It seems like our previous article on the leasing FAQ has received many visitors, so I have decided to post a few more tips for those of you that are looking to lease your BMW but are still confused about the leasing terms and terminology.
This article is based on a post written by "Mace" on e90post.com
Never put money down (known as "Capitalized Cost Reduction") is not gospel, just generally good advice. In a lease BMW Financial Services is actually buying the car, you're just renting it from them. If you do a CCR and total the car in an accident, all that money from your insurance company goes to BMWFS not you so any money you put into CCR is lost. Well, not really lost BMWFS gets it.
You have a few options to reduce your monthly payments. CCR is one but there are others.
- Negotiate a lower purchase price
- Omit options
- Negotiate down the money factor (essentially the same as interest on a purchase) to get the payments down. Even though you're not actually buying the car you're negotiating the price BMWFS will pay for it and the interest they will charge. The difference between this purchase price and the residual X interest + tax is what determines your monthly payment so you want to do everything you can get get the purchase price and interest (money factor) down just as if you're purchasing it outright.
- Another option with BMW is called Multiple Security Deposits (MSD). If you're a new buyer you'll have to pay one security deposits but under MSD you can make up to seven more.
The security deposit is your monthly payment rounded UP to the next $50 increment so $630 payment requires a $650 security deposit. The point to the MSD is that each additional security deposit cuts the money factor by .00007 so if you do all seven you'll cut your money factor by .00049 lowering your monthly payment and the total price of the lease. The really nice part about this is that you get all of your security deposits back (less excess wear and tear) at the end of the lease OR if you wreck your car. The only downside to MSD is that it will not lower your payments as much as CCR but it is perfectly save and a you get a good rate of return on that money while BMWFS holds it.
Let me add one more thing. Many people say that if you're planning on keeping the car go ahead and finance it because that's cheaper. That is not necessarily true. If you get a relatively low money factor and interest rates on a purchase is high it's usually cheaper to lease the car for three years and buy it at the end of the lease.
If the situation is reversed and interest rates are low and money factor high this situation could be reversed. The only way to know for sure is to work the numbers and see how it comes out. You could be saving $200-$400 per month in a lease, putting some of that savings away during the lease will net you interest plus a nice nest egg toward the purchase at the end of the lease.