FairBMWLease.com
Serving CA, FL, IL, MA, PA, TX and NY-NJ-CT Tri-State Area
BMW Lease Guide
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What is a LeaseBMW provides its customers with the option to lease cars instead of buying them. When you lease a car, you pay only for the part of the vehicle value that you “use up” during the time that you have the car. As a result, when you lease a car your monthly payments are about half of what they are compared to when you buy. The amount you “use up” depends on factors that affect the value of the car and include a vehicle’s residual value (more on this later), lease length and miles used during the lease. At the end of a lease, you can return the car, re-lease it, purchase it or lease a new one. back to top ↑ Leasing vs. BuyingLeasing a BMW is an attractive option for most people, around 60% of customers lease their BMWs, but it is not for everyone. The following summarizes advantages and disadvantages of leasing when compared to buying. Advantages:
Disadvantages:
Credit RequirementsLeasing a BMW requires having a good credit score. BMW places customers in 5 categories based on their credit score: Elite/Super Elite (700+), Standard/Standard Plus (640-699), Progressive/Progressive Plus (639-). While BMW leases are pass/fail as far as qualifying, having a lower credit score can increase your expenses because you might be required to place a higher downpayment amount or to place multiple security deposits to get the lease. Therefore, before you go to the dealership, you should get your Fico Scores/Reports back to top ↑ Insurance RequirementsBMW requires the customer to maintain the following insurance during the term of the lease:
Tire and Rim insurance
If you want extra protection, you may want to consider getting Tire and Rim insurance in addition to the regular
insurance. While not required by BMW, this type of insurance can protect you from having to pay for bent or
cracked rims and punctured tires. You can get Tire and Rim insurance from your BMW dealer or from a third party
provider. A reasonable price for this type of insurance should be in the range of $100 - $150 per year of coverage
depending on the type of coverage that you get.
back to top ↑ Order ProcessPreparation
You should start preparing to order your BMW long before you come to a dealership. First, decide which
vehicle or vehicles you are interested in and what options you want. If you are not sure which BMW you want,
you can schedule a test drive. Do not accept any offers and make sure to state upfront that you will not be
ordering a car yet. Once you know exactly which vehicle you want, use the
Fair Price Calculator
to figure out how much it should cost to lease and to get the price calculation spreadsheet for use during
negotiations with dealers. You should also decide whether you want to take advantage of any special
programs such as MSD or ED. Finally, before you go to a dealership, make sure that you meet the
Credit Requirements and know your
Fico Score.
Price Comparison
Another useful technique for getting a good price is to compare prices online. You can use a service such as
Yahoo! Autos
Placing the order
Once you agree on an acceptable price with your dealer, you will need to sign some paperwork and go through
a credit check. Knowing your Fico Score and what is on your credit reports will help you avoid any unpleasant
surprises. You should make sure that your dealer throws in free floor mats before you sign the paperwork,
as they are not included by default. You will also need to leave a deposit, usually around $500, which you
can pay with a credit card.Picking up your BMW
Unless you get a vehicle from your dealer’s lot, your BMW will be custom built (at no extra charge). Once
you place the order, it will take 6-8 weeks for your vehicle to get to the dealership. When you come to
pick up your BMW, you should already have insurance that meets BMW’s
Insurance Requirements. You will also
need to bring your checkbook to pay the amount due at signing – you will not be able to use a credit card
unless this amount is small. Once you sign the paperwork, the dealer will help you register for BMW Assist
(if your car comes with it) and give you the key.BMW Credit Card
As you sign the paperwork, the dealer will try to sign you up for the BMW credit card. Unless having BMW on
your credit card is important to you, you can get a better card elsewhere. The BMW card requires you to
spend $2 for every reward point, effectively giving you only 0.5% cash back. If you are looking for a
credit card with better rewards on your gas purchases, you should consider the
Discover Open Road Card.
