Business History Books » Business Consultant » BMW Lease Assumptions
BMW Lease Assumptions
Question:
GAP insurance covers the difference between what your car is worth on a total loss and what you may owe on it. You may owe more that the book value of the car. GAP insurance covers that difference. Jack
– Hide quoted text — Show quoted text ->Is your insurance different than if you’d bought it? Also, do you have GAP >insurance? > I don’t know why it would be any different. What’s "GAP" insurance..?
Response:
I agree once again that this is rather ridiculous. Not being "legally inclined" it is a trap that I would easily fall into. I especially don’t appreciate the arrogance of most BMW dealerships that I have been to. If you get something going, let us know, as I’m sure many here may be inclined to sign on to a petition or whatnot. BTW – Isn’t there something illegal about not providing ALL lease info up front? That seems like some legal eagles are really working a loophole in this situation! – Hide quoted text — Show quoted text -> I agree Gary…money is not the problem here thouugh. I got a good cap > cost, excellent residual (72%) and good cost of money. The problem is in > the assumption process itself. I just contacted BMW again because after all > the "read the lease" advice which I did when I purchased it I could not find > anything about assumptions. Well, guess what — it is not in the lease > document. They issue an addendum containing those provisions when you > request an assumption. Every dealer I talked to mentions assumption as a > possible exit of a car lease but it is not in the contract! I do not like > the arrogant attitude of the BMW Finance people about this issue and will do > no more business with BMW.
Response:
But it really doesn’t matter to me who profits. I care about how much I spend on transportation. If I buy I spend quite a bit more per month which prevents me from putting more into investments and forces me to put more into a depreciating asset. If you buy out the lease at the end, then buying is far better financially, but if you roll the lease into a another one, my monthly costs are far lower and I have more money to put into a appreciating asset (i.e. mutual fund, stock, etc) Kevin – Hide quoted text — Show quoted text – >When you lease a car, 3 companies profit, the dealer, the manufacturer and >the leasing company. When you buy, only 2 profit. I realize this is a >simplistic argument but how can leasing be a better deal, unless there are >some serious tax advantages? It might work for you but not for me! >You have to look beyond monthly payments to see the whole picture. It is >very difficult to see what is really happening in a lease. The one time I >looked into it, I could not get any significant information beyond the >monthly payment. You need to know the capitalized cost, interest and >residual. Then you can check the numbers out yourself and compare. >– > >which is why leasing really blows. next time: buy. > Wrong. You can drive a lot more car for a lot less money when leasing. >This > assumes that you do not beat the thing to death and do not drive excessive > mileage. I’ve been leasing cars since 1982. Works for me. The only car >I > would ever buy would be another collector’s car.
Response:
Sage advice Gary! Jack
– Hide quoted text — Show quoted text -> Larry, your comparison is shoddy. Do a discounted cash flow analysis of buy > and lease, and do it over the course of several cars, not just one. Sure > there is an opportunity cost associated with buying but when you lease, you > are just borrowing more. After all, someone is putting up the money to buy > the car from BMW. Who do you think pays for it? I have spent a few years > driving cheap cars so now I just pay cash and invest ALL of that $1000/month > you use to make payments. If I want to go into debt, I just borrow against > my portfolio which I can do at a lower interest rate that a car loan. If I > want to get out of debt, I sell some stock. I have complete control. When > you lease, you are at their mercy for the duration. > Rule #1, do not borrow money for a depreciating asset. This happens whether > you borrow to buy or lease. > — > >You have to look beyond monthly payments to see the whole picture. It is > >very difficult to see what is really happening in a lease. The one time > I > >looked into it, I could not get any significant information beyond the > >monthly payment. You need to know the capitalized cost, interest and > >residual. Then you can check the numbers out yourself and compare. > First, let’s assume that I’m always going to have monthly payment of some > kind. > This is a personal decision arising from the fact that I do not want a car > older > than 40-48 months. > I want new, reliable transportation, and