[eelnoraa]

I can also echo @turtleboy here. If you pay off your lease on day one. Then car gets stolen and completely distorted, the leaser get paid, you will have no car, no guarantee if any of your lease payment back. This part is very different than financing a car. That is why you should always try to put $0 toward down payment on a lease.

[TurtleBoy]

Originally Posted by eelnoraa

I can also echo @turtleboy here. If you pay off your lease on day one. Then car gets stolen and completely distorted, the leaser get paid, you will have no car, no guarantee if any of your lease payment back. This part is very different than financing a car. That is why you should always try to put $0 toward down payment on a lease.

Correct, the only caveat in that scenario is if you did a one-pay lease. In that instance the money is held in escrow and withdrawn each month. Should the vehicle get totaled/stolen then any remaining money in escrow will be returned.

[TXPearl]

Originally Posted by eelnoraa

I can also echo @turtleboy here. If you pay off your lease on day one. Then car gets stolen and completely distorted, the leaser get paid, you will have no car, no guarantee if any of your lease payment back. This part is very different than financing a car. That is why you should always try to put $0 toward down payment on a lease.

How is this any different than if you purchased or financed the vehicle?

You might "lose your downpayment" because of rapid depreciation of the vehicle, but not because it was a lease vs. finance/cash purchase.

Note that the insurance settlement amount is typically the Actual Cash Value (basically fair market value), and not trade value. So if the car was stolen/totaled on day one of the lease, you're going to get your money back or a new car.

Obviously, I can't speak to every captive leasing agreement out there, but I just took a look at my BMWFS lease contract from 2020. There's nothing in there to allow BMWFS to keep any insurance proceeds beyond the normal lease payoff amount. It's pretty clear, and I have to believe others are the same.... there's no way they could get away with simply keeping any excess insurance proceeds. I don't doubt that there have been some situations where the leasing company screwed up and made it a hassle to get the balance returned to the lessee, but that's an exception and not a valid reason to essentially finance more $$$s on a lease contract than you otherwise would.

A total loss is pretty rare and BMWFS is a probably a pretty good financing company to have to deal with in the unlikely event that you did encounter this situation. Other than foregoing the value of the GAP insurance (relatively small value) that BMWFS includes in all leases, there's no reason to treat a lease any differently than you would traditional financing with respect to a down-payment.

[TurtleBoy]

Originally Posted by TXPearl

How is this any different than if you purchased or financed the vehicle?

You might "lose your downpayment" because of rapid depreciation of the vehicle, but not because it was a lease vs. finance/cash purchase.

Note that the insurance settlement amount is typically the Actual Cash Value (basically fair market value), and not trade value. So if the car was stolen/totaled on day one of the lease, you're going to get your money back or a new car.

Obviously, I can't speak to every captive leasing agreement out there, but I just took a look at my BMWFS lease contract from 2020. There's nothing in there to allow BMWFS to keep any insurance proceeds beyond the normal lease payoff amount. It's pretty clear, and I have to believe others are the same.... there's no way they could get away with simply keeping any excess insurance proceeds. I don't doubt that there have been some situations where the leasing company screwed up and made it a hassle to get the balance returned to the lessee, but that's an exception and not a valid reason to essentially finance more $$$s on a lease contract than you otherwise would.

A total loss is pretty rare and BMWFS is a probably a pretty good financing company to have to deal with in the unlikely event that you did encounter this situation. Other than foregoing the value of the GAP insurance (relatively small value) that BMWFS includes in all leases, there's no reason to treat a lease any differently than you would traditional financing with respect to a down-payment.

Leasing is much different than financing, that is not even worth discussing.

As I said to begin with, BMW does not have such a clause but some companies do. I know, at least up until two years ago, Genesis specifically stated in the lease contract that all insurance proceeds would go to them. It is also quite common for other manufactures to keep the proceeds. You can find countless articles talking about this and examples of this. If you don't believe it fine, it is your money just don't advise others.

[eelnoraa]

Originally Posted by TXPearl

How is this any different than if you purchased or financed the vehicle?

You might "lose your downpayment" because of rapid depreciation of the vehicle, but not because it was a lease vs. finance/cash purchase.

Note that the insurance settlement amount is typically the Actual Cash Value (basically fair market value), and not trade value. So if the car was stolen/totaled on day one of the lease, you're going to get your money back or a new car.

Obviously, I can't speak to every captive leasing agreement out there, but I just took a look at my BMWFS lease contract from 2020. There's nothing in there to allow BMWFS to keep any insurance proceeds beyond the normal lease payoff amount. It's pretty clear, and I have to believe others are the same.... there's no way they could get away with simply keeping any excess insurance proceeds. I don't doubt that there have been some situations where the leasing company screwed up and made it a hassle to get the balance returned to the lessee, but that's an exception and not a valid reason to essentially finance more $$$s on a lease contract than you otherwise would.

