[barryc365]

Originally Posted by OSee

I bought a 2018 M2 brand new knowing that Artemis (mod) was 100% sure a S55 powered version was on the horizon.

I was sure it would be depreciation disaster but couldn't wait for the car.

I just sold that 3 year old M2 to VROOM for the equivalent of 73% residual. Carvana spammed a week later with another offer that would have brought it to 75%.

I say buy the car now.

It's a very strange time for second hand cars. Can't see the second hand market being this hot forever

Do we think the Xdrive is going to be so popular it negatively effects the 2WD model disproportionately in terms of depreciation?

I assume there will be those who absolutely want the 2WD but in colder states given the choice I assume a lot more will want the xdrive in time

[35mphgolf]

Originally Posted by Mr. Maboomba

….If I want to buy the car after the lease, I will have to pay the agreed residual value of $42607 (57% of MSRP) and $3622 of sales tax….

I’m asking because it’s f***** insane and I honestly don’t know but, you gotta pay sales tax TWICE?? You pay it on a lease, AND if you choose to buyout?!

Is it just me or is that


edit update after reading the entire thread:

Originally Posted by Mr. Maboomba

…Owner's Choice is designed to be a lease-by-another-name for lease-unfriendly states, such as states that charge sales tax on the full value of the vehicle at lease origination.

I take it you already answered my question here ^^ ?

[barryc365]

Originally Posted by 35mphgolf

I'm asking because it's f***** insane and I honestly don't know but, you gotta pay sales tax TWICE?? You pay it on a lease, AND if you choose to buyout?!

Is it just me or is that


edit update after reading the entire thread:

I take it you already answered my question here ^^ ?

Not fully accurate.

On the 36 month lease you pay about half of the tax of the MSRP and then pay tax on the remaining residual if you choose to buy out so not exactly a full on double tax as far as I can tell

That's in NY anyway but in some states like IL I believe you have to pay all of the tax upfront on a lease so that makes no financial sense to buy it out and I assume pay taxes on the residual then. If that's the case that's kind of nuts but I guess Owners Choice avoids that since the car is titled to you from the start unlike with a lease

[35mphgolf]

Originally Posted by barryc365

Not fully accurate.

On the 36 month lease you pay about half of the tax of the MSRP and then pay tax on the remaining residual if you choose to buy out so not exactly a full on double tax as far as I can tell

That's in NY anyway but in some states like IL I believe you have to pay all of the tax upfront on a lease so that makes no financial sense to buy it out and I assume pay taxes on the residual then. If that's the case that's kind of nuts but I guess Owners Choice avoids that since the car is titled to you from the start unlike with a lease

From what I can tell from lease figures, in VA it’s full tax up front too. I just wasn’t expecting to pay sales tax again if I chose to buy at the end. They don’t call it a Communistwealth (Commonwealth) state for no reason… oh and let’s not forget the mf personal property tax on assessed value we have to pay each year on our cars

[Multimodal]

In California you pay sales tax on your lease payment and then on your buyout amount so there is no double taxation. Some states charge you sales tax on the full value of the car up front, which does lead to double taxation on the residual value.

[gohawks23]

Originally Posted by Mr. Maboomba

BMW Select doesn't offer you the opportunity to turn in the car at a pre-set value. You own it and you have to sell it when you want. BMW Select has two risks: (1) because you're paying down your loan slower you are likely to be upside down (loan > car value) for more of the loan term and (2) you will pay more on interest at an equivalent interest rate because you're paying down the loan slower and have a balloon payment to pay or finance for another couple years at the end.

There is another program called Owner's Choice that is like BMW Select (a partial-amortization loan with a balloon payment) plus the opportunity to turn in the car at a pre-set value (very similar to a lease). Owner's Choice is designed to be a lease-by-another-name for lease-unfriendly states, such as states that charge sales tax on the full value of the vehicle at lease origination. The difference is that the vehicle is titled to you in the Owner's Choice program rather than BMW Financial Services. That may be what you're looking for if you don't want the depreciation risk. However I found Owner's Choice to cost way more than a lease or BMW Select in my area.

