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      01-22-2011, 04:20 AM   #1
bmw_guy_2020
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Advantages of Owner\'s Choice?

Can soneone please explain the advantages of "owner's choice" to me?

From what I understand the primary advantage is tax advantages in IL and TX.

On a normal lease in TX you have to pay sales tax on the full cost of the vehicle @ 6.25%. So if the vehicle costs $70K then sales tax for a 36 mo lease would be $70K * .0625 = $4375.

With owner's choice I'm assuming that you only have to pay tax on the depreciation amount. So if the $70K car has a residual of 60% after 36 months then you would only pay tax on the depreciation amount - $70K * .40 * .0625 = $1725. Is this correct?

What about personal property tax? Does TX charge personal property tax on leased vehicles? It seems like owners choice vehicles could be subject to this tax since the title would be in the buyer's name.

I think gap insurance is automatically included in lease agreements but is gap insurance really needed if my coverage is 100-300-100? I don't think any additional insurance would be needed for owners choice right?

I googled owners choice and it looks like maybe 5-10 years ago OC was consistently more expensive than leasing. However, I ran the numbers on the BMW website tonight and I would save $50/mo on my pmt with OC over leasing.

So for practical purposes is OC just like leasing but with tax advantages?

Also - I read that BMW charges a $725 "bank fee" for leases. I read that this is because having the bank listed as the lien holder on the title is a liability for the bank. If I go the OC route would this avoid the $725 bank fee? Or does BMW charge this bank fee for all financing methods?
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      01-22-2011, 07:15 AM   #2
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I'm interested in this information as well.
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      01-22-2011, 07:22 AM   #3
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I wonder what would be the end value for an owners choice. Is it similar to the number on the lease ?
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      01-22-2011, 07:24 AM   #4
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Quote:
Originally Posted by cracker123 View Post
I wonder what would be the end value for an owners choice. Is it similar to the number on the lease ?
My thoughts exactly cracker. I would think the Owner's Choice balloon would be more in line with the BMW Select Rates.


EDIT: What other numbers are coming into play that makes the Owners Choice numbers roughly $50 cheaper than leasing? It can't be taxes, because according to the calculator taxes, fees, etc. are not included in the calculated payment.

Last edited by tzak; 01-22-2011 at 11:31 AM..
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      01-23-2011, 12:26 PM   #5
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Anyone know the current rates?
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      01-25-2011, 12:23 AM   #6
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I called BMW Financial Services this afternoon.

The lady I talked to seemed fairly confident that with Buyer's Choice financing you ***cannot*** turn in the car after 36 months like a lease.

The lady I talked to said that you simply have lower payments for the first 36 months followed by a balloon payment.

Has anybody here used Owner's Choice who can speak to the contrary? The BMWFS website seemed to imply that you could turn in the car like a lease but the lady I talked to at BMWFS says no....
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      01-25-2011, 07:46 AM   #7
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It never says anywhere on the website that you can just turn the car in....However it does say you can trade it in on a new BMW if you wish.

You options are to Pay the Balloon, Refinance the Balloon, or trade the car in on a new BMW. If you are looking to do a trade in on a new BMW, owner's choice really isnt the way to go. Owner's Choice only seems advantageous if you plan on paying the balloon or refinancing because you don't get double taxed.

michaelw9:
Are you positive that the owner's choice uses the Financing Interest Rates? That would somewhat explain the $50 lower payment compared to a lease, but not completely I don't think.

Only thing I can think of is the reason why the monthly payment is lower is you have a higher balloon at the end of your term versus the residual value on a lease. Just doesn't seem to make sense though.


Quote:
Originally Posted by bmw_guy_2020 View Post
I called BMW Financial Services this afternoon.

The lady I talked to seemed fairly confident that with Buyer's Choice financing you ***cannot*** turn in the car after 36 months like a lease.

The lady I talked to said that you simply have lower payments for the first 36 months followed by a balloon payment.