A total loss is pretty rare and BMWFS is a probably a pretty good financing company to have to deal with in the unlikely event that you did encounter this situation. Other than foregoing the value of the GAP insurance (relatively small value) that BMWFS includes in all leases, there's no reason to treat a lease any differently than you would traditional financing with respect to a down-payment.

It is how lease work. I will refer to you a forum with lease experts: https://leasehackr.com/ for all the details.

It all make sense after you understand leasing. Most people don't understand, they see lease a driving a more expansive car with less payment (down and monthly). But as with everything else, the devil is in the details.

The official lease rule can changes from time to time too. Many years ago, BWM allowed MSD for lease. But in 2018 when I tried lease one, MSD was possible unless you were coming off from an existing BWM lease and transfer the MSD. Now, it seems MSD is possible again. Also, BWMFS used to cover gap insurance, not sure if that is still the case. And for a lot of brand, lease is not transferable (Audi, Nissan, ..), meaning even if you sell the lease to someone, the original leasee is still responsible for the lease term ..... lot of details

[TXPearl]

Originally Posted by TurtleBoy

Leasing is much different than financing, that is not even worth discussing.

In many ways, yes, but in this regard, not really. There are interest charges on outstanding balances. Reduce the latter and pay less of the former.

As I said to begin with, BMW does not have such a clause but some companies do. I know, at least up until two years ago, Genesis specifically stated in the lease contract that all insurance proceeds would go to them. It is also quite common for other manufactures to keep the proceeds. You can find countless articles talking about this and examples of this. If you don't believe it fine, it is your money just don't advise others.

We're talking about a BMW here, so my advice stands.

Regarding other makes, it seems odd to attempt to profit from a customer's misfortune, but I'll take your word for it and steer clear of Genesis leases.
I can understand the lessor requiring that they get first dibs on all insurance funds to pay themselves any outstanding amounts, but to keep excess amounts seems....excessive.

[TurtleBoy]

Originally Posted by TXPearl

In many ways, yes, but in this regard, not really. There are interest charges on outstanding balances. Reduce the latter and pay less of the former.



We're talking about a BMW here, so my advice stands.

Regarding other makes, it seems odd to attempt to profit from a customer's misfortune, but I'll take your word for it and steer clear of Genesis leases.
I can understand the lessor requiring that they get first dibs on all insurance funds to pay themselves any outstanding amounts, but to keep excess amounts seems....excessive.

Actually the many ways are what we are talking about and the interest has nothing to do with the discussion.

BMW was specifically excluded from the conversation of keeping money.

[TurtleBoy]

Been reading a lot of posts on various forums and it looks like it depends on the lease contract, the state, the insurance company and the leasing company as to whether a person gets any overage from the insurance payout. In more recent posts (the last few years) people have reported some instances of their insurance company cutting two checks, one to the lessor for the payoff and one to them for the overage. Others have reported that their contract stated that the lessor will keep all proceeds so they didn't get anything.

As I stated in my first post, just not worth the hassle to deal with the possibility. You would have to run the numbers but in all likelihood there will be little to no savings anyways when making a down payment on a lease when taking into account the opportunity costs.

As far as BMW's are concerned, it is much better to just put the money towards MSDs since those will actually produce a fairly high return and there is no risk of losing them.

[Henry2020]

If you total your leased car and try to buy it out to get the insurance money BMW may not let you. I’ve heard of cases where BMW found out that a leased car got involved in an accident and returned lessee’s buy out check. Technically you don’t really own the car and if I’m not mistaken BMW is named as a beneficiary in the insurance policy. There are lawsuits against BMW right now because they took people’s equity.

[TXPearl]

Originally Posted by TurtleBoy

Been reading a lot of posts on various forums and it looks like it depends on the lease contract, the state, the insurance company and the leasing company as to whether a person gets any overage from the insurance payout. In more recent posts (the last few years) people have reported some instances of their insurance company cutting two checks, one to the lessor for the payoff and one to them for the overage. Others have reported that their contract stated that the lessor will keep all proceeds so they didn't get anything.

As I stated in my first post, just not worth the hassle to deal with the possibility. You would have to run the numbers but in all likelihood there will be little to no savings anyways when making a down payment on a lease when taking into account the opportunity costs.

As far as BMW's are concerned, it is much better to just put the money towards MSDs since those will actually produce a fairly high return and there is no risk of losing them.

