Buying after lease end? Low milage vehicle with mods?

[LOW4LYF]

Just courios,

is it okay to buy the car after lease end?

I'm thinking to keep the car and finance the rest? Car is in excellent condition with some mods and much less miles then alowed.

Any pro or cons?

Thanks

[MadZarBMR]

Originally Posted by Figurka

Just courios,

is it okay to buy the car after lease end?

I'm thinking to keep the car and finance the rest? Car is in excellent condition with some mods and much less miles then alowed.

Any pro or cons?

Thanks

Too many variables missing to give a simple answer. On the CON side, you're probably looking at paying taxes on the payoff depending on your state and you would be assuming the full liability if something happens to the car unless you pay for GAP insurance on the refi.

[LOW4LYF]

What you mean if something happens to the car? Like a accident?

I'm just thinking about because it's a great car and then I could keep the mods.

[MadZarBMR]

Originally Posted by Figurka

What you mean if something happens to the car? Like a accident?

I'm just thinking about because it's a great car and then I could keep the mods.

Yes, if you wreck the car your insurance may not cover what you owe the bank. If you don't want to deal with removing the mods, then consider selling the car privately or see what you can get for it as is as a trade. Most of us that lease do it because we like to switch cars frequently.

[jjrandorin]

Originally Posted by Figurka

Just courios,

is it okay to buy the car after lease end?

I'm thinking to keep the car and finance the rest? Car is in excellent condition with some mods and much less miles then alowed.

Any pro or cons?

Thanks

Its absolutely "OK" to keep the car after lease end. This is one of the benefits to leasing, actually. Since the car has been great for you, if you love it, you have some choices at the end of your lease:

1. Pay off the residual value on the car thats on your contract (either with cash, or financing)

Pro: easiest to do, as the value is already on your contract. Just give BMW FS the money, or re finance it.
Con: Its HIGHLY unlikely that your car is actually worth its contracted residual.

2. Re negotiate the purchase of the car with a few dealers for less than the residual value (preferred if you want to keep it)

Pro: You can get a price that is closer to what the car will be worth on open market, which is likely not the residual (M cars might be closer to the residual value though)
Con: takes some work because its not a given that the dealer you originally purchased from will be the cheapest to buy the car from

(BMW dealers will get a "special" buy out price on your car which is lower than the residual, usually. Depending on what this price is, they can then mark it up, and still offer to sell you your car for less than the stated residual. HOW MUCH less depends on market value and what BMW FS offers to the dealer.

3. Give car back (either taking off mods, or leaving them on the car and not only losing them, but taking the chance that the dealer actually charges you for your modifications to BMWs leased vehicle.

Pro: Get a new car, and out of this one
Con: have to take off mods and lose them, or give them to BMW on the car. BMW can charge you for the mods to remove them as well.

IF you decide on option 1 or option 2, and finance the sales price (either the residual, or the negotiated sales price), you will need to look into getting Gap insurance. This consideration would be the EXACT same consideration that you would have had if you had purchased the car new. The "Gap" chance is exactly the same, especially if you finance the car and do not put much down. Just ask about Gap insurance if you choose to buy it.

[LOW4LYF]

Thanks guys.

[Fast4d]

I might do the same when my lease is up in may 2018. especially if it continues to be without issues.

I wont pay the 50k residual value though so,I will try number 2 mentioned above

[BavarianFanatic]

You can refinance the lease and flip to a loan at any point. You don't need to wait until the end of the lease. Shop around for the best rates and crunch numbers to see what makes the most sense.

I did this with my previous F30 about 13 months into a 36 month lease. I flipped it to Penfed at 0.9%.

[BMW F22]

Originally Posted by jjrandorin

Its absolutely "OK" to keep the car after lease end. This is one of the benefits to leasing, actually. Since the car has been great for you, if you love it, you have some choices at the end of your lease:

1. Pay off the residual value on the car thats on your contract (either with cash, or financing)

Pro: easiest to do, as the value is already on your contract. Just give BMW FS the money, or re finance it.
Con: Its HIGHLY unlikely that your car is actually worth its contracted residual.