I want BMW to fix it free when > it’s > broken. Okay… > New 540IA purchase scenario: > Price = $51,000 > Down paymet = $10,000 (finance co’s usually want about 20%) > Interest rate = 9% apr > Term = 36 months (closest I could come to my lease term of 40 months) > Monthly Payment = $1,303 > ..and remember – it costs $10,000 out of pocket to get this far. > Same car on a 40 month lease: > Cost to start lease = $1,800 (includes first lease payment) > With money factor, etc. at the time > Monthly payment = $912.00 (including taxes) > (This ir REAL, it’s my current 540iA month lease…) > Result – I pay $400 per month less to drive the car. I have $8,000 more > cash in > the bank. I drive back to the dealer at the end of 40 months, and for > another > $1,800 or so, drive away with another $50,000+ car. > It doesn’t matter whether or not I can deduct the lease payments (I do) > the cost > of doing the business is still less. > I can still point at it and say, "my car…"
Response:
Larry, your comparison is shoddy. Do a discounted cash flow analysis of buy and lease, and do it over the course of several cars, not just one. Sure there is an opportunity cost associated with buying but when you lease, you are just borrowing more. After all, someone is putting up the money to buy the car from BMW. Who do you think pays for it? I have spent a few years driving cheap cars so now I just pay cash and invest ALL of that $1000/month you use to make payments. If I want to go into debt, I just borrow against my portfolio which I can do at a lower interest rate that a car loan. If I want to get out of debt, I sell some stock. I have complete control. When you lease, you are at their mercy for the duration. Rule #1, do not borrow money for a depreciating asset. This happens whether you borrow to buy or lease. — – Hide quoted text — Show quoted text ->You have to look beyond monthly payments to see the whole picture. It is >very difficult to see what is really happening in a lease. The one time I >looked into it, I could not get any significant information beyond the >monthly payment. You need to know the capitalized cost, interest and >residual. Then you can check the numbers out yourself and compare. > First, let’s assume that I’m always going to have monthly payment of some kind. > This is a personal decision arising from the fact that I do not want a car older > than 40-48 months. > I want new, reliable transportation, and I want BMW to fix it free when it’s > broken. Okay… > New 540IA purchase scenario: > Price = $51,000 > Down paymet = $10,000 (finance co’s usually want about 20%) > Interest rate = 9% apr > Term = 36 months (closest I could come to my lease term of 40 months) > Monthly Payment = $1,303 > ..and remember – it costs $10,000 out of pocket to get this far. > Same car on a 40 month lease: > Cost to start lease = $1,800 (includes first lease payment) > With money factor, etc. at the time > Monthly payment = $912.00 (including taxes) > (This ir REAL, it’s my current 540iA month lease…) > Result – I pay $400 per month less to drive the car. I have $8,000 more cash in > the bank. I drive back to the dealer at the end of 40 months, and for another > $1,800 or so, drive away with another $50,000+ car. > It doesn’t matter whether or not I can deduct the lease payments (I do) the cost > of doing the business is still less. > I can still point at it and say, "my car…"
Response:
>GAP insurance is included in the BMW lease. My insurance is no different >with a lease or a purchase.
Yes, the same is true in Canada. Even if it weren’t though, GAP coverage only adds $20 or so to a yearly premium here. Cheers, Karl Karl Blomquist consultant – Nortel Technology ph:613-765-4886 fx:613-765-1670 My opinions do not necessarily reflect Nortel’s
Response:
>Thank you Rastamon! Too many people just put up with stuff like this. As a >group we can change things for the better.
we can each start by BUYING the car we can AFFORD.
Response:
It’s really rather simple: Save up and buy the car with cash…unless…you can invest the money with a guaranteed return % rate that is greater than the % of a possible loan. Let’s also factor in the price of all of those stamps for all of those months. That adds up!! I just take a suitcase full of hundreds to the dealership. You can get a good price that way too. If the salesman gives you any trouble, just thump him with the butt end of your gun and stuff his arrogant ass in the trunk (be sure not to get blood stains on the carpeting). Tell the service department manager that he’s next if he tries to mess with you. It works. I get great service now.
Response:
>Larry I can get you nothing down and 7.3% interest for your loan. Also >remember once you’ve PAID for the loan, you own the car which is worth way >more then 8,000!