You can see what programs are available, what the cost would be, and what the balloon payment would be at
https://www.bmwusa.com/financial-ser...estimator.html.

Here's a decent video explaining leasing vs. Owner's Choice: https://www.momentumbmw.net/financin...ers-choice.htm

Big downsides of OC are full sales tax on entire purchase price due up front and interest rates are usually much higher than MFs or the market. OC makes more sense if car is worth more at term end and is purchased tax free.

[gohawks23]

Originally Posted by barryc365

Not fully accurate.

On the 36 month lease you pay about half of the tax of the MSRP and then pay tax on the remaining residual if you choose to buy out so not exactly a full on double tax as far as I can tell

That's in NY anyway but in some states like IL I believe you have to pay all of the tax upfront on a lease so that makes no financial sense to buy it out and I assume pay taxes on the residual then. If that's the case that's kind of nuts but I guess Owners Choice avoids that since the car is titled to you from the start unlike with a lease

Tax is only paid on lease payment in IL but where I live in Chicago the city also charges a 9% use tax on lease payment making leasing fiscally unsound. With OC you pay entire vehicle sales tax up front.

[MJO316]

Originally Posted by barryc365

I hear you, and I could put the money in the market etc but I like the idea of having a decent amount of equity in it. I'll be doing small miles and unsure how long I'll keep it.

Anyone else worried about the AWD being much more in demand come resale? I'm in the North East. I'd like the AWD but want the car for the summer and don't want to wait

It will absolutely be much more in demand.

Has anyone considered the countries unhinged push towards electric vehicles? The used market in 3 years might be in an issue for these cars. They are already ruining the cars by suffocating the exhausts.

I wouldn't put it past them to put a tax on buying a gas vehicle in 3 years like a standard gas guzzler. Just food for thought. I don't know which option is best yet.

[OSee]

Pasadena Credit Union (and a bunch of others I’m sure) offer balloon loans with the option to walk away. You do pay based on agreed upfront miles like you would on a traditional lease. And if you’re over miles you’re charged for them at around .10 a mile.

I’m not a member so I haven’t seriously inquired. But credit unions are pretty good about protecting their members so I’m sure it’s legit. If Penfed offered walk away I’d be all over it.

[barryc365]

Originally Posted by MJO316

It will absolutely be much more in demand.

Has anyone considered the countries unhinged push towards electric vehicles? The used market in 3 years might be in an issue for these cars. They are already ruining the cars by suffocating the exhausts.

I wouldn't put it past them to put a tax on buying a gas vehicle in 3 years like a standard gas guzzler. Just food for thought. I don't know which option is best yet.

100% could see a tax on emissions like some European countries. In Ireland you have to pay like $2600 per year in emissions tax on a car like an M3 but if you have an electric vehicle the emissions taxes are close to zero.

They're coming for us!!

[barryc365]

Do you guys know should the tax be paid upfront on a purchase or rolled in to the monthly payments?

My quote has it on the monthlies which is nice if true because if I sell after 18 months I'm only paying taxes proportionately?

[Multimodal]

Originally Posted by barryc365

Do you guys know should the tax be paid upfront on a purchase or rolled in to the monthly payments?

My quote has it on the monthlies which is nice if true because if I sell after 18 months I'm only paying taxes proportionately?

Depends on the state. Some states only tax you on your lease payment. You can find what kind of state NY is online.

[Dave07997S]

Originally Posted by Mr. Maboomba

I am considering the lease or purchase of a 2021 M3. BMW provides a number of interesting incentives and financing programs (leasing, low-rate financing, BMW Select, Owners' Choice) that aren't always straightforward in their puts and takes. I wanted to outline my personal analysis here to provide an opportunity for the community to point out any errors and, if accurate, as a resource for others in the future.

