BMW Lease Rates on New Models

[benchmark2020]

I will be leasing my new 1 series assuming that it is in my price range. I wanted to ask: Does anyone know the lease rate BMW usually sets on their new models?

[Khobin~]

Originally Posted by loun80

I will be leasing my new 1 series assuming that it is in my price range. I wanted to ask: Does anyone know the lease rate BMW usually sets on their new models?

for the 1 it will probably be around bank rate, so about 8%?

right now they have encentives on the 3 series for around 4.9%.

[benchmark2020]

8% eh? Great.. another reason not to get the 1.

[pwong888]

I think BMW canada has already lower the leasing rate because of the price different between the US.

[imported_Topdown]

lease rates from Buds Oakvile are 5.9%

Waiting to see if BMW Canada rates will be a bit lower. Also, residual amounts from dealers (in house) tend to be lower than BMW Canada financing. This makes the lease payments quite high from the dealers. I was quoted $917/month (taxes incl.) for 128i cab for the dealer rates...OUCH

[M3Newbie88]

Originally Posted by Topdown

lease rates from Buds Oakvile are 5.9%

Waiting to see if BMW Canada rates will be a bit lower. Also, residual amounts from dealers (in house) tend to be lower than BMW Canada financing. This makes the lease payments quite high from the dealers. I was quoted $917/month (taxes incl.) for 128i cab for the dealer rates...OUCH

Thatsthe same rate T&C mentioned to me for financing.. leasing is 6.9% as stated in my other thread... this is not confirmed but it shouldn't be the 8.9 from last year.

[benchmark2020]

Originally Posted by Topdown

lease rates from Buds Oakvile are 5.9%

Waiting to see if BMW Canada rates will be a bit lower. Also, residual amounts from dealers (in house) tend to be lower than BMW Canada financing. This makes the lease payments quite high from the dealers. I was quoted $917/month (taxes incl.) for 128i cab for the dealer rates...OUCH

Are you sure that wasn't for "Financing"?

[avonord]

So Buds Oakville is a 3rd party leasing company? I think usually, when you lease from a third party, the lease rate is lower, but the residual is also much lower. The only way I'm getting a 135 is if the monthly lease is less than 700 tax included. Maybe I'm dreaming...

[toosteeley]

^ You're DEFINITELY dreaming, I'm afraid.

[benchmark2020]

I'm going to put $12,000 down for my lease. Hope it will be around $300 + Tax.

[MrRoboto]

Why would you put 12k down on a lease? You might as well just buy it.

[TunedM2C]

Originally Posted by MrRoboto

Why would you put 12k down on a lease? You might as well just buy it.

Yeah, this makes no sense whatsoever.

[linus]

Originally Posted by MrRoboto

Why would you put 12k down on a lease? You might as well just buy it.

Because you have to make a certain $ amount of payments during the term of the lease anyway to pay down "1-residual", irrespective of how little you put down. Putting as much down as possible to minimize lease interest charges can be a smart strategy if your personal cost of financing is less than BMW Canada's lease rates. I would definitely consider such a strategy if the lease rate offered is greater than 6%.

[ARES45]

Agreed, if you can make more interest off that money than they will charge than put nothing down, if not put as much as you want down.

[john970]

Originally Posted by loun80

I'm going to put $12,000 down for my lease. Hope it will be around $300 + Tax.

That's one way to avoid capital gains tax (eliminate the gain).

[john970]

Originally Posted by linus

Because you have to make a certain $ amount of payments during the term of the lease anyway to pay down "1-residual", irrespective of how little you put down. Putting as much down as possible to minimize lease interest charges can be a smart strategy if your personal cost of financing is less than BMW Canada's lease rates. I would definitely consider such a strategy if the lease rate offered is greater than 6%.

Organizing your finances around the assumption you can't beat 6 or 7 percent is a scary idea. You can get a fixed interest account at 6 percent, most people average well over 10% with conservative investing strategies.

[toosteeley]

Originally Posted by loun80

I'm going to put $12,000 down for my lease. Hope it will be around $300 + Tax.

Typically when leasing, every $5000 you put down, the monthly decreases by $100.

You'll be well over $300.

[linus]

Originally Posted by john970

Organizing your finances around the assumption you can't beat 6 or 7 percent is a scary idea. You can get a fixed interest account at 6 percent, most people average well over 10% with conservative investing strategies.

I think you have to be very careful with this logic. There are broadly two types of buyers:

1. Those with ample cash to invest or spend. For them, and assuming they're long-term investors, your logic may be appropriate. Just keep in mind that "conservative investing strategies" often means maintaining a balanced portfolio in terms of asset allocation. With 10-year US Treasuries at a minimal 3.6% and 2-year Treasuries at an even lower 1.9%, your assumptions around asset allocation and equity returns need to be even more aggressive than in previous times. This somewhat negates your argument in terms of conservative investing strategies. With the bond market at cyclical highs, it's very difficult to achieve a very conservative approach while coincidentally achieving a 7% target rate of return. And I haven't even touched on the issue of taxes on earned income.

