Leasing a 2012 128i Coupe

[Ryan9095]

Hi All,

I'm just wondering what you 2012 owners who have leased ended up paying. My dealer is quoting me the BMW Financial Lease Special: "369/month w/ $3,594 Cash due at signing (excludes tax, title, license/registration fees)"

Thoughts?

[__ivy__]

A good rule of thumb is to never put money up front in a lease.

Why? Let's say the day you sign the papers and drive off the lot, your car is totaled. Insurance will cover the car, and reimburse BMWFS for their loss. They will call everything even, and you're out $3500.

If you roll the up front money into the payments, you'll pay something around $469/mo, with very little up front. In this case, if your car is totaled, you're out $469.

Are you familiar with how lease prices are computed? It will be helpful for you to understand where the numbers come from when you're negotiating.

[Ryan9095]

I'm not really familiar with leasing. I just went in knowing I didn't want to spend as much on my commuter car and I liked the <$400 range. I selected the 128i for this exact reason and when I test drove it I LOVED the car! To stay in this price range I need to put a good chunk down. I know that mentally I'm paying the same thing either way it's just the lower monthly appeals more.

Also, gap insurance would cover the car if it got totaled. So I'm not worried about any loss god this would occur. I would appreciate if you wouldn't mind explaining the numbers so I can attempt to negotiate a better deal.

Thanks,

Ryan

[BimmerEnthusiast99]

Rule of thumb is about $33 off the mo. payment for every $1,000 down. I'm not a big leaser. I wouldn't put that much down, but in today's economy, you'd have a hard opportunity cost argument ( ie, making only 3k work for you elsewhere), so its up to you---you wouldn't be losing enough to worry about it to be honest.

Looks about like a standard advertised rate, see if you make them sweat it down a tad lower and enjoy your new car.

[Ryan9095]

Thank you for the advice. What do you think would be reasonable to ask them? Maybe include tax into that advertised rate? Also, how do I determine what my tax/title/license/registration fees will cost? They are excluded from the down payment.

[ejm3]

It's worth noting that my credit union is offering new car rates of 1.99%, and 1.75% if you let thm do a direct withdrawal every month.

So if you choose to buy rates are pretty much as low as they are ever going to be.

[the1andonly]

My 128i was my first lease, usually I buy. It was $299 a mo but after tax, title, registration, adding 15,000 more miles and my -$4000 negative equity in my POS FIAT I ended up with $488 a mo...and that was still with $2000 down

Im really considering buying it at lease end, this is a fantastic car

[terrapen73]

Keep in mind that you can negotiate the price of the car as well. Say the car you are looking at has a MSRP of 38,500 and an invoice (what dealer paid) cost of 35,000. You could negotiate your price down as close to that 35k as possible and that will help you on your lease payments. The lease is going to be figured off of the MSRP number no matter what you actually "pay" for the car. You should be able to get in somewhere around 500-1000 over invoice. There are numerous websites to allow you to determine the invoice cost. I have just ordered a 135i that I will be leasing and this is my first lease as well. I was able to get in close to invoice and that is about 2600 below the MSRP. This helped lower my lease cost a bit.

[128vertinnoho]

I paid $500 under dealer invoice on my 2012 128i convertible about a month ago. Nothing down other than tax, title, and first month's payment. I did roll about $2000 of negative equity from my trade in into the lease payment, but I'm happy with the final figure. And it's great to be back in a BMW with a NA engine! Pure buttery smoothness!

[Ryan9095]

How do you find out what the dealer invoice of the car is? I will be special ordering mine so I'm not sure if it's as easy to negotiate down the actual price of the car?

[ejm3]

go to edmunds.com or kbb.com

[135iUSN]

or buy a 2010/11 CPO

Could net same outcome and you own it

[terrapen73]

Originally Posted by Ryan9095

How do you find out what the dealer invoice of the car is? I will be special ordering mine so I'm not sure if it's as easy to negotiate down the actual price of the car?

If your present dealer is not willing to negotiate price with you, then go to another dealer. Google BMW 128i invoice price and that will lead you to numerous sites with the answer to that. I special ordered my car exactly how I wanted it then told the dealer to make me his best offer. I countered with what I was willing to pay and we met at a place both parties are happy with. Only on very limited cars like the 1M coupe do you see dealers not willing to negotiate below sticker price.

[__ivy__]

Originally Posted by Ryan9095

Also, gap insurance would cover the car if it got totaled. So I'm not worried about any loss god this would occur. I would appreciate if you wouldn't mind explaining the numbers so I can attempt to negotiate a better deal.

Sorry for the slow reply.

First, gap insurance covers the 'gap' between what you still owe the leasing company and what the car is worth when it is totaled. It won't help you recover monies that you've already spent. I understand the psychology of a lower payment, but you'd be better off stuffing $3600 under your mattress and pulling out a crisp C-note once per month, rather than give it to BMWFS up front.

As for how a lease is computed, there are a couple of important bits of information you'll want to look up or otherwise glean. There are many spreadsheets floating around that can do the computation for you. It's not really hard, but it's a little cumbersome.

1. MSRP - This is the sticker price. You need this to compute the residual value.

2. The residual value percentage. This is how much the car will be worth at the end of the lease. For example, if your car stickers at $40k, and has a 60% residual, it will be worth $24k at the end of the lease.

3. Capitalized Cost. This is the price you are paying for the car. If you got your $40k car for $1500 of sticker price, the capitalized cost will be $38,500.
Once you add in any fees that you need to pay, and subtract the down payment you make from this number, it becomes the adjusted capitalized cost. (Don't forget the fees and down payment) This adjusted number is important below.