To be clear, I'm not recommending a lease down-payment, just saying it might be a worthy option. For your consideration: the current BMWFS base money factor is 0.0019, or equivalent to an interest rate of 4.56%. Most BMW lessees in the US are probably in the 25-35% marginal tax bracket. In order to offset the lease finance charges, you'd have to earn 6-7% pre-tax on funds that otherwise could be used as a down-payment. To get that type of return, there are also investment risks to consider. YMMV

Agree on MSDs, but that doesn't preclude a down-payment as well.

[Henry2020]

Originally Posted by TXPearl

To be clear, I'm not recommending a lease down-payment, just saying it might be a worthy option. For your consideration: the current BMWFS base money factor is 0.0019, or equivalent to an interest rate of 4.56%. Most BMW lessees in the US are probably in the 25-35% marginal tax bracket. In order to offset the lease finance charges, you'd have to earn 6-7% pre-tax on funds that otherwise could be used as a down-payment. To get that type of return, there are also investment risks to consider. YMMV

Agree on MSDs, but that doesn't preclude a down-payment as well.

With max MSD’s the interest rate gets close to 3.5%. I wouldn’t put anything down other than maybe paying acquisition and doc fees.

[TurtleBoy]

Originally Posted by TXPearl

To be clear, I'm not recommending a lease down-payment, just saying it might be a worthy option. For your consideration: the current BMWFS base money factor is 0.0019, or equivalent to an interest rate of 4.56%. Most BMW lessees in the US are probably in the 25-35% marginal tax bracket. In order to offset the lease finance charges, you'd have to earn 6-7% pre-tax on funds that otherwise could be used as a down-payment. To get that type of return, there are also investment risks to consider. YMMV

That is not how the rent charge/interest is calculated on a lease. The MF is not equivalent to a rate of return on the same money. You would need have specific numbers to calculate it but before taking taxes into consideration you would need to earn about half the equivalent of the MF interest rate to break even.

Here is an example with and without a $10k down payment. We will assume an $80k MSRP, all fees paid outside the lease and an MF of .0019.

No down payment:


With $10k down payment:


Putting the $10k down only saves $19 a month in interest or $228 a year. That would be equivalent to a $10k investment earning 2.28%.

When looking at the total cost of the leases, there is only a $683.72 difference over 3 years. On $10k that is about a 2.2% return compounded monthly.

Of course the above is a simple example assuming you wouldn't use the $10k for payments along the way or considering the return on the lower payment difference but it was just to give you the idea of how little a down payment on a lease actually saves. As I said earlier, leasing and financing are very different.

[TXPearl]

Your analysis is flawed. It does not consider the timing of the net cash flows (the lower payment amount) and the opportunity to reinvest those savings each month of the lease term. If you do that, then the implicit return on the down payment is exactly 4.56%. It's math, and it has to work out to the underlying interest rate because a lease is simply an alternative form of financing. The lease agreements and F&I worksheets show it broken down into rent charges and depreciation because that's what is more understandable to their user base.

I'd be happy to share the math with you, if you're genuinely interested in learning about it, but I think we've hijacked the OP's thread for long enough. Have a great day!

[TurtleBoy]

Originally Posted by TXPearl

Your analysis is flawed. It does not consider the timing of the net cash flows (the lower payment amount) and the opportunity to reinvest those savings each month of the lease term. If you do that, then the implicit return on the down payment is exactly 4.56%. It's math, and it has to work out to the underlying interest rate because a lease is simply an alternative form of financing. The lease agreements and F&I worksheets show it broken down into rent charges and depreciation because that's what is more understandable to their user base.

I'd be happy to share the math with you, if you're genuinely interested in learning about it, but I think we've hijacked the OP's thread for long enough. Have a great day!

I covered the lower payments as something to make a complete analysis but the return on them has nothing to do the the lease MF especially since they may be used for non-investment activities. A down payment can be a tool some may need to use to lower a monthly payment but overall it is not a money saving strategy. Go with it if it makes you feel better though.

Edit: This is my last post on the subject to you since there is evidently no point in continuing this discussion. Good luck to you.

[TXPearl]

Fair enough - all good.

If you, or anyone else, is ever interested in how money factors and the 2400 multiplier are algebraically derived from APRs, here you go...

https://www.mathscinotes.com/2011/03...-auto-leasing/

[GerWil]

I have an order for a 2023 45e and intend to buy and initially finance with BMWFS because of the loyalty credit. I have leased six BMW’s with three-year leases and purchased three including this one. My first two BMW.s were purchased and sold privately at three years since I was hesitant to own a BMW after expiration of its three-year warranty. I have always leased at base MF and considered leasing worthwhile until the current 45e. The present low residual value is disproportionate to other vehicles that I have leased, and leasing is also not worth passing up the $7500 tax credit.