Terms:

Lessee = Client Leasing the Vehicle
Lessor = Financial Institution Leasing the Vehicle to Lessee

Vehicle Leasing is probably the most prudent way to acquire your next vehicle. Similar to vehicle ownership, leasing requires that you only pay a portion of the vehicle’s price while enjoying the benefits of ownership without the bothersome details and hassles at trade-in time. It provides an alternative way of paying for that new vehicle allowing your money for be used for investment or other purposes. 

In reality, it is like getting the trade-in value, upfront allowing the client to pay for only that portion of the vehicle’s useful life (depreciation) that they anticipate having it (Lease term). 

BMW and MINI, often times provide considerably more attractive Lease rates (interest cost) than rates prevailing on a typical car financing purchase. This is a product of (a) BMW, because of it’s size, being able to borrow monies in the market place in large chunks at more favorable rates then typically available to individuals and passing this savings onto it’s customers and (b) it is a merchandising tool that enables a manufacturer to make driving a particular vehicle more cost effective. 

More than 50% of the vehicles we sell are leased through BMW lease programs. In fact, the rates are typically so good that a fair percentage of those individuals leasing are customers that would typically write a check and not even finance their purchase. It’s where the saying comes from that “The Smart Money Leases” 

For customers that like to get a new car every two or three years, leasing provides a fixed cost with no worry about the vehicle’s value at trade-in time, as the result of used car market conditions. 

There is an old adage that tells the real story “If it appreciates- Buy It” and “If itdepreciates- Lease It”. While BMW and MINI enjoy excellent resale values withinthe industry- the customer receives this benefit as the lease is predicated on exceptionally good residual values. That said, what is a know fact is that automobiles begin to depreciate the day they are driven out of the showroom and continue depreciating until the day they are sold or traded.

A number of questions are typical of customers acquiring vehicles as to the best method. The answers to this are really quite simple:

Q. Should I Buy or Lease

A. The cost is really quite comparable either way. Leasing affords the advantages outlines in the opening paragraphs. At the end of the lease term you won’t own the car, but what you will have is the additional money that would have been put into the car over that period of time and you have an option to purchase it.

If you purchase a car through conventional financing, you will typically owe more than the car is worth while driving a 3 year old car. By the 5th or 6th year you finally own a 5 or 6 year old car. For the same cost you can drive 2 new vehicles for 3 years each.

For the cash buyer simply add to the vehicle’s purchase price the value of their money invested in a purchase, after all it has a value even if left in a CD or invested. For the buyer financing the purchase a typical 60 or 72 month finance plan with a minimal down payment results in a higher monthly payment and typically in 3-years the value of the vehicle is at or less than the balance owed (referred to as “upside-down”).

That same buyer would typically have to put a considerably larger down payment to obtain a payment comparable to a lease.

Q. I drive too many miles to Lease

A. This is a real fallacy. Leases are tailored around the amount of mileage that will be put on the vehicle with the lower mileage drivers paying less than a higher mileage driver since mileage is a factor in determining the value of a used vehicle. With ownership the same case prevails. The customer trading in a 3-year old car with 30,000 miles on it, will get more than a customer with the identical vehicle with 50,000 miles on it. In other words, the owner of who is the higher mileage driver will bear a greater depreciation. In the event an individual’s driving habits change the lessor will typically provide a mid lease opportunity to adjust mileage.

Q. Does the Lease require a down-payment

A. While most leases are advertised with a minimal down payment ($2500 and up), this is a cap cost reduction that is a direct reduction to the monthly rental. A down-payment is not a requirement. The full price of the vehicle may be capitalized into the lease.

Q. Can I purchase the vehicle at the end of the lease?

A. For those that really love their BMW or MINI and want to keep it longer, at lease-end they may purchase it from the Lessor. After the lease is up the lessor’s only goal is to turn the vehicle to cash. The state of Maryland exempts the vehicle from tax in the event of such purchase based upon the fact that the Lessee either paid or included state tax in the lease at inception.
 

Q. Do I carry insurance ?

A. Yes, in most cases the Lessee simply transfers their insurance policy the same as if the car was being purchased. The lease requires minimum limits of liability of $100/300,000, Property Damage $50,000, Comprehensive and collision ($500 maximum deductible). These limits are not different than what the majority of people already carry.
 

Q. What about maintenance ?

A. It is the same as if the car is purchased. The new car warranty comes with the vehicle and includes maintenance to 50,000 miles on a BMW and 36,000 on a MINI. Additional coverage is available.