Has anybody here used Owner's Choice who can speak to the contrary? The BMWFS website seemed to imply that you could turn in the car like a lease but the lady I talked to at BMWFS says no....

Last edited by tzak; 01-25-2011 at 07:51 AM..
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      01-25-2011, 12:59 PM   #8
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Quote:
Originally Posted by tzak View Post
Are you positive that the owner's choice uses the Financing Interest Rates? That would somewhat explain the $50 lower payment compared to a lease, but not completely I don't think.

Only thing I can think of is the reason why the monthly payment is lower is you have a higher balloon at the end of your term versus the residual value on a lease. Just doesn't seem to make sense though.
Yes, I'm 100% sure. I did this with my own M3 and my interest rate is 1.90% @ 60mo. Some people have had it at 0.9% when that was offered. The benefit of the balloon decreases with increasing interest rates. If you had an interest rate of 0%, for example, you wouldn't pay any interest on the balloon at all and would get a "free loan" for that portion of the term.
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      01-25-2011, 01:59 PM   #9
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Quote:
Originally Posted by michaelw9 View Post
Yes, I'm 100% sure. I did this with my own M3 and my interest rate is 1.90% @ 60mo. Some people have had it at 0.9% when that was offered. The benefit of the balloon decreases with increasing interest rates. If you had an interest rate of 0%, for example, you wouldn't pay any interest on the balloon at all and would get a "free loan" for that portion of the term.

Thanks for the info. Couple of quick questions then since you have done this. How do they calculate the balloon? Based on lease residuals? How do they tax you? Full price of car or just depreciation?
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      01-25-2011, 02:34 PM   #10
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Quote:
Originally Posted by tzak View Post
Thanks for the info. Couple of quick questions then since you have done this. How do they calculate the balloon? Based on lease residuals? How do they tax you? Full price of car or just depreciation?
It has nothing to do with a lease -- they use their own value that you can check from the dealer. It's also based on your credit score. If you have super good credit, they will increase it a bit more (3% additional). You have to pay tax on the full price of the car. You are buying it 100%. It's just a weird way of getting a loan.

Edit: this is for BMW Select - Not for Owners Choice

Last edited by michaelw9; 01-31-2011 at 06:00 PM..
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      01-25-2011, 05:54 PM   #11
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Quote:
Originally Posted by michaelw9 View Post
It has nothing to do with a lease -- they use their own value that you can check from the dealer. It's also based on your credit score. If you have super good credit, they will increase it a bit more (3% additional). You have to pay tax on the full price of the car. You are buying it 100%. It's just a weird way of getting a loan.
OK interesting. Thanks for the info. It seems the Balloon is higher on a 36 month Owner's Choice than it is on a 36 month Lease according to the calculators on BMW's website.
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      01-30-2011, 07:33 AM   #12
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Quote:
Originally Posted by michaelw9 View Post
She is right. It's nothing like a lease. It's just a loan. You buy the car. You own the car. You have the loan for X period of time, and when the loan is finished, you have to pay Y all at once. (Like $25,000ish). If you don't pay that balance immediately upon the end of the term, usually 60months, you default on the loan.
The loan interest rates for OC is the same as regular financing. You will, in fact, pay more interest in the owners choice than the regular financing, despite the higher payments. This is because your total amount paid equals Monthly Payment * Term + Balloon. You are paying interest on the balloon amount up until month 59. Whereas in a traditional loan on month 59 you would only be paying interest on the last payment due.
Stop the repeated misinformation, please.

You do not pay interest in the balloon... that's the whole point of the Select Program and therefore "lower" payments than regular financing.

My M3 is financed thru the Select Program and the total amount of interest to be paid after 60 months is a whopping $1200 at .9% interest rate. If the balloon payment were also financed I would be paying more than $5000 total in interest and my payment would be more than $60 higher, which it is not obviously.