2. Re negotiate the purchase of the car with a few dealers for less than the residual value (preferred if you want to keep it)

Pro: You can get a price that is closer to what the car will be worth on open market, which is likely not the residual (M cars might be closer to the residual value though)
Con: takes some work because its not a given that the dealer you originally purchased from will be the cheapest to buy the car from

(BMW dealers will get a "special" buy out price on your car which is lower than the residual, usually. Depending on what this price is, they can then mark it up, and still offer to sell you your car for less than the stated residual. HOW MUCH less depends on market value and what BMW FS offers to the dealer.

3. Give car back (either taking off mods, or leaving them on the car and not only losing them, but taking the chance that the dealer actually charges you for your modifications to BMWs leased vehicle.

Pro: Get a new car, and out of this one
Con: have to take off mods and lose them, or give them to BMW on the car. BMW can charge you for the mods to remove them as well.

IF you decide on option 1 or option 2, and finance the sales price (either the residual, or the negotiated sales price), you will need to look into getting Gap insurance. This consideration would be the EXACT same consideration that you would have had if you had purchased the car new. The "Gap" chance is exactly the same, especially if you finance the car and do not put much down. Just ask about Gap insurance if you choose to buy it.

Why does one need to buy GAP insurance when buying out a lease? I'm just curious as this is the first I've heard of it.

[jjrandorin]

Originally Posted by BMW F22

Why does one need to buy GAP insurance when buying out a lease? I'm just curious as this is the first I've heard of it.

You never "have" to buy GAP insurance. GAP insurance protects you if you have financing and a "GAP" between what the car is worth and what you owe.

If you are putting money down on the buyout, then it is less likely you will have a gap. If you are NOT putting money down on the buyout (or minimal money down) having a gap between value of car and what is owed on financing is possible.

One would either need to do the math to see if they will not have that GAP (by estimating value of car vs how many miles they drive, etc, or , put down a big enough down payment so that you dont have a gap.

Alternatively, one could just roll the dice, and hope that they dont end up in a situation where, if the car is totalled in an accident, insurance will only pay what you owe, so you (a person) could end up still owing money on a car that was totaled.

[BMW F22]

Originally Posted by jjrandorin

You never "have" to buy GAP insurance. GAP insurance protects you if you have financing and a "GAP" between what the car is worth and what you owe.

If you are putting money down on the buyout, then it is less likely you will have a gap. If you are NOT putting money down on the buyout (or minimal money down) having a gap between value of car and what is owed on financing is possible.

One would either need to do the math to see if they will not have that GAP (by estimating value of car vs how many miles they drive, etc, or , put down a big enough down payment so that you dont have a gap.

Alternatively, one could just roll the dice, and hope that they dont end up in a situation where, if the car is totalled in an accident, insurance will only pay what you owe, so you (a person) could end up still owing money on a car that was totaled.

Ah, gotcha. Thank you.

[mercedesc63]

Originally Posted by Figurka

Just courios,

is it okay to buy the car after lease end?

I'm thinking to keep the car and finance the rest? Car is in excellent condition with some mods and much less miles then alowed.

Any pro or cons?

Thanks

It's never smart to buy out a lease.

Your total lease payments never equate the number they give for the pay off it usually is significantly higher.


Low milage? Then trade it into a dealership. You will probably get some money in your pocket.

Then I would go BUY or finance a new car.

[afadeev]

Originally Posted by Figurka

is it okay to buy the car after lease end?

I'm thinking to keep the car and finance the rest? Car is in excellent condition with some mods and much less miles then alowed.

Any pro or cons?

The biggest CON is the artificially high buy-out price. It is defined in lease contract as % residual (usually high to subsidize leases) times MSRP.

Unless you royally screwed up and paid MSRP for the car, you bought it for much less than MSRP.

My M3 was $7K below, my i3 was $12.2K below. Therefore, at 65% residual (for example), I would have over-paid for the $4.6K for M3 or $7.9K for i3 if I leased them and contemplated lease buy-out.