4. Money factor. This is the interest rate. You'll typically see it as a cryptic number like 0.00165. If you multiply this number by 2400, you can convert it to an interest rate.

Now on to the fun stuff. When you lease, you are sometimes told you're only paying for depreciation. It's not the only thing, but it is part of it.

Depreciation is calculated like this:
((Adjusted capitalized cost) - (Residual value))/(# of payments)

So, if you by the car for $38,500, and it's worth $24,000 at the end of 3 years, the depreciation is: ($38500 - $24000)/36 = $402.78

Now, the remaining portion of what you pay is the finance charge. They charge you interest on the value of the car. The problem is, the value of the car changes each month. i.e. the car is worth the full price in the beginning, and the residual value at the end of the lease. So, they charge you interest based on the average value of the car:

Again, if it's worth $38,500 at the start, and $24,000 at the end, the average value is: (38,500 + 24000) / 2.

If you start with an annual interest rate, let's say 4% (which is 4/100), and turn it into a monthly rate by dividing by 12: (4/100)/12, or (4/1200)

Multiply the average value by the monthly interest, and you get:

(38,500 + 24000) (4/1200)/2.

notice that (4/1200)/2 is the same as (4/2400). Remember I mentioned that the "money factor" is the interest rate/2400 above? So, the interest part is really just the capitalized cost added to the residual, multiplied by the money factor. In this case, it will be:

(38,500+24000)*.00167 = $104.38

If you're still awake, your total payment is the depreciation + interest, which is: $402.78+$104.38 = $507.16.

So, in summary:

1. Calculate the capitalized cost (C) and the residual value (R).

2. assuming 36 payments, and MF is your money factor, your payment is:

(C-R)/36 + (C+R)*MF

I won't bore you more this evening. Tomorrow or Wednesday I'll go over some negotiating points on you lease, including what fees are negotiable, and some other programs that might save you some money in the long run.

[Ryan9095]

WOW! Thank you so much for the incredibly detailed lease overview. Now that I have an understanding of where the numbers come from it's easier to see where my money is going/how my price is calculated. I'm going to look up all the numbers that relate to my customized 1-coupe and will let you know. I'm looking forward to your advice on what fees to negotiate. Thanks again for the help! Amazing!

[__ivy__]

OK, as promised:

Some of the items above are negotiable, and some aren't.

1. Residual value. BMWFS will set this, and it can't be adjusted. The rate they use does vary with milage however. The published rate is for 15k/year, 2% higher for 12k, and an additional 1% for 10k. Obviously, the MSRP it is based upon is fixed as well.

2. Inception Fee. This is fixed by BMWFS, but I seem to recall the dealer can mark it up by $100 or so. The inception fee has been growing with time, so I'm not positive on the specifics

3. Money factor. The base rate is fixed by BMWFS. The dealer is free to mark it up, however.

4. Title and registration. State specific, but you're going to pay these.

5. Other fees, like dealer prep. These are not required, and are presumably negotiable.


Also, there are a couple of programs that you can use to save a bit on a lease.

1. The MSD program. MSD stands for multiple security deposits. Basically, you can put up to 7 security deposits down on the lease. Each security deposit will reduce your money factor by 0.00007. The amount of the security deposit is your lease payment rounded up to the next $1000.

So, if your lease payment is $480, you can place 7 security deposits down on your lease (7x$500 = $3500) which will reduce your money factor by 0.00049. The security deposit is fully refundable. If you do the math, you'll find that this will reduce your lease cost by about $1000 for about a $500 payment. You can think of this as placing $3500 in a 3 year CD, with about 9.5% APR return.

2. European Delivery. This one is more fun. I've done two of these. Basically, by taking delivery of your car in Munich, BMW will give you a 7% discount. Furthermore, the car you order is not part of the dealer's normal allocation, ans is not subject to certain fees BMW charges the dealer. You'll find many dealers nationwide that will sell you the car at a deep discount. It's not too hard to get the car at around 10% off MSRP. Since your lease residual is based on the MSRP, and that doesn't change. you can save a lot.

The way the program works is this: You sign the paperwork and buy the car 2 weeks before you leave. You go to Munich, pick up your car, and can drive it around Europe for up to 6 weeks. You will then drop it off, and 6 weeks later, you car arrives here. (It's a little longer for the West coast.)

The upside is driving you car down the Autobahn, and enjoying Europe in general.

The downside is that you're paying for the car to sit on a boat. BMW does waive the 2nd lease payment, but they charge a slightly higher interest rate to cover this change, so you really just spread this payment over the other 35 payments.

[cindisargent]

Wow, thanks for that info Ivy. I’ve never really understood leasing in depth…Never really been good at math. I used to just look up discount auto insurance rates and go with whatever sounds best. Leasing sounds like a good idea but I don’t know if I can budget well and I’m not sure if my income will be steady either…

[jmcphillips1]

my lease runs me 550 a month, I put nothing down at all for a 36 month lease 10k miles a year and the sticker was for 44k

[Ryan9095]

Ivy, the MSD program seems incredibly interesting. I'm assuming that the money you put down within this program is in ADDITION to your down payment, correct?

[__ivy__]

Originally Posted by Ryan9095

Ivy, the MSD program seems incredibly interesting. I'm assuming that the money you put down within this program is in ADDITION to your down payment, correct?

Yes, but it is a fully refundable security deposit.