Well, this may a good interest rate, I don’t know. But in Canada I just picked up a ‘99 540iA (retail CDN$77k+taxes – paid $72800+taxes) on a BMW lease at 3.8% over 36 months. Even if I decided I wanted to keep the car after the 36 month lease is up and I go out and get a bank loan to buy it at residual cost, I’d still be ahead because I would never have been able to get a loan anywhere near 3.8%. I put $2500 down + fees and for < $1k a month I’m driving a CDN$77k car. This would never even be close to achievable with a purchase loan here. If I decide to buy out the car at the end of lease and take a 2 year be about $81k (all numbers exclude taxes). If I had simply taken a 5 year loan initially and bought the car (assuming same downpayment of $2500) the total payout over the same 60-month period would have been around $86.5k (assuming 9%). Sure in the former case I’d have 24 months of high payments for the loan, but I get to enjoy 36 initial months of low payments. Plus I’d by > $6k ahead in total cost outlay. Granted, this was a BMW Canada ‘99 model clear-out special rate, but the timing was right for me anyhow. Leasing makes a lot of sense in many cases, perhaps not all, but many. Also, like some others, I write off a large chunk of the lease via business which makes it doubly attractive. I’m not sure how leasing works in the U.S., but here calculating a lease payment is no different than calculating a loan payment. A percentage is assigned to the lease, a residual (based on fixed formula), and from there any spreadsheet can calculate the PMT on the lease — Cheers, Karl Karl Blomquist consultant – Nortel Technology ph:613-765-4886 fx:613-765-1670 My opinions do not necessarily reflect Nortel’s
Response:
Speak for yourself Bongo! jack
– Hide quoted text — Show quoted text ->Thank you Rastamon! Too many people just put up with stuff like this. As a >group we can change things for the better. > we can each start by BUYING the car we can AFFORD.
Response:
> a mobster will lend you a lot of money and your monthly loan payments will be > really low. he forgets to tell you that you will be making payments forever. as > long as you keep focusing on that LOW, LOW monthly payment (heard this one > before?!?!)
Yeah, from my credit card company <read 90’s Mafia>
Response:
>Result – I pay $400 per month less to drive the car. I have $8,000 more cash in >the bank. I drive back to the dealer at the end of 40 months, and for another >$1,800 or so, drive away with another $50,000+ car.
You certainly seem to have more money than sense. Ever pause to think that you OWN something after your 36 mo scenario? the bottom line: Unless you get a write off from your taxes, the lease vs buy decision is a break-even scenario after 36 months, and swings STRONGLY toward buying if you can possibly keep the car an extra year. it’s THOUSANDS of dollars difference after 4 years, and purchasers laugh all the way to the bank. i think most people could find a way to live with a 540i for 4+ years. it’s a no-brain decision: BUY, BUY, BUY. leasing fools you into thinking you can afford a car you really have no business driving. a mobster will lend you a lot of money and your monthly loan payments will be really low. he forgets to tell you that you will be making payments forever. as long as you keep focusing on that LOW, LOW monthly payment (heard this one before?!?!) you are fooled into thinking life is grand. the reality is that you’re GETTING RIPPED OFF!!! Leasing is the biggest crock of shit since the 6-ball lottery. people are so friggin stupid with their money!
Response:
GAP insurance is included in the BMW lease. My insurance is no different with a lease or a purchase. Jack
– Hide quoted text — Show quoted text -> x-no-archive: yes > [demonstration of lease advantages snipped] > Is your insurance different than if you’d bought it? Also, do you have GAP > insurance?
Response:
Larry I can get you nothing down and 7.3% interest for your loan. Also remember once you’ve PAID for the loan, you own the car which is worth way more then 8,000! My rule of thumb is if you plan on keeping the car for up to 36 months, lease it. If over 36 months, then purchasing is a very strong argument. Leasing offers very little flexibility once you own the car, but it also has a number of positive points.