Look at your contract and try to understand the numbers printed. Several members have posted before that dealers also added the balloon to the interest rate calculation and that's not correct... not to say a blatant sucker punch.
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      01-31-2011, 01:03 PM   #13
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Quote:
Originally Posted by Technic View Post
Stop the repeated misinformation, please.

You do not pay interest in the balloon... that's the whole point of the Select Program and therefore "lower" payments than regular financing.

My M3 is financed thru the Select Program and the total amount of interest to be paid after 60 months is a whopping $1200 at .9% interest rate. If the balloon payment were also financed I would be paying more than $5000 total in interest and my payment would be more than $60 higher, which it is not obviously.

Look at your contract and try to understand the numbers printed. Several members have posted before that dealers also added the balloon to the interest rate calculation and that's not correct... not to say a blatant sucker punch.
Sorry, but it's not misinformation. I'm doing the Select program for my M3 through BMW financial services myself.

Here's my entire amortization schedule. Perhaps you have another program or you just got lucky.

2011 M3 Coupe
FS Account #
Many BMW Financial Services customer request their Amortization schedule to assist them in their financial management and planning. By clicking below, you can view both your Actual and Projected Amortization schedule. We hope you find this information both valuable and convenient.

View Actual Amortization
View Projected Amortization Projected Amortization
Payment Number Payment Date Payment Amount Interest Portion Principal Portion Principal Balance
1 12/9/2010 $838.81 $169.45 $669.36 $71,653.22
2 1/9/2011 $838.81 $115.61 $723.20 $70,930.02
3 2/9/2011 $838.81 $114.44 $724.37 $70,205.66
4 3/9/2011 $838.81 $102.31 $736.50 $69,469.15
5 4/9/2011 $838.81 $112.09 $726.72 $68,742.43
6 5/9/2011 $838.81 $107.33 $731.48 $68,010.96
7 6/9/2011 $838.81 $109.73 $729.08 $67,281.88
8 7/9/2011 $838.81 $105.05 $733.76 $66,548.13
9 8/9/2011 $838.81 $107.37 $731.44 $65,816.69
10 9/9/2011 $838.81 $106.19 $732.62 $65,084.07
11 10/9/2011 $838.81 $101.62 $737.19 $64,346.89
12 11/9/2011 $838.81 $103.82 $734.99 $63,611.90
13 12/9/2011 $838.81 $99.32 $739.49 $62,872.41
14 1/9/2012 $838.81 $101.44 $737.37 $62,135.05
15 2/9/2012 $838.81 $100.25 $738.56 $61,396.49
16 3/9/2012 $838.81 $92.67 $746.14 $60,650.35
17 4/9/2012 $838.81 $97.86 $740.95 $59,909.40
18 5/9/2012 $838.81 $93.54 $745.27 $59,164.13
19 6/9/2012 $838.81 $95.46 $743.35 $58,420.78
20 7/9/2012 $838.81 $91.22 $747.59 $57,673.19
21 8/9/2012 $838.81 $93.05 $745.76 $56,927.43
22 9/9/2012 $838.81 $91.85 $746.96 $56,180.47
23 10/9/2012 $838.81 $87.72 $751.09 $55,429.38
24 11/9/2012 $838.81 $89.43 $749.38 $54,680.01
25 12/9/2012 $838.81 $85.38 $753.43 $53,926.58
26 1/9/2013 $838.81 $87.01 $751.80 $53,174.78
27 2/9/2013 $838.81 $85.80 $753.01 $52,421.76
28 3/9/2013 $838.81 $76.39 $762.42 $51,659.34
29 4/9/2013 $838.81 $83.35 $755.46 $50,903.88
30 5/9/2013 $838.81 $79.48 $759.33 $50,144.56
31 6/9/2013 $838.81 $80.91 $757.90 $49,386.65
32 7/9/2013 $838.81 $77.11 $761.70 $48,624.96
33 8/9/2013 $838.81 $78.46 $760.35 $47,864.60
34 9/9/2013 $838.81 $77.23 $761.58 $47,103.02
35 10/9/2013 $838.81 $73.55 $765.26 $46,337.76
36 11/9/2013 $838.81 $74.77 $764.04 $45,573.71
37 12/9/2013 $838.81 $71.16 $767.65 $44,806.06
38 1/9/2014 $838.81 $72.29 $766.52 $44,039.55
39 2/9/2014 $838.81 $71.06 $767.75 $43,271.79
40 3/9/2014 $838.81 $63.06 $775.75 $42,496.04
41 4/9/2014 $838.81 $68.57 $770.24 $41,725.80
42 5/9/2014 $838.81 $65.15 $773.66 $40,952.14
43 6/9/2014 $838.81 $66.08 $772.73 $40,179.40
44 7/9/2014 $838.81 $62.74 $776.07 $39,403.33
45 8/9/2014 $838.81 $63.58 $775.23 $38,628.10
46 9/9/2014 $838.81 $62.33 $776.48 $37,851.61
47 10/9/2014 $838.81 $59.10 $779.71 $37,071.90
48 11/9/2014 $838.81 $59.82 $778.99 $36,292.91
49 12/9/2014 $838.81 $56.67 $782.14 $35,510.77
50 1/9/2015 $838.81 $57.30 $781.51 $34,729.25
51 2/9/2015 $838.81 $56.04 $782.77 $33,946.48
52 3/9/2015 $838.81 $49.47 $789.34 $33,157.13
53 4/9/2015 $838.81 $53.50 $785.31 $32,371.82
54 5/9/2015 $838.81 $50.55 $788.26 $31,583.56
55 6/9/2015 $838.81 $50.96 $787.85 $30,795.71
56 7/9/2015 $838.81 $48.08 $790.73 $30,004.98
57 8/9/2015 $838.81 $48.41 $790.40 $29,214.59
58 9/9/2015 $838.81 $47.14 $791.67 $28,422.91
59 10/9/2015 $838.81 $44.38 $794.43 $27,628.48
60 11/9/2015 $838.81 $44.58 $794.23 $26,834.25
Totals: - $50,328.60 $4,840.27 $45,488.33 -