2. Those who have to effectively borrow one way or another. For such a buyer, the interest rate equation becomes a simple "Can I get a better rate anywhere else". There is no "opportunity cost of capital" such as with the first type of buyer. In Canada, the prime bank rate is 5.75% - this is the same rate that I can get on my secured line of credit. I would definitely borrow from such a line at this rate enough to make a significant enough downpayment to lower my lease interest charges if the lease rate is greater than the 5.75% rate. Additionally, I (and most economists) expect the Bank of Canada to lower its overnight rate by a further 50bps at minimum in the coming year. This will further lower my effective financing rate - whereas the BMW Canada rate is fixed not floating. I'm not as familiar with the US situation as it pertains to what banks are lending out on a secured basis, but the overnight rate set by the FOMC is already 100bps lower than the Canadian rate and is primed to go significantly lower in the coming year.

[john970]

Originally Posted by linus

I think you have to be very careful with this logic. There are broadly two types of buyers:

1. Those with ample cash to invest or spend. For them, and assuming they're long-term investors, your logic may be appropriate. Just keep in mind that "conservative investing strategies" often means maintaining a balanced portfolio in terms of asset allocation. With 10-year US Treasuries at a minimal 3.6% and 2-year Treasuries at an even lower 1.9%, your assumptions around asset allocation and equity returns need to be even more aggressive than in previous times. This somewhat negates your argument in terms of conservative investing strategies. With the bond market at cyclical highs, it's very difficult to achieve a very conservative approach while coincidentally achieving a 7% target rate of return. And I haven't even touched on the issue of taxes on earned income.

2. Those who have to effective borrow one way or another. For such a buyer, the interest rate equation becomes a simple "Can I get a better rate anywhere else". There is no "opportunity cost of capital" such as with the first type of buyer. In Canada, the prime bank rate is 5.75% - this is the same rate that I can get on my secured line of credit. I would definitely borrow from such a line at this rate enough to make a significant enough downpayment to lower my lease interest charges if the lease rate is greater than the 5.75% rate. Additionally, I (and most economists) expect the Bank of Canada to lower its overnight rate by a further 50bps at minimum in the coming year. This will further lower my effective financing rate - whereas the BMW Canada rate is fixed not floating. I'm not as familiar with the US situation as it pertains to what banks are lending out on a secured basis, but the overnight rate set by the FOMC is already 100bps lower than the Canadian rate and is primed to go significantly lower in the coming year.

This is not as complicated as you make it, despite all the big words. You borrow money as cheaply as possible, and unless you have horrible credit you can almost always make a higher return on your money than the bank as you are more risk tolerant. By "you" I mean the average buyer.

This is generally true and not subject to market conditions. No that it matters, but I have a degree in economics.

[linus]

Originally Posted by john970

This is not as complicated as you make it, despite all the big words. You borrow money as cheaply as possible, and unless you have horrible credit you can almost always make a higher return on your money than the bank as you are more risk tolerant. By "you" I mean the average buyer.

This is generally true and not subject to market conditions. No that it matters, but I have a degree in economics.

That's where we differ in our interpretation of the situation. What you're essentially advocating is a borrow and invest strategy. You've used "risk" as your uncontrolled variable in all of this. I fail to see how adding risk is not subject to market conditions. There is a variable called Market Beta. I'd love to know where you can get a virtually risk-free 7% rate of return. Please do advise... I'm sure many people would love to achieve these sorts of returns with no risk.

The arguments I've posted above are actually rather simple and quite basic. And for someone who's looking to invest money by borrowing money, I find your comment about "big words" to be quite arrogant.

And, not that it matters, but I have a Masters degree specializing in finance, a Chartered Financial Analyst designation and have been working in investment management for over a decade. Not that it matters...

[InOttawa]

Originally Posted by linus

I'd love to know where you can get a virtually risk-free 7% rate of return. Please do advise... I'm sure many people would love to achieve these sorts of returns with no risk.

Yes, where does this magical 7% come from? I want a piece.

[john970]

Originally Posted by linus

That's where we differ in our interpretation of the situation. What you're essentially advocating is a borrow and invest strategy. You've used "risk" as your uncontrolled variable in all of this. I fail to see how adding risk is not subject to market conditions. There is a variable called Market Beta. I'd love to know where you can get a virtually risk-free 7% rate of return. Please do advise... I'm sure many people would love to achieve these sorts of returns with no risk.

The arguments I've posted above are actually rather simple and quite basic. And for someone who's looking to invest money by borrowing money, I find your comment about "big words" to be quite arrogant.

And, not that it matters, but I have a Masters degree specializing in finance, a Chartered Financial Analyst designation and have been working in investment management for over a decade. Not that it matters...

I didn't mean it to be offensive and I apologize as you have obviously taken offense. In the short term, something like the stock market is very risky. However, taken over the long term (say 10 years) the risk drops dramatically. Someone who is on a fixed income retirement may make a smart decision and rely on lower yield guaranteed income investments that in most cases are lower than the finance rates available, but again I was referring to the average buyer.

Currently 7% is hard to come by with the recent fed actions, unless you have an existing relationship w/ a weath management group or something similar, but 5.9% is still pretty easy to get at most credit unions here in the states.

I said "not that it matters" as most of this stuff is pretty simple math and I didn't need a degree to learn any of this, I wasn't being arrogant. At least not on purpose.