Lease Question: 2018 M3 with 1 Yr remaining on Lease

[Mar48]

So I have a conundrum and hoping those with more experience can help.

I'm looking at buying a 2018 M3 which currently has 12 months left on the lease. I am a cash buyer/was looking to buy the car outright but it sounds like there is no advantage to 'taking over the lease' and immediately buying the car from BMW? To add to this, I am currently refinancing my house from a 30 yr to a 15 yr mortgage and want to minimize any impacts to credit in the next couple of months.

I have seen mixed information in some of the leasing threads on here, so I'll trying to boil down my questions:

1) Is there any advantage to buying the car outright right now?
2) Is there any disadvantage?

I have seem some threads saying that there is no difference (you save on financing if you buyout early and you don't lose anything since you can't "negotiate" at the end of lease with any dealerships - obviously the only risk would be foregoing any 'covid' discounts a year from now).

3) Confirming the above statement, you can or you can't negotiate the 'buyout' price with a dealer at the end of the lease?

4) If I take over the lease and immediately buy out the car, will I ding my credit? I assume I will when I take over the lease, but it would be followed shortly by the loan payoff so hoping it would be minimal.

5) Also, the monthly payment on the lease is $1300/mo (buyout at the end of term is $53K), it seems high considering what others have on here. Is it likely that taxes and fees were rolled into the lease? If it was and I'm in MN and the seller is in VA, would I effectively be paying off the remaining taxes in VA and then paying the MN taxes when I retitle the car in MN?

Thanks in advance!!

[IrishCoffee]

That is an incredibly high lease payment to take on.

If you will be paying $1300 for 12 months, THEN paying the $53K for buyout, that means that you're really paying $68K for the car.

I'm not sure how the car was optioned, but you can buy a nicely equipped new M4 with an MSRP of $80K for about $70K probably right now. Obviously an M4 and M3 are slightly different, and maybe you really need 4 doors, but yikes. That seems like a tough sell to me.

[White340]

So you have to pay 1300 for 12 months plus 53000 at the end plus tax on the buyout (and possibly the lease payment)?

That's super expensive to me. There are plenty of m3s you can buy now in the 50s.

What is so special about the one you like with such a high monthly payment and it being far away?

I know they don't make them anymore but my 82k M3 cost 67k new in dec 2019.

[Mar48]

Ignoring the cost right now (1:1 color). Was hoping to get answers to the questions I had above. I am considering a couple new M4s as well (and there is another M3 I’m looking at that is quite a bit less expensive).

[2SNAILS]

$1300/mo
M tax @ it's finest!

[mtr3s]

4) If I take over the lease and immediately buy out the car, will I ding my credit? I assume I will when I take over the lease, but it would be followed shortly by the loan payoff so hoping it would be minimal.

Yes, you will get a credit inquiry. This matters only if you are within cross hairs of being over your debt to income and credit score guidelines in refinancing your house. This may also put you in a different risk level with underwriting and put you in a higher rate. I can't generically answer your question unless I had more details. Being in the industry, I have seen customers not be able to close due to large purchases made before closing. Credit updates usually happen in 30-60 day time frames, thus the reason why your bank or mortgage company will pull credit day before closing.

[N1rve]

If you paid in cash for buy out, you would save whatever money factor interest you would have paid instead of letting the lease run it's course. Depending on your MF, it could be a few hundred dollars for a year.

Once you close your lease account (turn in or buy out), your credit will dip slightly.

[IrishCoffee]

You could also just do a 3rd party lease buyout, which avoids taking over the lease, as I understand it.

[Mar48]

Originally Posted by IrishCoffee

You could also just do a 3rd party lease buyout, which avoids taking over the lease, as I understand it.

I’m looking at another 2018 which coincidentally has similar amount of time left but with a more reasonable monthly pmt. Where can I find info on the 3rd party lease buyout? I was hoping I could do the lease transfer and buyout at the same time via BMW.

[fivemegabytes]

Originally Posted by Mar48

I’m looking at another 2018 which coincidentally has similar amount of time left but with a more reasonable monthly pmt. Where can I find info on the 3rd party lease buyout? I was hoping I could do the lease transfer and buyout at the same time via BMW.

I agree with the sentiment on this thread that this monthly payment is too high and you can do better. For this case, there's no advantage to you taking over the lease and then buying out. It's more work plus very slight temporary ding on your credit and no savings. MN doesn't roll up taxes so I doubt that's the reason for high payment.

If this was a well priced monthly payment (between 800 to 900 pre tax) then the advantage to leasing is you can easily move on after 1 year. AFAIK, MN has the same tax situation as CA, so if you buy you pay full tax on the whole price vs. during this year of lease you're only paying tax on each payment. This makes a big pro for leasing (if the monthly payment is right)

Re your dealer negotiation question (3), I can confirm that the dealer has no room anymore to help negotiate buyout price. The only help is any ongoing promo from BMW FS. Right now during the pandemic that is around $3k off for most folks with an M lease ending in next 1-3 months.

Slight caveat to above, if the dealer is selling the lease buyout to another customer (you) they can offer some discounts. (beats logic but that's how it is. If I buy out my own lease I pay residual, if you buy my lease you may get a slight discount) So ask the owner to email the dealer he'd like to sell this to a third party that is not his family/household (this is important because dealers get dinged if they sell it to owner for a lower price) and to get a buyout quote. Amount will probably be very similar to the payoff owner sees on BMW FS website. In theory, any dealer could facilitate this sale and doesn't have to be a BMW dealer but maybe a BMW dealer will get more favorable pricing. Only one way to find out. If you don't involve a dealer, the owner has to buy the car, pay sales tax on the whole thing and then you pay sales tax again, making the car more expensive.