– Hide quoted text — Show quoted text ->You have to look beyond monthly payments to see the whole picture. It is >very difficult to see what is really happening in a lease. The one time I >looked into it, I could not get any significant information beyond the >monthly payment. You need to know the capitalized cost, interest and >residual. Then you can check the numbers out yourself and compare. > First, let’s assume that I’m always going to have monthly payment of some kind. > This is a personal decision arising from the fact that I do not want a car older > than 40-48 months. > I want new, reliable transportation, and I want BMW to fix it free when it’s > broken. Okay… > New 540IA purchase scenario: > Price = $51,000 > Down paymet = $10,000 (finance co’s usually want about 20%) > Interest rate = 9% apr > Term = 36 months (closest I could come to my lease term of 40 months) > Monthly Payment = $1,303 > ..and remember – it costs $10,000 out of pocket to get this far. > Same car on a 40 month lease: > Cost to start lease = $1,800 (includes first lease payment) > With money factor, etc. at the time > Monthly payment = $912.00 (including taxes) > (This ir REAL, it’s my current 540iA month lease…) > Result – I pay $400 per month less to drive the car. I have $8,000 more cash in > the bank. I drive back to the dealer at the end of 40 months, and for another > $1,800 or so, drive away with another $50,000+ car. > It doesn’t matter whether or not I can deduct the lease payments (I do) the cost > of doing the business is still less. > I can still point at it and say, "my car…"
Response:
As a person who has leased many cars, I’ve come to understand that most leases are airtight and leave little wiggling room to get out early. I agree it’s wrong, but it is also a business contract. When you lease a BMW you can choose from many leasing companies, all with different terms. If BMW was not upfront about this I feel your pain, but I also understand the limitations of leasing. I
– Hide quoted text — Show quoted text -> Are you aware that if you lease a BMW through BMW Financial that if you have > someone assume the lease, you are still responsible for the terms of the > initial lease you signed. > BMW requires $450, a full credit check and approval of the person assuming > the lease, yet they hold the you resposible for all payments and will even > notify credit bureaus of "your" default. > I am also of the opinion that if the person who assumes the lease damages > the car you are liable for that damage also. > I think this is a "rape" of the consumer and I for one informed BMW that I > will not longer lease or purchase one of their vehicles. When my lease is > paid off in 11 months on my Z3, I am done with BMW! Or if I can sell it > outright and pay them their last dollars from this irate customer! > Other manufacturers have the same policies and I think something needs to be > done in regulating the auto lease terms to protect the consumer. I for one > will contact the FTC and my representatives about this policy. > Jack
Response:
Thank you Rastamon! Too many people just put up with stuff like this. As a group we can change things for the better. Jack
– Hide quoted text — Show quoted text -> x-no-archive: yes > [snip] >Still will mount a campaign with FTC and representatives to quash this type >of consumer abuse in automobile leasing contracts. > I, for one, applaude your bravery and persistence in asserting your rights as > a consumer.
Response:
I agree Gary…money is not the problem here thouugh. I got a good cap cost, excellent residual (72%) and good cost of money. The problem is in the assumption process itself. I just contacted BMW again because after all the "read the lease" advice which I did when I purchased it I could not find anything about assumptions. Well, guess what — it is not in the lease document. They issue an addendum containing those provisions when you request an assumption. Every dealer I talked to mentions assumption as a possible exit of a car lease but it is not in the contract! I do not like the arrogant attitude of the BMW Finance people about this issue and will do no more business with BMW. I have been a Mercedes owner for over 30 years and the Z was my first BMW. I was very much impressed and had planned to replace my MB wagon with a 528iT. No more! Jack
– Hide quoted text — Show quoted text -> When you lease a car, 3 companies profit, the dealer, the manufacturer and > the leasing company. When you buy, only 2 profit. I realize this is a > simplistic argument but how can leasing be a better deal, unless there are > some serious tax advantages? It might work for you but not for me! > You have to look beyond monthly payments to see the whole picture. It is > very difficult to see what is really happening in a lease. The one time I > looked into it, I could not get any significant information beyond the > monthly payment. You need to know the capitalized cost, interest and > residual. Then you can check the numbers out yourself and compare. > — > >which is why leasing really blows. next time: buy. > Wrong. You can drive a lot more car for a lot less money when leasing. > This > assumes that you do not beat the thing to death and do not drive excessive > mileage. I’ve been leasing cars since 1982. Works for me. The only car > I > would ever buy would be another collector’s car.