YMMV - run the #s!

a

[jjrandorin]

Originally Posted by afadeev

The biggest CON is the artificially high buy-out price. It is defined in lease contract as % residual (usually high to subsidize leases) times MSRP.

Unless you royally screwed up and paid MSRP for the car, you bought it for much less than MSRP.

My M3 was $7K below, my i3 was $12.2K below. Therefore, at 65% residual (for example), I would have over-paid for the $4.6K for M3 or $7.9K for i3 if I leased them and contemplated lease buy-out.

YMMV - run the #s!

a

This is why I recommended Option number 2 in my list. Its absolutely true that BMW inflates the RV percentages. If one was purchasing that car instead of leasing it in the beginning, what one would pay would be the exact same thing as the lease payments (minus taxes) + the Residual.


If you lease, you basically get 2 chances to negotiate on the car. once at the beginning and once at lease turn in, and you can walk away at each opportunity.

[MadZarBMR]

Originally Posted by afadeev

The biggest CON is the artificially high buy-out price. It is defined in lease contract as % residual (usually high to subsidize leases) times MSRP.

Unless you royally screwed up and paid MSRP for the car, you bought it for much less than MSRP.

My M3 was $7K below, my i3 was $12.2K below. Therefore, at 65% residual (for example), I would have over-paid for the $4.6K for M3 or $7.9K for i3 if I leased them and contemplated lease buy-out.

YMMV - run the #s!

a

I'm sorry, I've been leasing cars for over 20 years and don't understand how a higher residual equates to you overpaying. Even if you buy out at the artificially inflated RV, that doesn't change what you saved up front. Am I missing something?

[afadeev]

Originally Posted by MadZarBMR

I'm sorry, I've been leasing cars for over 20 years and don't understand how a higher residual equates to you overpaying. Even if you buy out at the artificially inflated RV, that doesn't change what you saved up front. Am I missing something?

By setting an artificially high residual value (e.g.: 64% on an i3 2 years/20K miles) BMW FS accomplishes its primary goal of lowering monthly lease payments, making BMWs more "affordable". Thus, ~2/3 of new BMWs are leased these days.

The secondary consequence is that lease buy-out value also becomes similarly artificially inflated. In the i3 example, after 2 years, a $50K MSRP i3 would have lease buy-out value of 50*.64 = $32K. In reality, 2-year old i3s go for around $20K, so one would be mad to buy an i3 out at the contractually specified lease buy-out price.

Most lease return cars go back to the dealer's used-car/CPO lot, but dealers do have an option to return a fraction (~20-25%?) of the lease-return cars back to BMW FS if they don't think they can sell them at a profit. That's where all i3s go, which is why you hardly ever see them for sale on used/CPO lots. It's up to the dealer to decide if they will keep the lease-return car, or pass it on to BMW FS.

Originally Posted by jjrandorin

This is why I recommended Option number 2 in my list. Its absolutely true that BMW inflates the RV percentages. [...] If you lease, you basically get 2 chances to negotiate on the car. once at the beginning and once at lease turn in, and you can walk away at each opportunity.

Except that the second chance is largely illusionary.

Dealer can NOT and will NOT negotiate lease-return buy-out price. Dealer can either take the car from you at the buy-out price (minus discount from BMW FS), or pass it onto BMW FS. BMW FS may choose to negotiate with you, or not. If they do, they can flip the car back to the dealer if all 3 parties agree on the transfer price. You will need all 3 parties to come to an agreement there. Most dealers choose not to bother playing along, as they can always bounce unprofitable lease-return cars to BMW FS and forget about them.

The buy-out price is specified in the lease paperwork you signed, so strictly speaking, neither the dealer nor BMW FS have to negotiate anything with you. They can (and usually do) just ignore your requests, and then you either return the car, or buy it out and the specified buy-out price.

YMMV,
a

[jjrandorin]

Originally Posted by afadeev

By setting an artificially high residual value (e.g.: 64% on an i3 2 years/20K miles) BMW FS accomplishes its primary goal of lowering monthly lease payments, making BMWs more "affordable". Thus, ~2/3 of new BMWs are leased these days.