back to top ↑ Determining a Fair BMW Lease PriceMany people overpay for their lease because they do not understand how lease payments are calculated. Since federal regulations do not require disclosure of how the dealers come up with monthly payment and amount due at signing, most dealers do not disclose it, and you cannot check their calculations to see if you are getting a fair deal. Even the special lease offers from BMW do not include taxes and various fees that you would have to pay in their advertised price. Your monthly lease payments are actually calculated based on depreciation cost, finance cost and taxes. Depreciation cost is what you pay for the vehicle value that you “use up” during the time that you have the car. Finance cost is the interest that you pay to the leasing company for the use of its money. State sales tax is charged on top of these two costs and is determined by your state of residence, not by the location of the dealership. The depreciation cost is calculated as follows: Depreciation Cost = (Vehicle Price – Cost Reduction – Residual Value) / Lease Length The vehicle price is the price that you negotiate with the dealer. Some dealers might tell you that the price is not negotiable, but this is simply not true. The lower you can negotiate the price, the lower your monthly payment. The vehicle price should be equal to the sum of the car’s invoice price, some profit for the dealer and some additional charges. The amount of profit that a dealer would be willing to accept depends on the car model and on your negotiation skills. Additional charges include destination ($875), advertising (varies by dealership, but usually $200 - $400) and training ($180) fees. The cost reduction includes your downpayment, trade-in vehicle credit, rebates and factory incentives. The residual value is the value of the car at the end of the lease. This value is calculated as a percentage of MSRP. Since BMW, and not the dealers, sets both MSRP and the residual value percentage, this value is not negotiable. Since federal regulations do not require disclosure of the residual value percentage, you would need to find this information online or ask the dealer. The lease length is the length of your lease in months. BMW typically offers leases that are 24, 36, 48 or 60 months long. We do not recommend leases that are 60 months long since a vehicle’s warranty and maintenance programs expire after 48 months. The finance cost is calculated as follows: Finance Cost = (Vehicle Price – Cost Reduction + Residual Value) * Money Factor The money factor is the interest rate charged by the leasing company divided by 2400. For example, a 6.6% interest rate is equivalent to a 0.00275 money factor. Some dealers try to confuse customers by quoting the money factor as though it is an interest rate, for example, “2.75 money factor.” In this context, the money factor sounds like a low interest rate even though it is not. Since federal regulations do not require disclosure of the interest rate or of the money factor, you would need to find this information online or ask the dealer. BMW allows dealers to mark up the money factor by up to 0.00040. Thus, you should consult several sources to get the true money factor. The monthly lease payment is calculated as follows: Monthly Lease Payment = (Depreciation Cost + Finance Cost) * (1 + Tax Rate) This formula gives the correct monthly lease payment amount that the dealer should charge you. However, you need to be aware of the math behind this formula to make sure that there are no intentional or unintentional mistakes and that you are getting a fair deal on your BMW. The amount due at signing is calculated as follows: Due at Signing = 1st Month's Payment + Security Deposit + (Downpayment + Fees) * (1 + Tax Rate) Security deposit varies depending on your monthly payment. It is equal to the monthly payment (including tax) rounded up to the nearest $50. For example, if your monthly payment comes out to $555, your security deposit will be $600. Security deposit is refundable at the end of the lease. You can waive the security deposit by increasing the money factor by 0.00015. We recommend that customers put nothing toward downpayment when leasing a vehicle because in the event of a total loss of the vehicle, you will lose your downpayment! Fees include the $725 lease acquisition fee charged by BMW (BMW allows dealers to mark it up by up to $200) as well as various other fees. You can waive the acquisition fee by increasing the money factor by 0.00035. Some of the other fees are charged by the state, therefore, they vary by state. Others are dealer charges such as documentation fee, preparation fee and various other fees. These are often excessive and the consumer should negotiate with the dealer to minimize these fees. back to top ↑ Fair Price CalculatorUse the Fair Price Calculator to get a low price on your BMW lease. We keep track of all the information that is necessary to determine a fair price, including invoice prices, interest rates, and fee amounts. We then use this information to calculate what you should expect to pay for your BMW lease and give you the tools necessary to obtain your BMW at this low price. back to top ↑ Multiple Security Deposits Program (MSD)The MSD program allows you to lower your money factor by making additional security deposits. Each additional security deposit lowers your money factor by 0.00007. BMW allows you to make anywhere from 1 to 7 additional security deposits for a money factor reduction of up to 0.00049. These additional security deposits are due when you sign your lease and are fully refundable when you return the car at the end of your lease. In New York State, there is a security deposit cap of $749, which prevents NYS residents from using the MSD program. NYS residents can get around this limitation by leasing their vehicle from a dealer in a neighboring state. Using the Multiple Security Deposits program allows customers to save a significant amount of money compared to using this amount as a downpayment. In addition, you