Quote:
Originally Posted by red-beard
...I also know about the residual, and that if it is over esitmated, you can be liable for the difference.
I'm looking for practical advice on how not to get screwed in a lease.
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You cannot be liable for the difference in residual.
Knowing each variable up front will help you not get screwed.
You want to know:
Residual value expressed as percentage of MSRP
Acquisition fee (Up front origination fees, like points)
Termination fee (Fees to turn in the lease, or to purchase at end of the lease)
Money factor (interest rate, usually expressed as .00240 for example)
Capitalized cost before cap cost reduction (what you agree for intial price)
If you know these things, you can make an informed decision. You can get in trouble when you focus only on the payment, just like a loan.
Know how you are being taxed. I have done leases for TX residents before, but I can't remember if they pay tax on the payment as you go, or the initial capitalized cost, or the sum of payments paid up front.
I would think that you would go through BMW Financial. An independent lease company or bank is probably not a good idea for you.
The residual is NOT negotiable (the bank sets their risk and that's that) but can be manipulated by purchasing miles. Use that to your advantage. Ask me more if you'd like.
The money factor can be marked-up by the dealer. So either ask to see the program sheet, or shop around. BMW Fin may charge the dealer .00200, but the dealer may be able to mark up the rate to .00280 with the difference paid to the dealer. This is no different than marking up a loan rate, which dealers do as well. Knowing the base rate (like knowing invoice on the car) will help keep them honest.
The acquisition fee may be marked up as well. BMW Fin may charge $499 but the dealer may charge $999, for example. So again, shop around or ask to see.
Capitalized cost is disclosed and this is the 'purchase price' on which your lease is based. This is absolutely negotiable and is the same as paying cash or having a traditional loan.
Anything that reduces capitalized cost must be disclosed as well, such as trade equity or cash down. If you'd like to negotiate your best deal, tell them to calculate your lease with your first payment, security deposit (if reqd), and up-front fees due up front, but NO CASH CAP REDUCTION (or trade). Then you have a baseline for reducing your lease payments with cash (or trade equity) and the math should be transparent. Nothing else should change.
A high residual value is a GOOD thing, as the lease company is taking the risk that it may be wrong (in your favor) at the end.
If you need ANY help, let me know.
BTW, I would never 'BUY' a new vehicle, ONLY lease. I can't think of a single scenario where buying is better than leasing unless the deal is different (i.e. 72 mos at 0% if you buy vs 8% lease, etc)