Do dealers profit from higher interest with lease/finance?

[theshiningnova]

So this BMW CA I dealt with put through my lease app the other day and came back saying my app was approved. The rate is however a couple % worse than the quoted finance/lease offer rate I found in the BMW website.

I kind of expected this but here's my question. Do dealerships profit from a higher interest/money factor at all? Is BMWFS/BMWNA actually the sole party determining what the rate will be and earning the interest paid?

Are there usually any room for negotiation on the rate and residual?

[ralawren]

Yes, the dealer has a range available to them. How do I know?

Because I received a reduction of my money rate after I complained how poorly the Finance Mgr handled the paperwork. The sales Manager reduced by money factor from .250 to about .215 ( or there abouts). The reduction came out of the dealer not BMW Financial.

[jpd]

leasing depends upon a number of factors: credit history-very important, a track record of good credit, the age of the person leasing the car-this has more to do with your credit history than age. The dealer is paid by BMW NA.

[Angry3]

Originally Posted by theshiningnova

So this BMW CA I dealt with put through my lease app the other day and came back saying my app was approved. The rate is however a couple % worse than the quoted finance/lease offer rate I found in the BMW website.

I kind of expected this but here's my question. Do dealerships profit from a higher interest/money factor at all? Is BMWFS/BMWNA actually the sole party determining what the rate will be and earning the interest paid?

Are there usually any room for negotiation on the rate and residual?

No negotiation on residual values, those are set by BMWFS. They also set the base money factor rates, but dealers are allowed to mark up that rate by a maximum of .0004. You can expect any dealer's first offer to be based on the maximum MF markup.

In the end it's just another negotiating point, like the cap cost, acquisition fee markup, dealer fees, and so on.

[doublevanosrc]

Of course they do, i used to work in a dealer and the finance manager would raise the rate a very small percent that yields him a small cut. Usually between $200-500 depending on the car price.

[theshiningnova]

Thanks for all the reply.

This dealer told me that the higher money factor they are charging me is because of ED. Has anyone ever been charged more just because you do ED?

[jpd]

I really have no idea. My speculation centers around the great deal you get on ED vs the rest of us. Not sure if the dealer receives much from BMW to show the dealership a profit.

[allanak]

ED MF mark-up is .0003. If it's more than that, you know you're getting the shaft. You don't think that second month payment is actually free, do you?

[theshiningnova]

Originally Posted by allanak

ED MF mark-up is .0003. If it's more than that, you know you're getting the shaft. You don't think that second month payment is actually free, do you?

hum thx for the info! good to know that at least they are not trying to rip me off too much. Only by 0.0001 heh

[BobN2Tech]

Originally Posted by Angry3

No negotiation on residual values, those are set by BMWFS. They also set the base money factor rates, but dealers are allowed to mark up that rate by a maximum of .0004. You can expect any dealer's first offer to be based on the maximum MF markup.

In the end it's just another negotiating point, like the cap cost, acquisition fee markup, dealer fees, and so on.

Is this maximum rate somewhere written in the contract or on the BMWFS website? I bought in June 2011 and my MF was marked up more than .0004. If so, can I go back to the dealer or BMWFS and have them re-write the lease to the maximum allowed?

[dicker]

What was your MF? They can't and wont mark it up by more than .0004 over the tier you qualify for.

[BobN2Tech]

Originally Posted by dicker

What was your MF? They can't and wont mark it up by more than .0004 over the tier you qualify for.

It calculates out to .00295 and I should be in the top tier (credit score > 850)

[FJUNO78]

i dont care if the dealer wants to mark up the money factor... I offer a deal of $500 above invoice... if they accept, they can take their profit wherever they wish.

[BobN2Tech]

Originally Posted by FJUNO78

i dont care if the dealer wants to mark up the money factor... I offer a deal of $500 above invoice... if they accept, they can take their profit wherever they wish.

If its not being hidden by inflating the MF beyond the allowed maximum or suggesting that the MF being offered by BMW FS will be used. In my case, I asked about the equivalent percentage of the lease rate, and was told by the finance manager it was comparable to the 2.9% loan rate being offered. With a MF of .00295, this actually is 7.08%. I also got charged for a $925 acquisition fee added into the gross capitalization costs.

[Angry3]

Originally Posted by BobN2Tech

If its not being hidden by inflating the MF beyond the allowed maximum or suggesting that the MF being offered by BMW FS will be used. In my case, I asked about the equivalent percentage of the lease rate, and was told by the finance manager it was comparable to the 2.9% loan rate being offered. With a MF of .00295, this actually is 7.08%. I also got charged for a $925 acquisition fee added into the gross capitalization costs.

Hey Bob,

I'll try to help. Obviously the dealer lied to you about your lease MF being comparable to the subvented financing. You'll have a hell of a time proving it. One of the reasons dealers use the money factor term is it confuses customers who aren't familiar with it. I wasn't until I did some online research and found the conversion factor.

The $925 acquisition fee is allowed per BMWFS policy. The base fee at the time I leased was $725, dealers are allowed to mark that up a max of $200.

The key here is you need to find out what the base money factor was on the car you bought at the time you bought it, considering the credit tier if you've leased in the last year or so.

You can probably find that number online with some searching. If the dealer violated BMWFS policy I would pressure them to restructure your lease to bring it to where a should have been, with a little extra for your trouble. If the dealer and BMWFS won't play ball, I expect a letter to the CA Attorney General may help.

Hope that helps.