Incentives

BMW offers a number of incentive programs: loyalty, military, college grad, OL codes you obtain by attending events, etc. I won't try to detail them all but I will describe the incentives I personally qualify for, how they're valued on a 2021 M3 in April 2021, and how they can be combined with one another and BMW financing programs:

• Military Appreciation: $2500 if you do not finance with BMW FS, $500 if you do finance with BMW FS, stackable with Loyalty and CCA
• Loyalty: $500 if you do finance with BMW FS, stackable with Military and CC
• BMWCCA: $500 rebate if you've been a member for 6 months, claimed after delivery and paid directly, stackable with Military and CCA
• Corporate Incentive: $500 if you do finance with BMW FS, but not stackable with other incentives or rebates
• OL code: $1000 (technically $500 from BMW and $500 from the dealer, which means some dealers only honor BMW's $500 contribution on these), but I don't have a voucher

One interesting element of this is that some incentives are tied to using BMW Financial Services while the Military Incentive is much larger if you pay cash or bring your own financing.

Financing

Before getting into the options I should share my principle on financing: I try to allocate my money efficiently, which means doing whatever is cheapest considering the direct costs of borrowing (interest charges and fees) and opportunity costs of what else you could do with that money. To put it simply, I try to borrow as little as possible unless interest rates are a lot lower than what I can earn on my investments, in which case I try to borrow as much as possible so I can avoid dialing back savings and/or selling investments. (US stocks, based on the S&P 500, have earned 10.9% per year over the past 50 years or 13.9% per year over the past 10 years. Most financial advisors say it's safe to assume you can earn 6-8% per year.)

I have never leased a vehicle before but I've always been curious about it because it seems to provide drivers with a lower monthly payment and a call option (i.e., the right but not the obligation to buy the vehicle for a specific price at a specific time) which could have value if the market value of the vehicle is higher than the residual at the end of your lease. So one thing I tried to look at was how the financing cost of a lease + purchase compared to a simple up-front purchase.

I won't try to explain all the levers that impact the cost of a lease but I will call out that BMW's Multiple Security Deposit program can be quite attractive. BMW lets you put down up to 7 security deposits (a security deposit is equal to your monthly payment, rounded up to the nearest $50) which will be returned to you at the end of your lease. For each MSD they will reduce the money factor (interest rate) used to calculate your lease payment. Even at the relatively low money factors / interest rates we have today this program is still pretty appealing because by putting down a few thousand dollars you can reduce the interest rate charged on tens of thousands of dollars.

BMW also offers a "partial amortization" financing program in some states called BMW Select which provides drivers with a lower monthly payment for up to 5 years and then leaves you with a remaining balance equal to 25-35% of the original loan amount, which you can pay off in one lump sum or refinance through another loan. This kind of product can be quite "dangerous" for the average consumer if they do not prepare for the final balloon payment or appreciate the additional interest costs paid but with BMW offering very low interest rates (0.9% when I wrote this in April 2021) I think this is actually a very interesting way to keep money in my investments which are earning far more gains than the interest on an auto loan costs me.

I used Leasehackr's calculators to compute the cost of various lease options and BMW's Car Payment Estimator to compute the cost of various loan options. Here's what I came up with, assuming a $3500 dealer discount and qualifying for the incentives described above:

Lease with no MSDs: $74750 MSRP - $3500 dealer discount = $71250 net selling price - $500 military incentive - $500 loyalty credit = $70250 capitalized cost = $976/month with tax + $909 up front ($796 CA DMV fees and $113 CA taxes) - $500 CCA rebate + $350 disposition fee = $997/month effective.
If I want to buy the car after the lease, I will have to pay the agreed residual value of $42607 (57% of MSRP) and $3622 of sales tax. Financed at 1.49% for 36 months results in a payment of $1314/month in years 4 and 5.

Lease with max MSDs: $74750 MSRP - $3500 dealer discount = $71250 net selling price - $500 military incentive - $500 loyalty credit = $70250 capitalized cost = $941/month with tax + $909 up front ($796 DMV fees and $113 taxes) - $500 CCA rebate + $350 disposition fee = $962/month effective with 7 MSDs. (7 MSDs costs $6650 and this is saving me $1260 over three years, which is kind of like 6.3% per year. That's about the same as I can reliably earn on investments after income taxes so I could go either way on it, but the attractive thing is that this is a guaranteed savings whereas you never know what will happen with investments.)
Same situation as above if I want to buy the car after the lease - I will have to pay the agreed residual value of $42607 (57% of MSRP) and $3622 of sales tax. Financed at 1.99% for 36 months results in a payment of $1314/month in years 4 and 5.