save on the sales tax that most states charge on the downpayment. Since GAP insurance is included with all BMW leases, your MSDs are fully refundable if you get into an accident and the car is totaled, which makes using money for MSD a lot safer than using the money for downpayment. Some dealers will try to talk you out of using the MSDs because they do not understand the advantages of this program, others are not (or pretend that they are not) aware of this program. If your decide that you want to use the MSD program make sure that the dealer is willing to participate in the program before you place the order. back to top ↑ European Delivery Program (ED)BMW's European Delivery program allows you to take delivery of your new vehicle in Munich, Germany. This program offers significant savings over taking delivery of the vehicle in the US, and you can participate in the BMW factory tour as part of the delivery experience. You also get to drive your car on Germany's amazing roads and across Europe for up to two weeks with free insurance. To make the program even more attractive, BMW offers a free companion ticket for the flight to Germany. You can find out more about this program here. When you take advantage of the ED program, you save 7% off MSRP. In addition, you do not have to pay the advertising and training fees. Since this discount comes from BMW, not from the dealer, you should be able to get this discount on top of whatever price you can negotiate with the dealer. Moreover, when leasing the residual value is calculated using US MSRP, not ED MSRP, which results in a substantial discount for the customer. Some dealers try to base the residual value on ED MSRP, which is wrong, so you have to verify that your dealer uses US MSRP. The lease terms are slightly different with the European Delivery program. You pay the first month's payment during which you drive your car in Europe. BMW pays the second month's payment while your car is shipped to the US. However, you pay for this "free" payment by having a slightly higher money factor, an increase of 0.0003. back to top ↑ Owner Loyalty Program (OLP)The Owner Loyalty Program rewards existing BMW customers for continuing to stay with BMW. To qualify you either have to be a current BMWFS customer for at least 18 months or have to have been one within the last 6 months. The rewards come in the form of lower money factors and finance rates when you lease or finance a new BMW vehicle. The discount amount varies depending on the model and time at which you lease the new vehicle, and is not available at all times. Thus, you will have to ask a dealer about the current OLP rate. In addition, existing BMW customers do not have to put down a security deposit. back to top ↑ BMW CCA Rewards ProgramThe BMW Car Club of America offers a reward program for people who have been members of the club for one year or more immediately preceding the delivery date of the vehicle. The reward amount is $500 - $1500 depending on the vehicle. Membership costs $40 per year and offers various other benefits in addition to the reward program. You can find out more about this program here. back to top ↑ Equipping your BMWKeeping your BMW clean
To keep your BMW clean, you should get all-weather floor mats to keep water, road salt and mud away from your
vehicle’s interior. You should also get a cargo liner to keep spills, dirt and grease away from your trunk.
These products will protect the interior of your vehicle and make cleanup much easier. You can get
All-Weather Floor Mats
Transporting Children
If you have small children, you will need good car seats to keep them safe and comfortable. If you have an
infant under a year old, you will need a convertible car seat that can be installed and used rear-facing now
and forward-facing when your child gets a little older. The
Britax Boulevard
is one of the best convertible
car seat to use due to a plethora of comfort and safety features, and the extra side impact protection that
it offers. It fits children from 5 to 65 pounds. If your toddler is already a year old, you will need a
forward-facing car seat. The
Recaro Young Sport
is one of the best forward-facing car seat to use as it also
offers plenty of comfort and safety features, and the extra side impact protection. It fits children from 18
to 80 pounds. Since car seats can leave scratches and indents on the interior, you should also get an
Auto Seat Protector
to protect your vehicle from damage.Transporting Pets
If your pet will be riding with you in your BMW, you will need to protect the seats from scratching, biting
and “accidents.” You have several options to keep your pet comfortable and your seats intact including
Pet Barriers,
and
Car Seat Covers.
back to top ↑ In Case of an AccidentIn the event of an accident, you should think carefully about how you want to proceed with the repairs. If the damage is minor, you might want to consider paying for the repairs out of pocket. Whether you want to do this depends on the cost of the repairs vs. your deductible and anticipated increase in insurance cost due to your claim. If the damage is significant, you should file a claim with your insurance company. You do not need to worry about the devaluation of your vehicle due to an accident, and BMW will not charge you extra for it at lease end. If your car is totaled, the gap coverage, which comes automatically with all BMW leases, will pay the difference between what you owe and what the insurance company will pay when you file a claim. It is very important that any repairs be completed by a competent mechanic either at an authorized BMW center or at a repair facility that meets BMW standards, so that you do not get charged at lease end for improperly made repairs. You can use Angie’s List back to top ↑ Early Lease TerminationIf you need to terminate your lease early, you have three options:
Get someone to take over your lease
Your best option is usually to do a lease swap - get someone else to take over your lease. You can find someone
to take over your lease at
Swapalease.com.