You can see that on each month, the interest is calculated on the remaining balance -- which includes the balloon.
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      01-31-2011, 03:58 PM   #14
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There's a lot of misinformation here. Owner's choice is very similar to a lease in the state of TX. From the BMWUSA website:
Owners Choice
Owners Choice financing combines the lower monthly payments of leasing and the security of ownership. You make low monthly payments for your selected term then reach a three-way option point:

1. You can get a new BMW and sell your BMW back to us at a predetermined price.
2. You can refinance the balloon payment amount.
3. You can complete your purchase by making the balloon payment.
Owners Choice is a good alternative if you reside in a state where leasing is less advantageous due to state tax laws.

https://www.bmwusa.com/Secured/Conte...LzAkbglJKq1TU=
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      01-31-2011, 04:07 PM   #15
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bmw guy 2020,

In Texas you are correct in stating that you have to pay for the sales tax based on the total sale price divided into the months of the lease, then that amount is subjected to the money factor.
There is no longer a Personal Property Tax Liability on the value of your lease in Texas. So you don't have to worry about that if you choose to lease.
I will always choose a Owner's Choice in Texas as it always comes out with a lower monthly payment since you are not cramping all of the sales tax into the lease term. But the disadvantage of the OC is that you are indeed paying interest on the balloon portion of the loan, and if you decide to keep the car at the end, you end up financing the balloon and paying interest again. But its my understanding that the refi interest rate of the balloon cannot be more than the original rate charged during the inception of the OC loan.
Finally, OC allows you to carry the state minimum of auto insurance liability where else most leasing companies require to carry much higher limits, so consider the ins premium difference a factor as well.
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      01-31-2011, 04:36 PM   #16
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With all due respect, there is some crazy misinformation on this thread. The OP's question was about Owner's Choice. I think some of the replies have referenced BMW Select so we should be careful. Specifically because these are very different programs. I can't speak to BMW Select but I can speak to Owner's Choice as I'm presently doing it on my M3 and my folks have done it in the past on a X3. Audi has a similar program (premier purchase) and I've done that a few times in the past as well.

