in and start over fresh.

If you need anymore info with the finance part or anything else let me know. Or if there is a thread similar already posted I'd appreciate a link. Thanks.

Option E- Sell it to me... I will take it for 46k at lease end and you pocket 2k to put towards a new car... What are the options and color on the car?

[GrussGott]

FWIW, BMWFS seems to be pulling back on leases big time (no more security deposit, way smaller corporate discount, etc etc) which tells me they're forecasting a majorly shit used market in 3 years (or something worse).

Net-net, I'd count on at least 10-20% decrease in used car value within 2-3 years - BMWFS sure is.

[mercedesc63]

Originally Posted by DrtyJrze

Hello All,

Looking for the advice of the leasing gurus on here. MY15 M3. MSRP was 76k. Residual is $44k. Car will have about 24k miles give or take at lease end (September). With taxes it would be roughly $47k to buy (I think? NJ).

Car is clean, garage kept, hand washed, zero mechanical issues/rattles/etc. I still love the car and honestly don't see anything else out there that grabs my attention. My question is should I:

A) Keep the car and continue enjoying it. The longest I would keep is until the next generation M is released.

B) Sell to dealer and rollover difference into new M3 (with ZCP). Not sure if that is a viable option or how it would work.

C) Private sale, but my lack of experience with the financing with this option make me wary.

D) Turn it in and start over fresh.

If you need anymore info with the finance part or anything else let me know. Or if there is a thread similar already posted I'd appreciate a link. Thanks.

If the car will have 24k upon lease end that means the car is under mileage. My theory is under mileage isn't good and over mileage is preferable because IMO it's a better value.

Think about it this way you paid monthly for a certain amount of miles for 3 years.

I usually don't recommend buying out the lease. Instead I recommend buying another new car or leasing another new car. I also recommend the pull ahead program it allows you to get out of our lease 3 months early.

[MFNATIK]

Get a 2018 ZCP and pocket the profit from your current lease when you sell it.

Guys, the way I see it if you're profiting from your lease it means one of three things: 1. you got one hell of a deal or 2. your lease wasn't all that great to begin with or 3. the car really held it's value well. Am I missing any other angle? Not bashing on OP but just wanting to think this out loud with some of you leasing gurus.

[GrussGott]

Originally Posted by MFNATIK

Get a 2018 ZCP and pocket the profit from your current lease when you sell it.

Guys, the way I see it if you're profiting from your lease it means one of three things: 1. you got one hell of a deal or 2. your lease wasn't all that great to begin with or 3. the car really held it's value well. Am I missing any other angle? Not bashing on OP but just wanting to think this out loud with some of you leasing gurus.

If you're "profiting" on a private sale coming off of a lease it means you got a "bad" lease deal ... not that you could've necessarily done anything about it.

Here's why:

The lease premise is that you're paying for the difference between the price of the car new and the price after the lease period, say three years.

That means you can get a better deal by:
(1.) Negotiating down for cheaper new car price (which lessees have control over) or
(2.) Negotiating up for a higher turn in price up (the residual which lessees have no control over), or
(3.) Both of those.

Moving those levers squishes the chunk of the car that the lessee is paying for (I'm purposely ignoring interest rate which applies to both loan and lease).

So a high residual value is good for the lessee because it means the lessee is paying for a smaller chunk of the new car in the lease.

If the residual is lower, such that the lessee can sell the car on the open market and make a "profit", well that means their lease was too expensive and their private sale is only recovering the dollars they should've gotten in the first place when the lease was signed.

Example:

Let's say the car was $10,000 and the residual is 60% meaning the car is estimated to be worth $6,000 at lease end, which means the lessee pays $4,000.

But the lessee discovers at lease end that he can sell the car for $6,200; $200 more than the residual, and thus "profit" by paying off the $6,000 and keeping the $200.

Well, they actually didn't profit because their lease had too low of a residual (60%) rather than the actual (62%) which means they paid 40% on the lease instead of 38%. So it's not a profit, but a recovery.

But, again, that doesn't mean anyone could've avoided the 2% since residuals are estimates and each person has to decide if they're willing to sign the deal. Personally I'll just turn in the car and avoid the sales hassle, but the point of the lease is, I don't have to, I have options.

Now, on the other hand, in the same example, let's say the car could only be privately sold for $5,800 or 58%, i.e., 2% lower than what the lease was signed for. That's the real profit - the lessee only paid for 40% of the car in their lease when they should've paid for 42% - so in that case BMWFS ate 2% and has no option to recover from you.

