Quote:
Originally Posted by AGS
Yet another reason why a lease is a great option. BMW FS is incentivized to negotiate because they cannot afford to take all lease returns back on their books. In fact, BMW requires its dealers to buy a certain number of the lease returns from BMW FS each year to help mitigate the problem.
Leases in general get a bad rap, but I think it's because many people really don't understand them and the benefits they provide. I've heard many people say "... but you don't own anything at the end." That's exactly why they are so great - the "free" put option. If you want to own the car at the end you can, but you don't have to. If the car depreciates faster then expected (as in lllwlf's example), you can give it back no questions asked OR negotiate a market deal to buy it - a win/win situation for the customer.
On the other hand, if the car is worth more than the residual value you still have a number of options:
1. Turn it in and move on to your next vehicle, or
2. Buy it out at the below market price, or
3. If the market's strong enough negotiate a payout of the equity with a dealer. When used Acura MDX's were in short supply last year, a buddy of mine had two dealers bidding for him to turn his leased MDX in at their store. In the end, one of the dealers cut him a check for $5,300 JUST TO TURN THE CAR INTO HIS STORE!!! What a deal!
The only downside to leases, assuming the money factor is roughly consistent with prevailing financing rates which is generally the case, is the limited flexibility to get rid of the car during the lease period. As I've said before, they may not be right for everyone but they should always be considered and analyzed as one option.
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Agreed - I have personally always favored financing, and current rates are very appealing. It is very nice however to turn a car in w/o any consequence. One of my biggest pet peeves is worrying about what value I will get when it comes time for a trade-in, since I hate dealing with a private sale on my own.