[SkykingUSA]

Has anyone ever bought out their lease early to purchase the car? I noticed online that there is an option to get a buyout quote from BMWFS for my lease, but wondered if there are any gotchas I need to be aware of.

If I want to keep the car long term (yes, I know there are good and bad reasons for that), it appears that BMW will not charge you for the remaining "rent" portion of the monthly payments if you decide to buy the car before the end of the lease term.

Also a related question - for those who have done this, how do you pay the taxes on the purchase? Did BMWFS charge you tax on top of the payment they provide, or do they just leave it up to you to pay your sales tax another way? I'd love to hear how things went for anyone who has done this before.

[arkhi]

The "gotcha" here is that you have to handle the financing and taxes yourself. BMW wants to be paid in full with either a check or money order. Taxes are paid upfront when you re-register it at the DMV when BMW sends you the title, as it will be a change of ownership to remove BMW FS as leasor and you as lessee.

I see you're in CA. Call BMW of Murrieta, they help with lease buyouts as a courtesy and will find you good financing rates, as well as registering your car with the DMV so you don't have to deal with it. Last I checked, they don't even charge you for it. They're awesome. BUT they can only help you when you're in the last 90 days of your lease.

Source: I bought out my G30; sent check to BMW FS. Got title. Re-registered the car and paid 3k in taxes for a 39k buyout.

[SkykingUSA]

Thank you, that's very helpful. I think the piece I was missing was how I would pay the taxes. Looks like when I go to the DMV with the title to register the car in my name, the DMV will charge me taxes at that time right?

Another related question for some of the people on here who work at the dealerships: I know the sales folks make money on the back end of the deals through the financing/leasing arrangements. I don't want to eliminate the money my salesperson will make on the back end if I can avoid it. How long does a lease arrangement have to be in place in order for my sales person or dealership to still get credit for it. For example, do they get full commission if the lease is held for at least one month? six months? one year? In other words, is there a cutoff I should know about if I want my sales person and/or dealership to get the full amount they are due on the back end?

[AddyDaddy]

Originally Posted by SkykingUSA

Thank you, that's very helpful. I think the piece I was missing was how I would pay the taxes. Looks like when I go to the DMV with the title to register the car in my name, the DMV will charge me taxes at that time right?

Another related question for some of the people on here who work at the dealerships: I know the sales folks make money on the back end of the deals through the financing/leasing arrangements. I don't want to eliminate the money my salesperson will make on the back end if I can avoid it. How long does a lease arrangement have to be in place in order for my sales person or dealership to still get credit for it. For example, do they get full commission if the lease is held for at least one month? six months? one year? In other words, is there a cutoff I should know about if I want my sales person and/or dealership to get the full amount they are due on the back end?

I think these days they get structured fee maybe, but my family and myself have had same sales guy at BMW who cuts other dealerships costs on same car by few hundred a month, I always give him a few bills for each car.

[RichardInCA]

Originally Posted by SkykingUSA

Thank you, that's very helpful. I think the piece I was missing was how I would pay the taxes. Looks like when I go to the DMV with the title to register the car in my name, the DMV will charge me taxes at that time right?

Another related question for some of the people on here who work at the dealerships: I know the sales folks make money on the back end of the deals through the financing/leasing arrangements. I don't want to eliminate the money my salesperson will make on the back end if I can avoid it. How long does a lease arrangement have to be in place in order for my sales person or dealership to still get credit for it. For example, do they get full commission if the lease is held for at least one month? six months? one year? In other words, is there a cutoff I should know about if I want my sales person and/or dealership to get the full amount they are due on the back end?

Genuine question - don’t you end up worse if you buy out the lease early? Two things in my mind - 1) wouldn’t you end up paying less if you financed to buy than lease in the first place? 2) Do you just accelerate all the payments on the lease if you buy out early - could you invest that money and make more returns and still buy out at the end if you wanted to?

[SkykingUSA]

Originally Posted by RichardInCA

Genuine question - don’t you end up worse if you buy out the lease early? Two things in my mind - 1) wouldn’t you end up paying less if you financed to buy than lease in the first place? 2) Do you just accelerate all the payments on the lease if you buy out early - could you invest that money and make more returns and still buy out at the end if you wanted to?

Good questions, and I have thought about both.

1) The leasing turned out to be cheaper because of the $7500 EV credit available (which the dealership passes through as a discount). If you purchase the vehicle rather than lease, you would not benefit from the EV credit because the car does not qualify. When a business purchases the car, it does not have to satisfy the same criteria as a private sale. So, BMWFS gets the EV tax credit, but they pass that on to you as a discount off MSRP when leasing.