Military Incentive with Third Party Loan: $74750 MSRP - $3500 dealer discount - $2500 military incentive (it's more if you don't finance with BMWFS) - $500 CCA rebate + $6056 taxes + $796 DMV fees = $75102 financed = $1292/month at 1.24% for 60 months or $1104/month at 1.89% for 72 months (these are PenFed's discounted rates as of April 2021 if you connect with a dealer via their TrueCar Car Buying Service)

BMWFS 60 Month Loan: $74750 MSRP - $3500 dealer discount - $500 military incentive - $500 loyalty - $500 CCA rebate + $6056 taxes + $796 DMV fees = $76602 financed = $1306/month at 0.9% for 60 months

BMW Select 60 Month: $74750 MSRP - $3500 dealer discount - $500 military - $500 loyalty - $500 CCA rebate + $6056 taxes + $796 DMV fees = $76602 financed = $884.53/month at 0.9% (BMWFS) plus a $25863 balloon payment due at the end of year 5
Balloon: $25863, refinanced at 1.49% for 24 months = $1100/month.
BMW anticipates two options at the end of the five year loan: you either sell or trade in the car, which hopefully is worth more than your remaining balance, or you refinance the residual balance with a new loan. Assuming I want to keep the car, for the purpose of this exercise, I assumed I would finance the remaining balance at 1.49% for 24 months (one of my credit unions, Digital Credit Union, offers really low used auto rates). This results in a payment of $1094/month in years 6 and 7.

I looked at the pure financing costs of each scenario:

• If buy up front with PenFed 60 month 1.24% loan: $918, net of extra $1500 rebate (if you finance via a third party the military incentive is $2000 higher but you lose the $500 loyalty incentive)
• If buy up front with BMWFS 60 month 0.9% loan: $1758
• If buy up front with BMWFS 60 month 0.9% Select loan then refinance balloon for 24 months at 1.49%: $2333 + $393 = $2726
• If buy up front with PenFed 72 month 1.89% loan: $2886, net of extra $1500 rebate
• If lease for 36 months then turn in the car: $4642
• If lease for 36 months then finance buyout on 36 month 1.49% loan: $4642 + $1075 = $5717

It looks like buying up front with third-party financing is the least expensive option and leasing or lease-to-buy is the most expensive option. I was pretty surprised by this since the Leasehackr calculator said the money factors used for BMW leases were equivalent to 1-2% interest rates. I guess the various fees involved in leasing (e.g., $925 acquisition fee, $325 disposition fee) add up and you are paying to finance the full value of the car.

Leasing seems to only make sense if I expect the market value of a 2021 M3 in 2024 to be $3750 higher than BMW's residual value estimate of $42607. If it was I could sell the car private party or trade it in to a dealer like Carmax for more than my residual value and the profit on that sale/trade would reduce some of my out of pocket cost for the lease. That doesn't seem like a great bet to me, especially with the controversial styling of the 2021 M3. I have never leased before but I understand BMW residuals tend to generally be set higher than typical market values to make leases cheaper, so underestimating the residual value by 5% would be a big miss for BMW.

I think BMW Select is the best option when BMW is offering interest rates as low as 0.9%. I can reduce my monthly payment by $422 relative to a conventional 60 month loan and keep money invested earning a much higher rate of return. I think there are four ways to deal with the residual balance: (1) sell the car to pay off the loan, (2) finance the residual balance for an extra two years at a pretty low rate, (3) put $360/month into investments which should add up to enough money by the end of the term to pay off the balance or (4) put $17,500 into investments (instead of, say, a $25K down payment) on day one and let it grow over five years into enough money by the end of the term to pay off the balance.

For those of you who have used BMW Select before - what has been your experience?
It feels like leasing should be cheaper since it's so popular - what am I missing, other than the ability to turn in the car every 3 years?

I hope someone gets value from me writing all of this out.

Very good post, but you also have to consider the equation if you are self employed and can write off a good portion of the payment. Which plays a lot in my circle as I want the deduction.