Owner's Choice is only available in IL and TX. I will only speak to IL as that's where I live. Specifically in Chicago, there is a crazy tax added to auto leases (6%). Also in IL, when you lease a car, you pay taxes on the WHOLE car and get this....if you want to buy it at the end of the lease you have to pay taxes AGAIN on the residual.

Owner's Choice allows you to bypass both of these as its not technically a lease. It is a balloon finance BUT you do have the option of turning in the car at the end of the period. I'm positive about this aspect of the program as my folks turned in their X3 last year when their 36 month term ended.

Based on my experience, here's what I know about the program:
--You select a desired time period for ownership, I did 36 months
--BMW financial services runs the program and sets a finance rate for the car. Sort of like a money factor but it's a traditional rate. Mine was 3.5%. This is for the amount that is financed (not the balloon). This is based on the selling price minus the residual.
--Unlike a lease, the title is actually in your name so you can end the program anytime you want by selling the car and paying off the total loan.
--When the term is over, you can either turn in the car like a lease or pay/finance the balloon to keep the car

More info: http://fs.bmwusa.com/BmwFsPulp/VEHCHO_OwnersChoice.htm

Hope this helps.
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      01-31-2011, 06:02 PM   #17
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I guess I mistook Owner's Choice for the Select program that I am using. They both use balloons but appear to be different programs entirely.

Since the OC is only in two states, it's not something I'm familiar with. In CA, it's just a normal purchase with a balloon at the end.
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      01-31-2011, 06:41 PM   #18
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Quote:
Originally Posted by Technic View Post
Stop the repeated misinformation, please.

You do not pay interest in the balloon... that's the whole point of the Select Program and therefore "lower" payments than regular financing.

My M3 is financed thru the Select Program and the total amount of interest to be paid after 60 months is a whopping $1200 at .9% interest rate. If the balloon payment were also financed I would be paying more than $5000 total in interest and my payment would be more than $60 higher, which it is not obviously.

Look at your contract and try to understand the numbers printed. Several members have posted before that dealers also added the balloon to the interest rate calculation and that's not correct... not to say a blatant sucker punch.
I think you got lucky....call BMWFS and they will tell you that for SELECT financing (not the same as Owners Financing as the OP is talking about), you DO pay interest on the balloon.

BMW is not going to give you a a free down payment which is essentially what this would be if they didn't charge you interest on it.
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      01-31-2011, 07:05 PM   #19
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Quote:
Originally Posted by 8042 View Post
With all due respect, there is some crazy misinformation on this thread. The OP's question was about Owner's Choice. I think some of the replies have referenced BMW Select so we should be careful. Specifically because these are very different programs. I can't speak to BMW Select but I can speak to Owner's Choice as I'm presently doing it on my M3 and my folks have done it in the past on a X3. Audi has a similar program (premier purchase) and I've done that a few times in the past as well.

Owner's Choice is only available in IL and TX. I will only speak to IL as that's where I live. Specifically in Chicago, there is a crazy tax added to auto leases (6%). Also in IL, when you lease a car, you pay taxes on the WHOLE car and get this....if you want to buy it at the end of the lease you have to pay taxes AGAIN on the residual.

Owner's Choice allows you to bypass both of these as its not technically a lease. It is a balloon finance BUT you do have the option of turning in the car at the end of the period. I'm positive about this aspect of the program as my folks turned in their X3 last year when their 36 month term ended.