Response:
When you lease a car, 3 companies profit, the dealer, the manufacturer and the leasing company. When you buy, only 2 profit. I realize this is a simplistic argument but how can leasing be a better deal, unless there are some serious tax advantages? It might work for you but not for me! You have to look beyond monthly payments to see the whole picture. It is very difficult to see what is really happening in a lease. The one time I looked into it, I could not get any significant information beyond the monthly payment. You need to know the capitalized cost, interest and residual. Then you can check the numbers out yourself and compare. — – Hide quoted text — Show quoted text ->which is why leasing really blows. next time: buy. > Wrong. You can drive a lot more car for a lot less money when leasing. This > assumes that you do not beat the thing to death and do not drive excessive > mileage. I’ve been leasing cars since 1982. Works for me. The only car I > would ever buy would be another collector’s car.
Response:
>Are you aware that if you lease a BMW through BMW Financial that if you have >someone assume the lease, you are still responsible for the terms of the >initial lease you signed.
which is why leasing really blows. next time: buy.
Response:
Have you ever sat down an read the back of a lease agreement. You would need 3 weeks and a battery of lawyers to understand any of it (include a CPA also.) Also, this is not a crisis sale — it was a way to offload one BMW in a more opportune way to purchase another one of greater value. Trading in a lease for purchase is another whole rip off procedure. I am not discussing disclosure — I am discussing the reason for such a clause. When someone assumes your mortgage and the mortgage company accepts that person, you are no longer responsible for the loan. You are not a co-signer for a stranger. BMW accepts you based on the same information a new customer would have to provide — why the co-sign clause? Why did BMW not mention to me that clause when I called for specific assumption information prior to putting the ad in the paper. Why was it in a cover letter when the credit application blank was faxed to me? I had 4 calls the first day (yesterday) and the deal would be done had I agreed to co-sign. In addtion, BMW indicates an assumption will take one month to complete!!! This is a "gotcha" clause and they may have got me this time but never again. That 528iT Larry had ready for me is his to keep. He will know the reason why today. A new E320 wagon or similar vehicle is now in my sights. If the car sells for the payoff which is a very good deal for someone, then my relationship with BMW is over. Should I have to complete the 11 months left on the lease — so be it and they can have it back. However, instead of 7 or 8000 miles on the speedo, it will have the maximum of 22,500 — I will drive this thing into the ground during the next 11 months. Still will mount a campaign with FTC and representatives to quash this type of consumer abuse in automobile leasing contracts. Jack
– Hide quoted text — Show quoted text -> I understand that you’re pissed, but really, you are supposed to read the > lease agreement before you sign. BTW – The way BMW works a lease (IMHO) is > really sort of goofy, but that doesn’t make [your] car (read BMW’s car if > you lease) any less of a great machine.
Response:
I understand that you’re pissed, but really, you are supposed to read the lease agreement before you sign. BTW – The way BMW works a lease (IMHO) is really sort of goofy, but that doesn’t make [your] car (read BMW’s car if you lease) any less of a great machine.
Response:
John Unfortunately, Much of this is covered in the Disclosure that you signed when you initiated the lease. Among other things, you are also responsible for the "Assumed Income" that such a lease represented at the time you signed it. Mazda is much nicer (On the Miata) then BMW in that they allow you to pay off the "current value" of the car to eliminate the lease. And they will also allow "Full Assumption". That is why Leasing is something you have to read at the time of the initiation. With cars such as BMW, Jaguar and (oddly enough) HUMMER, you should expect to have to do a lot of gymnastics to exit the lease when it becomes unsatisfactory to you. It isn’t personal, it is just Business. – Hide quoted text — Show quoted text -> Are you aware that if you lease a BMW through BMW Financial that if you have > someone assume the lease, you are still responsible for the terms of the > initial lease you signed. > BMW requires $450, a full credit check and approval of the person assuming > the lease, yet they hold the you resposible for all payments and will even > notify credit bureaus of "your" default. > I am also of the opinion that if the person who assumes the lease damages > the car you are liable for that damage also. > I think this is a "rape" of the consumer and I for one informed BMW that I > will not longer lease or purchase one of their vehicles. When my lease is > paid off in 11 months on my Z3, I am done with BMW! Or if I can sell it > outright and pay them their last dollars from this irate customer! > Other manufacturers have the same policies and I think something needs to be > done in regulating the auto lease terms to protect the consumer. I for one > will contact the FTC and my representatives about this policy. > Jack
Share what you know. Learn what you don’t.