I did the whole math for myself recently and evaluated keeping my upcoming 2018 M4 lease end vs. moving on and realized I can buy it out for 41k (pre-tax after 3k promo) right now which is much cheaper than the average 50-60k pre-tax prices folks are sharing in the used price thread.

[Mar48]

Current one I'm looking at is $843.92/month with $48K residual and 12 months left.

I'm trying to avoid the credit impact of a lease, right now we have no car payment and I want to keep it that way (800+ credit and my wife works at a bank - says between our credit getting pulled for the refinance + another for a car/lease it could drop 30+ pts and impact the refinanced mortgage rate). Hence, why I'm trying to figure out ways to buy the car without taking a lease on even temporarily.

[f80er]

Originally Posted by Mar48

Current one I'm looking at is $843.92/month with $48K residual and 12 months left.

I'm trying to avoid the credit impact of a lease, right now we have no car payment and I want to keep it that way (800+ credit and my wife works at a bank - says between our credit getting pulled for the refinance + another for a car/lease it could drop 30+ pts and impact the refinanced mortgage rate). Hence, why I'm trying to figure out ways to buy the car without taking a lease on even temporarily.

Your credit is still going to show the amount you owe on the lease. But why worry about that? If you pay your bills and live within your means your credit score becomes irrelevant because it will be sky high.

[DocL]

Leasing is better for your credit report. It’ll only show up as the remaining total lease payments opposed to a loan for if you purchase it right now. Also, you never know what kind of deal you can get on the car in a year if you still want to buy it. Maybe interest rates will be lower.

If you really want it, assume the lease first.

[Mar48]

Originally Posted by f80er

Your credit is still going to show the amount you owe on the lease. But why worry about that? If you pay your bills and live within your means your credit score becomes irrelevant because it will be sky high.

I think you may have missed my point. Having the lease on the credit will lower it and we are in the middle of refinancing (already started the process and had credit pulled at the beginning - but due to the time it's taking loans to close there is a chance they would repull and if there are any big changes it could impact our rate which we don't want).

So, I'm saying purchase it outright, no loan, no lease. Just wondering how it can be done without 'assuming' the loan... I think I'll call BMWNA, to see if I can pay them for the car outright and then they can transfer the title to me from the current owner. Otherwise, would have to assume the lease and pay the car off. I don't care to have to financing payments that are a part of the lease (I know you can do better in the market yada yada, but it's a personal choice)

[f80er]

Makes sense. I am sure BMW will work with you. Good luck.

[HRamadan]

Originally Posted by Mar48

Ignoring the cost right now (1:1 color). Was hoping to get answers to the questions I had above. I am considering a couple new M4s as well (and there is another M3 I’m looking at that is quite a bit less expensive).

Just out of curiosity what color is it? I was thinking of letting go of my 18 LSB M3 very well optioned...

[erictrainer]

Couple of things here... the first being 1300 is a very high payment... so unless that's the car you really want I'd look elsewhere. But without knowing what the original spec its hard to tell... could've been a 100k sticker car. In that case paying 1300 for a year wouldn't be that bad considering it's the car you want and someone else took 2/3 of that hit and in a year a 53k payoff would be ok, again if it's the car you really want. But I think you get the gist...1300 is very high.

With that said if you do want to move forward don't buy outright immediately. There is no upside to doing that. I can think of a huge disadvantage, once you buy it you carry the liability of a loss in value if God forbid you crash. So yeah there are NO advantages to buying it outright immediately.

Finally I wouldn't worry too much about having your credit hit, I've been through this process a couple of times and I don't remember my credit taking a hit bigger than 10 points. The internet has made it out to be a big deal... it has never affected me enough to care... it'll go back up in 2-3 months time if you really care about those 10 points.

[chenry]

check your lease end buyout options - with one month left on my 340 lease BMW just extended a $6k discount without me asking (and updated my BMWFS account accordingly).

Curious if the number is the same on the M cars

[f80er]

Originally Posted by chenry

check your lease end buyout options - with one month left on my 340 lease BMW just extended a $6k discount without me asking (and updated my BMWFS account accordingly).

Curious if the number is the same on the M cars

Someone else posted it was $3K discount for their M3 ending in August IIRC.

[IrishCoffee]

Originally Posted by Mar48

I’m looking at another 2018 which coincidentally has similar amount of time left but with a more reasonable monthly pmt. Where can I find info on the 3rd party lease buyout? I was hoping I could do the lease transfer and buyout at the same time via BMW.

If you are interested in a 3ed party buyout, I would contact BMWFS. Essentially it means someone other than than the current lessee is buying the car out from the bank prior to lease termination. Its relatively common. There may be a fee to do so.

I agree with the sentiment of the rest of folks that the credit hit for a 1 year lease payment is pretty minimal. It's the best option as it gives you flexibility. I would just talk to your lender. They'll always tell you to wait if possible, but if you do it, they're not going to walk away from your business. I cant imagine if you're in the position to pay cash for an M3 that your credit is close to the edge, but the lender should be able to tell you. Basically they dont want to have to re run your credit, so they do a soft inquiry to make sure nothing has changed just before closing. If it has, they have to spend money to check it and verify that all the new numbers line up. I just went through this. Leased my M4 the day before closing after they did the final credit check to avoid the hassle.