2) At first, I thought that paying off early would just accelerate the monthly lease payments, then add the residual and taxes/reg on at the end too. However, BMW subtracts from that the "rent" portion of the monthly payments you have not yet paid. Think of the monthly lease payment as made up of three things: a) depreciation, b) rent, and c) taxes. To my surprise, BMWFS subtracts the rent portion (for the remaining months left on your lease) before giving you a payoff amount. So, there is some money to be saved by paying off the lease before it ends. Essentially, you don't pay the rent part of the payment for every month that has not yet passed by on the lease. Depending on your MF, that will be less or more, but would likely still be thousands of dollars on a 5 series when you look at the payoff price near the beginning of the lease. Certainly, the longer you wait to payoff the lease, the less money you save on the rent charge.

In addition to the "rent" money you save on the payments, there is Opportunity Cost to factor in as you described (the money you could make by investing the money instead of paying it to BMWFS). I still have to run all the numbers in my case, but I suspect that I can save a few thousand dollars by buying out the lease early, even factoring in the opportunity cost.

Lastly, any of this only makes sense if you actually want to keep the car long term and not return it after the lease (because you completely lose that option when buying out early). I'll probably wait a little longer before deciding on that, but so far I'm loving the vehicle and don't like the idea of paying monthly car payments "forever" - I generally am willing to sacrifice new technology for having no car payments at all for a few years.

This is my understanding of it anyway. I think it all makes sense, but I'm always open to other opinions or information I may not have considered. This whole car buying/leasing thing has taught me a lot over the past few months since I starting looking into it.

The picture below are the numbers BMW will quote for the Payoff amount. The formula is basically:

Payoff amount = Residual + Outstanding Balance - Unearned Amount + Purchase Option Fee.

The option fee is usually only a few hundred dollars, and would be listed in the lease agreement. The "Unearned Amount" is the rent charge of the payment for future payments.

[alewifebp]

We just don't know what the depreciation hit is going to be on the electric cars. It's been brutal with other manufacturers, and I expect you'll be upside down even with the credit.

There was a little bit of a golden time with the car being worth more than the buyout. I leased my X5 in 2020 when interest rates were low and there was some uncertainty about car sales at that time. Fast forward to 2023 and I had positive equity. I think those days are over though.

[RichardInCA]

Sounds like you’ve got it all worked out well Skyking. For me the purchase option looked more expensive as you’d noted, but I didn’t want to just sink cash into the car and preferred to put that to use elsewhere.

Will be interested to hear where this ends up for you.

[arkhi]

Originally Posted by SkykingUSA

Thank you, that's very helpful. I think the piece I was missing was how I would pay the taxes. Looks like when I go to the DMV with the title to register the car in my name, the DMV will charge me taxes at that time right?

Correct. You pay them on the counter. It will be a similar process as a registration renewal, except you have a manually filled-out "Transfer of Title" form plus the Title and Bill of Sale from BMW with you.

P.S. I highly recommend not buying out this lease this early. EV technology is changing rapidly. Sure, you save money from not paying BMW the Rent Charge, but the saving is cancelled with you paying the Sales Tax for your buyout price. Wait until you're close to 3 months at the end of your lease at least. That way you can see what the comparable G60 values are at that time, and you can also see if you like the LCI.

[BMW012]

Originally Posted by arkhi

The "gotcha" here is that you have to handle the financing and taxes yourself. BMW wants to be paid in full with either a check or money order. Taxes are paid upfront when you re-register it at the DMV when BMW sends you the title, as it will be a change of ownership to remove BMW FS as leasor and you as lessee.

I see you're in CA. Call BMW of Murrieta, they help with lease buyouts as a courtesy and will find you good financing rates, as well as registering your car with the DMV so you don't have to deal with it. Last I checked, they don't even charge you for it. They're awesome. BUT they can only help you when you're in the last 90 days of your lease.

Source: I bought out my G30; sent check to BMW FS. Got title. Re-registered the car and paid 3k in taxes for a 39k buyout.

you can also get BMW financing. doesn't have to be a different bank.

[BimmerFix]

Originally Posted by SkykingUSA

Another related question for some of the people on here who work at the dealerships: I know the sales folks make money on the back end of the deals through the financing/leasing arrangements. I don't want to eliminate the money my salesperson will make on the back end if I can avoid it. How long does a lease arrangement have to be in place in order for my sales person or dealership to still get credit for it. For example, do they get full commission if the lease is held for at least one month? six months? one year? In other words, is there a cutoff I should know about if I want my sales person and/or dealership to get the full amount they are due on the back end?

3 months

[SkykingUSA]

For those interested, after I ran the numbers I found that I was no better off whether I continued leasing or did the Payoff. The real clincher is the opportunity cost (the money I could make on that money by keeping/investing it versus giving it away to pay for the car). Looks like I'll be continuing with the lease for now.

[guinmurph]

I also leased my i5 to get the $7500 credit. I prepaid the lease with the intention of buying it out early. I was given the buyout cost up front when I ordered the car. I love the car so far so I'll likely still buy it out sometime in the next year.