The secondary consequence is that lease buy-out value also becomes similarly artificially inflated. In the i3 example, after 2 years, a $50K MSRP i3 would have lease buy-out value of 50*.64 = $32K. In reality, 2-year old i3s go for around $20K, so one would be mad to buy an i3 out at the contractually specified lease buy-out price.

Most lease return cars go back to the dealer's used-car/CPO lot, but dealers do have an option to return a fraction (~20-25%?) of the lease-return cars back to BMW FS if they don't think they can sell them at a profit. That's where all i3s go, which is why you hardly ever see them for sale on used/CPO lots. It's up to the dealer to decide if they will keep the lease-return car, or pass it on to BMW FS.



Except that the second chance is largely illusionary.

Dealer can NOT and will NOT negotiate lease-return buy-out price. Dealer can either take the car from you at the buy-out price (minus discount from BMW FS), or pass it onto BMW FS. BMW FS may choose to negotiate with you, or not. If they do, they can flip the car back to the dealer if all 3 parties agree on the transfer price. You will need all 3 parties to come to an agreement there. Most dealers choose not to bother playing along, as they can always bounce unprofitable lease-return cars to BMW FS and forget about them.

The buy-out price is specified in the lease paperwork you signed, so strictly speaking, neither the dealer nor BMW FS have to negotiate anything with you. They can (and usually do) just ignore your requests, and then you either return the car, or buy it out and the specified buy-out price.

YMMV,
a

Thats simply not true. Dealers WILL negotiate the buy out price, IF they are given a special buy out price by BMW FS direct to them to keep the car. That price is closer to wholesale (not many times not at wholesale). Dealer can mark up the car, and still sell it to you for less than the residual on your contract.

Not ALWAYS, but definitely most times. Its not true to say it cant be done. The specifics depend on what BMW FS offers the dealer of course.

What IS true is that BMW FS will never negotiate the buyout with YOU the person leasing directly. They dont do that. You HAVE to go to a dealer and ask what it would be to buy the car... and you DONT have to go to the dealer you bought it from.

In fact, you CAN and SHOULD shop this around if you are intending to do it. If BMW FS is not giving a good buyout to the dealer, then it wont work, but most times they are. They just dont advertise this fact to everyone.

I am 100 percent sure of my position on this because I have done it, and talked to current CAs about it. Of course there IS no "one size fits all" because for any specific car, BMW FS may choose not to offer the dealer a buyout price to keep it.

Thats rare however. What is more common is dealer just doesnt want to keep it, or the dealer does not feel the buyout price is low enough. Whats ALSO possible is, it may cost more for YOU to buy it out than someone else buying your exact same car off the lot.

So, I agree with the position that its generally cheaper to turn your lease car in and then go buy the exact same model car off the dealers lot... the difference is, for YOUR lease car YOU know where all the miles came from if you leased it new. For a car on the lot, you dont know. For many people getting a good one and wanting to keep it is worth a little extra.

Not "paying the residual value" extra but "paying a little more than the used car lot" extra.

[BavarianFanatic]

Originally Posted by mercedesc63

It's never smart to buy out a lease.

Your total lease payments never equate the number they give for the pay off it usually is significantly higher.


Low milage? Then trade it into a dealership. You will probably get some money in your pocket.

Then I would go BUY or finance a new car.

This is not universally true. It wasn't in my case. It's always best to avoid absolutes like "always" and "never" in discussions with so many potential variables and circumstances.

[danniexi]

Originally Posted by BavarianFanatic

It's always best to avoid absolutes like "always" and "never" in discussions with so many potential variables and circumstances.

mercedesc63 is a sith lord.

[LOW4LYF]

Mine was 4k below sticker if I correct remember...

[G35POPPEDMYCHERRY]

Originally Posted by BavarianFanatic

This is not universally true. It wasn't in my case. It's always best to avoid absolutes like "always" and "never" in discussions with so many potential variables and circumstances.

right? My lease and buyout will only be 500$ more than .9% for 5 years.

[mercedesc63]

Originally Posted by Figurka

Mine was 4k below sticker if I correct remember...

Yea but the residual is based on the MSRP not the sale price.