Response:
I called BMW a week ago and asked for details on assumptions and no one mentioned the co=sign clause. I still ask why and for what reason? Jack
– Hide quoted text — Show quoted text – > John > Unfortunately, Much of this is covered in the Disclosure that you > signed when you initiated the lease. Among other things, you are also > responsible for the "Assumed Income" that such a lease represented at > the time you signed it. Mazda is much nicer (On the Miata) then BMW in > that they allow you to pay off the "current value" of the car to > eliminate the lease. And they will also allow "Full Assumption". > That is why Leasing is something you have to read at the time of the > initiation. With cars such as BMW, Jaguar and (oddly enough) HUMMER, > you should expect to have to do a lot of gymnastics to exit the lease > when it becomes unsatisfactory to you. > It isn’t personal, it is just Business. > Are you aware that if you lease a BMW through BMW Financial that if > you have > someone assume the lease, you are still responsible for the terms of > the > initial lease you signed. > BMW requires $450, a full credit check and approval of the person > assuming > the lease, yet they hold the you resposible for all payments and will > even > notify credit bureaus of "your" default. > I am also of the opinion that if the person who assumes the lease > damages > the car you are liable for that damage also. > I think this is a "rape" of the consumer and I for one informed BMW > that I > will not longer lease or purchase one of their vehicles. When my > lease is > paid off in 11 months on my Z3, I am done with BMW! Or if I can sell > it > outright and pay them their last dollars from this irate customer! > Other manufacturers have the same policies and I think something > needs to be > done in regulating the auto lease terms to protect the consumer. I > for one > will contact the FTC and my representatives about this policy. > Jack > Share what you know. Learn what you don’t.
Response:
It’s lousy business and no more from me to BMW! Back to MB for purchase only! Jack
– Hide quoted text — Show quoted text – > John > Unfortunately, Much of this is covered in the Disclosure that you > signed when you initiated the lease. Among other things, you are also > responsible for the "Assumed Income" that such a lease represented at > the time you signed it. Mazda is much nicer (On the Miata) then BMW in > that they allow you to pay off the "current value" of the car to > eliminate the lease. And they will also allow "Full Assumption". > That is why Leasing is something you have to read at the time of the > initiation. With cars such as BMW, Jaguar and (oddly enough) HUMMER, > you should expect to have to do a lot of gymnastics to exit the lease > when it becomes unsatisfactory to you. > It isn’t personal, it is just Business. > Are you aware that if you lease a BMW through BMW Financial that if > you have > someone assume the lease, you are still responsible for the terms of > the > initial lease you signed. > BMW requires $450, a full credit check and approval of the person > assuming > the lease, yet they hold the you resposible for all payments and will > even > notify credit bureaus of "your" default. > I am also of the opinion that if the person who assumes the lease > damages > the car you are liable for that damage also. > I think this is a "rape" of the consumer and I for one informed BMW > that I > will not longer lease or purchase one of their vehicles. When my > lease is > paid off in 11 months on my Z3, I am done with BMW! Or if I can sell > it > outright and pay them their last dollars from this irate customer! > Other manufacturers have the same policies and I think something > needs to be > done in regulating the auto lease terms to protect the consumer. I > for one > will contact the FTC and my representatives about this policy. > Jack > Share what you know. Learn what you don’t.
Response:
Are you aware that if you lease a BMW through BMW Financial that if you have someone assume the lease, you are still responsible for the terms of the initial lease you signed. BMW requires $450, a full credit check and approval of the person assuming the lease, yet they hold the you resposible for all payments and will even notify credit bureaus of "your" default. I am also of the opinion that if the person who assumes the lease damages the car you are liable for that damage also. I think this is a "rape" of the consumer and I for one informed BMW that I will not longer lease or purchase one of their vehicles. When my lease is paid off in 11 months on my Z3, I am done with BMW! Or if I can sell it outright and pay them their last dollars from this irate customer! Other manufacturers have the same policies and I think something needs to be done in regulating the auto lease terms to protect the consumer. I for one will contact the FTC and my representatives about this policy. Jack