Based on my experience, here's what I know about the program:
--You select a desired time period for ownership, I did 36 months
--BMW financial services runs the program and sets a finance rate for the car. Sort of like a money factor but it's a traditional rate. Mine was 3.5%. This is for the amount that is financed (not the balloon). This is based on the selling price minus the residual.
--Unlike a lease, the title is actually in your name so you can end the program anytime you want by selling the car and paying off the total loan.
--When the term is over, you can either turn in the car like a lease or pay/finance the balloon to keep the car

More info: http://fs.bmwusa.com/BmwFsPulp/VEHCHO_OwnersChoice.htm

Hope this helps.
Thanks for the clarification.
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      01-31-2011, 10:18 PM   #20
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Quote:
Originally Posted by 8042 View Post
With all due respect, there is some crazy misinformation on this thread. The OP's question was about Owner's Choice. I think some of the replies have referenced BMW Select so we should be careful. Specifically because these are very different programs. I can't speak to BMW Select but I can speak to Owner's Choice as I'm presently doing it on my M3 and my folks have done it in the past on a X3. Audi has a similar program (premier purchase) and I've done that a few times in the past as well.

Owner's Choice is only available in IL and TX. I will only speak to IL as that's where I live. Specifically in Chicago, there is a crazy tax added to auto leases (6%). Also in IL, when you lease a car, you pay taxes on the WHOLE car and get this....if you want to buy it at the end of the lease you have to pay taxes AGAIN on the residual.

Owner's Choice allows you to bypass both of these as its not technically a lease. It is a balloon finance BUT you do have the option of turning in the car at the end of the period. I'm positive about this aspect of the program as my folks turned in their X3 last year when their 36 month term ended.

Based on my experience, here's what I know about the program:
--You select a desired time period for ownership, I did 36 months
--BMW financial services runs the program and sets a finance rate for the car. Sort of like a money factor but it's a traditional rate. Mine was 3.5%. This is for the amount that is financed (not the balloon). This is based on the selling price minus the residual.
--Unlike a lease, the title is actually in your name so you can end the program anytime you want by selling the car and paying off the total loan.
--When the term is over, you can either turn in the car like a lease or pay/finance the balloon to keep the car

More info: http://fs.bmwusa.com/BmwFsPulp/VEHCHO_OwnersChoice.htm

Hope this helps.
Hmm. Interesting that you say you can just turn your car in at the end of OC like a lease. Considering the website doesn't say in black and white that you can.

I still don't see how with OC you get a cheaper monthly payment, because the interest rate seems to be higher than leasing? no? Only explanation I can think of for this is with OC you have a higher balloon payment compared to a similar lease term having a lower residual.
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      02-01-2011, 08:43 AM   #21
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Quote:
Originally Posted by tzak View Post
Hmm. Interesting that you say you can just turn your car in at the end of OC like a lease. Considering the website doesn't say in black and white that you can.

I still don't see how with OC you get a cheaper monthly payment, because the interest rate seems to be higher than leasing? no? Only explanation I can think of for this is with OC you have a higher balloon payment compared to a similar lease term having a lower residual.
It could be cheaper in Texas because in Texas you are required to pay Sales Tax on the entire 'transaction amount' not just the 'rent' portion of the payment.
eg. you lease an M3 with a transaction price of 65K for 3 years. Sales tax of 6.25% of 65K = 4062.50 is divided into the 36 monthly lease payments and added in (this is 112.85 added to the rent portion)...and this does not take into account the money factor thsat is applied to this 4K.
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      02-01-2011, 01:01 PM   #22
tzak
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The calculator on bmw's website excludes taxes to my knowledge.


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Originally Posted by DCC View Post
It could be cheaper in Texas because in Texas you are required to pay Sales Tax on the entire 'transaction amount' not just the 'rent' portion of the payment.
eg. you lease an M3 with a transaction price of 65K for 3 years. Sales tax of 6.25% of 65K = 4062.50 is divided into the 36 monthly lease payments and added in (this is 112.85 added to the rent portion)...and this does not take into account the money factor thsat is applied to this 4K.
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