[Dave07997S]

Originally Posted by Mr. Maboomba

Depends on the state. Some states only tax you on your lease payment. You can find what kind of state NY is online.

You are in Cali, the sales tax is only on the payment not the actual vehicle.

Dave

[barryc365]

Just got off the phone with BMW.

The select sounds pretty attractive I have to say.

For example $80k car, $88k with taxes and fees.

.9% interest assuming good credit

With Zero money over down over 60 months the monthly payment is $1031 with $29,738 due at the end.

If I put $20k down the payment drops to $690

Taxes are paid monthly. You can sell the car back to them at anytime so if I wanted to get out of it after 3 years you'd owe them the $29k plus two years of payments. Obviously the risk here is that you're upside down but as long as you understand that and can afford to be it seems like a great way of having a low monthly.

At the end of the 5 years the car will be worth more than $29k I would wager assuming it isn't wrecked.

I'm doing low mileage so this seems like a good option to me. Certainly better than leasing for 3 years at a similar payment and having nothing to show for it at the end

Thoughts?

[Multimodal]

Given the unique parts of my situation - especially the much larger ($2500) military rebate that only applies when you don't use BMW Financial Services and my ability to get a 1.49% 65 month loan from Digital Credit Union - I am going to go that direction.

If the military rebate didn't exist, at 0.9% interest rates, I would 100% go for BMW Select over a traditional loan. I think it's more attractive than leasing as long as you plan to keep the car more than two years. Leasing protects you from larger than expected depreciation and in states like California lets you avoid paying sales tax on ~60% of the car's value but it also adds fees (acquisition and disposition), costs more in financing charges, and creates a risk that your dealer will bend you over on damage/maintenance fees when you turn in the car.

[barryc365]

Thank you sir!

I agree.

My mileage will be very low so as far as I can tell
The only risks over leasing is the car gets wrecked and insurance doesn't cover it all, or the resale value is exceptionally poor because everyone wants the XDrive where I am in the North East or something.

This is far outweighed by the fact my monthly payments are very low but they're also not 'dead money' like in a lease, and if the car is in superb condition it'll command a good resale value in the future

Interestingly I had one dealer try talk me out of Select and another tell me it's a 'no brainer'. Haha. Who to trust?

[Multimodal]

I would add gap insurance for the first 3 years with Select. USAA offered me a 20% bonus payout (effectively gap or better) rider for the M3 for ~$160/year.

[barryc365]

Originally Posted by Mr. Maboomba

I would add gap insurance for the first 3 years with Select. USAA offered me a 20% bonus payout (effectively gap or better) rider for the M3 for ~$160/year.

Great stuff. Is that just an add on to regular auto insurance? Never had GSP before but probably makes sense in this scenario

[Murf]

Originally Posted by barryc365

Just got off the phone with BMW.

The select sounds pretty attractive I have to say.

For example $80k car, $88k with taxes and fees.

.9% interest assuming good credit

With Zero money over down over 60 months the monthly payment is $1031 with $29,738 due at the end.

If I put $20k down the payment drops to $690

Taxes are paid monthly. You can sell the car back to them at anytime so if I wanted to get out of it after 3 years you'd owe them the $29k plus two years of payments. Obviously the risk here is that you're upside down but as long as you understand that and can afford to be it seems like a great way of having a low monthly.

At the end of the 5 years the car will be worth more than $29k I would wager assuming it isn't wrecked.

I'm doing low mileage so this seems like a good option to me. Certainly better than leasing for 3 years at a similar payment and having nothing to show for it at the end

Thoughts?

This more or less exactly the math/thinking I put into it - including the 20k down. Seems like the best course of action for me at least.

[Bch53211]

My ca says residual on the m3/m4 is .56 I’ve seen others say .57 on this forum. Is there a way to verify this? I’m thinking that changes over time? If so , monthly?

[Delmoney335]

Originally Posted by Bch53211

My ca says residual on the m3/m4 is .56 I’ve seen others say .57 on this forum. Is there a way to verify this? I’m thinking that changes over time? If so , monthly?

Changes monthly and by mileage. 57% is the current residual for 10k miles. 56% for 12k.