Purchase the car and resell it to pay off the lease
Another option is to purchase the car and then to re-sell it to pay off the lease. The purchase price will be
the residual value of the car at the time you want to terminate the lease. If you choose to go this route
make sure that you take into account the state sales tax that you will have to pay when you purchase the car,
and the sales tax that the buyer will have to pay when purchasing the car from you. Unfortunately, BMW will
not sell the car to your buyer directly so that you could avoid paying the sales tax twice. Depending on the
tax rate and the number of months that are left in the lease, it might be less expensive to pay the Early
Termination liability.Pay the Early Termination liability
You might prefer to pay the Early Termination liability if you cannot use either of the other two options.
There are two ways available for determining the liability amount: (A) pay off all remaining monthly
payments and (B) pay off the difference between the residual value of the car at the time you want to
terminate the lease and the realized value from disposing the car in a commercially reasonable manner. In
practice, choosing this option means that you will have to pay off all remaining monthly payments. So,
there is no reason to give up the car unless you absolutely have to - for example, you are moving to
another country.Servicemembers Civil Relief Act (SCRA)
Servicemembers Civil Relief Act (SCRA) prohibits BMW from charging an early lease termination fee to military
personnel under the following circumstances:
back to top ↑ End of Lease InformationAt the end of the lease, you can return your BMW, re-lease it, purchase it or lease a new one. BMW will only extend your current lease if you have another BMW vehicle on order and you are waiting for it to arrive. Return your BMW
If you choose to return your car, you have to return it in a good condition. Some people fear that the
leasing company will charge for every little scratch and ding that happens to the car, but with BMW these
fears are unfounded. BMW will not charge you for scratches and dings less than 2” across. BMW’s rates for
scratches longer than 2” are very reasonable, and you will have enough time before the end of the lease
to decide whether it is better to repair the damage yourself or to let BMW repair it for you. See the
Summary of Lease-End Charges section of the guide for rates
that BMW charges for various types of damage.Your lease will specify your yearly miles allowance. For example, if your yearly miles allowance is 15,000 miles and you lease a car for 3 years, you are allowed to drive it up to 45,000 miles during the lease period. BMW will not charge you a fee if you drive your car for more than 15,000 miles during some of the years, as long as you drive up to 45,000 during the 3-year lease period. If you go over your miles allowance, BMW will charge you for the extra miles that you use - 20 cents per mile for most models, 25 cents per mile for the 7 Series. You can lower this cost by up to 20% if you know in advance (4 months or more) that you will use up more miles and purchase addional miles from BMW. The cost of the additional miles can be spread out over the remaining monthly payments or paid for in one lump sum payment. If you drive less than your miles allowance, BMW will refund you for the portion of the miles that you did not use. If you decide to return your car to BMW, you will have to pay a $350 disposition fee. However, if you release your old car, purchase it or lease a new car, BMW will waive the disposition fee. Re-lease or Purchase your BMW
Re-leasing your old car is usually a bad idea since you can lease a new car for about the same amount
of money and you will not have the new vehicle’s warranty and maintenance coverage. If you decide that you
really like your old car and do not want to get a new one, it is usually better to purchase it. The price
that you will have to pay is equal to the car's residual value plus the sales tax on the residual value. If
you finance your purchase, you will also have finance costs.Lease a new BMW
If you choose to lease a new car, BMW makes the transition from the old car to the new car easy. BMW will
even extend your old lease for up to 6 months while you wait for your new car to arrive. BMW will also waive
the disposition fee on the old car and the security deposit on the new car. You will still have to pay
the lease acquisition fee.back to top ↑ Summary of Fees
back to top ↑ Summary of Lease-End Charges
Any vehicle with accident damage involving dents, dings or scratches greater than 8", inoperable Xenon headlights, any misaligned or broken components, any major mechanical problem, improper repairs, hail damage or a badly damaged interior (multiple burns, rips, or water damage) requires an evaluation by an independent inspection company to determine end of lease charges. Tire and Rim Cost Information:
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