Thus lease "profit" is in the original lease contract negotiation, not at lease end when the only option for the lessee is recovery, not profit.

SUMMARY

So leasing gives you the option: profit from market downswings, or normalize and recover from a market upswing if your deal wasn't market aligned to start.

A loan has no option to recover or downswing profit, and exposes you to full market risk on day 1.


PS - all the "but if you lease you don't have equity! You're a renter!" talk is crap - you have equal "equity" in either case, leasing just gives you the option to avoid an unexpected depreciation loss (at lease end, but if you choose to buy at that point, now you're at full risk as well)

PPS - This is also why BMWFS is making leasing less attractive: they're forecasting a market downswing and don't want to eat a bunch of depreciation so they're pushing risk to people who take loans

[MFNATIK]

Great breakdown GrussGott !!!

[HighlyMedicated]

Before turning into bmw you can try carmax, ive heard of a couple people that have got a quote higher than the buyout of the lease and made a little profit not much but 1-5 thousand depending on condition. I should have tried it with my 2015 but I was busy and they take about an 30-60 mins to do the appraisal and the closest carmax to me was 30-45 minutes away. Its faster than private and an option to think about near the end of your lease. I got a better deal in the end by returning to bmw and telling them im going to lease another one just ask and try.

[classyfast]

...

[hyperspeed]

I was in the same boat, here were my options:

1. Carmax it... you should be around 46-50k for it
2. Dealer buy back
3. Buyout / Private sale within 10 days to avoid CA Sales Tax

I went with #3 and I have a '18 ZCP on the way.

[noone]

Originally Posted by GrussGott

If you're "profiting" on a private sale coming off of a lease it means you got a "bad" lease deal ... not that you could've necessarily done anything about it.

Here's why:

The lease premise is that you're paying for the difference between the price of the car new and the price after the lease period, say three years.

That means you can get a better deal by:
(1.) Negotiating down for cheaper new car price (which lessees have control over) or
(2.) Negotiating up for a higher turn in price up (the residual which lessees have no control over), or
(3.) Both of those.

Moving those levers squishes the chunk of the car that the lessee is paying for (I'm purposely ignoring interest rate which applies to both loan and lease).

So a high residual value is good for the lessee because it means the lessee is paying for a smaller chunk of the new car in the lease.

If the residual is lower, such that the lessee can sell the car on the open market and make a "profit", well that means their lease was too expensive and their private sale is only recovering the dollars they should've gotten in the first place when the lease was signed.

Example:

Let's say the car was $10,000 and the residual is 60% meaning the car is estimated to be worth $6,000 at lease end, which means the lessee pays $4,000.

But the lessee discovers at lease end that he can sell the car for $6,200; $200 more than the residual, and thus "profit" by paying off the $6,000 and keeping the $200.

Well, they actually didn't profit because their lease had too low of a residual (60%) rather than the actual (62%) which means they paid 40% on the lease instead of 38%. So it's not a profit, but a recovery.

But, again, that doesn't mean anyone could've avoided the 2% since residuals are estimates and each person has to decide if they're willing to sign the deal. Personally I'll just turn in the car and avoid the sales hassle, but the point of the lease is, I don't have to, I have options.

Now, on the other hand, in the same example, let's say the car could only be privately sold for $5,800 or 58%, i.e., 2% lower than what the lease was signed for. That's the real profit - the lessee only paid for 40% of the car in their lease when they should've paid for 42% - so in that case BMWFS ate 2% and has no option to recover from you.

Thus lease "profit" is in the original lease contract negotiation, not at lease end when the only option for the lessee is recovery, not profit.

SUMMARY

So leasing gives you the option: profit from market downswings, or normalize and recover from a market upswing if your deal wasn't market aligned to start.

A loan has no option to recover or downswing profit, and exposes you to full market risk on day 1.


PS - all the "but if you lease you don't have equity! You're a renter!" talk is crap - you have equal "equity" in either case, leasing just gives you the option to avoid an unexpected depreciation loss (at lease end, but if you choose to buy at that point, now you're at full risk as well)

PPS - This is also why BMWFS is making leasing less attractive: they're forecasting a market downswing and don't want to eat a bunch of depreciation so they're pushing risk to people who take loans

Gruss, doesn't the higher interest rate one pays on their money through BMWFS on a lease vs. a significantly lower rate from a CU purchase play a factor in leasing costs? BMWFS financing is 3.29 and my CU is 1.99 for a 4 year loan.