Lease vs. OC/OC Flex - What factors helped you decide?

[user 1536]

I see lots of threads about the confusion of OC/OC Flex, and even mentions that some dealers aren't offering it. Probably because it's so confusing.

The language on the BMW website also says that BMW "may" buy your vehicle back. But there's no additional info online with all of the fine print of the agreement. And since nobody has been through a full cycle yet, nobody knows what BMW might do. I'm sure there's more concrete language in the actual documentation, but it doesn't appear to be available for review online.

I've seen conflicting stories on paying pack the $7.5k with OC Flex. Some people brag about the great deal they got with low down payment & low monthly payment, but don't mention that they have a balloon payment of $7.5k due at some point there (which significantly changes the total cost of ownership math for a 2-3yr lease period).

That's where I'm at today - trying to figure out the total OOP for a 2yr lease. I've tried to read through the threads here and figure out a pattern, but it's dizzying.

I know there are a lot of things that can come into play, like taxes (which might be different on lease vs. own) and state/local subsidies.

What are the advantages/decision points to choose traditional lease vs. OC vs. OC Flex?

The only one that I know of is there's no benefit to OC/OC Flex over traditional lease if you don't have > $7500 in tax liability.

Any other good generic guidance on picking one of the 3 options?

 

[websterize]

The advantage is the additional $2,625 with OC+Flex over the traditional lease, in which BMWNA only credits $4,875. If you have a $7,500 tax liability, the Flex makes more sense. I'm leery of balloon loans (this is my first), and I plan to pay back the $7,500 float as soon as I get the federal refund this spring.

 

[i3atl]

Some states have favorable tax rules for leases, others (like GA) strongly favor ownership/Owner's Choice. There are several things to take into account, but due to what websterize posted above Owner's Choice is typically at least as good as leasing, often much better.

 

[user 1536]

The advantage is the additional $2,625 with OC+Flex over the traditional lease, in which BMWNA only credits $4,875. If you have a $7,500 tax liability, the Flex makes more sense. I'm leery of balloon loans (this is my first), and I plan to pay back the $7,500 float as soon as I get the federal refund this spring.

Ok, this is embarrassing, but I think I finally got it.
With a normal lease, BMW only decreases the sales price by $4875. If you do OC Flex, BMW is happy to front you the $7500k and will discount that off the original sales price, with the expectation that you pay it back before your lease is up. It's this confusing loan/payback thing that I wasn't comprehending (i.e. how can getting an extra 7.5k up front & paying it back later - net $0 - be better than a $4875 discount up front). Does it matter if you pay that amount back early?

Some states have favorable tax rules for leases, others (like GA) strongly favor ownership/Owner's Choice. There are several things to take into account, but due to what websterize posted above Owner's Choice is typically at least as good as leasing, often much better.

Ok, let's make a list of the states that favor one vs. the other. (Not expecting you to have all the answers, just trying to collect them in one spot)

Lease better

Own better
GA

 

[i3atl]

Ok, let's make a list of the states that favor one vs. the other. (Not expecting you to have all the answers, just trying to collect them in one spot)

Lease better

Own better
GA

It's not quite as simple as one being better than the other - even in states where the tax structure favors leasing (like CA, where you're only taxed on the total of the lease payments, vs the sales price of the car), OC still often ends up cheaper or equivalent due to the $2K+ that you give up by leasing. There are often other benefits to owning as well - tax benefits/discounts at trade in, etc.

 

[Jeffj]

The conclusion I came to in trying to figure out lease/buy/owner's choice/steal was to reduce everything to a cost/mile. In other words, if you lease for 2 years and end up driving, say 21K miles, what is your actual cost/mile (e.g.total lease cost divided by number of miles driven). Note that with a lease, you are paying for a fixed number of miles whether you use them or not. Compare that for each option.

In my case, I really couldn't predict how many miles I was going to drive, though probably less than 12K/year. However, we tend to keep cars for a long time, so I ended up buying based on a couple of assumptions (that I have no way of telling how true they will be):
- I'll probably drive less than I think, so the cost/mile on a lease actually increases
- There will be a residual value for the car, and at some point I'll be able to sell it or trade it in and benefit from that. In my case I figured it was 6 years out at least. I estimated the residuals assuming the car will lose 1% of its current value each month, starting with the effective price (e.g. purchase price minus tax credits).
- This will be the first car payment I've had in 10 years, so I have not accepted the fact that I have to pay every month to drive a car (I'm driving the i3 instead of a 14 year old F-150 that we are still using to haul horse stuff). Not having a monthly payment is a good thing.
- I'm hopeful (though not counting on) that I'll be able to buy a battery pack upgrade in 4 years or so, increasing the range and making the car "new" again

Since the i3 qualifies for the full state tax credit here in Colorado, its effectively a $13,500 discount. I figured that the unknowns around residuals would be significantly mitgated by that.

 

[websterize]

If you do OC Flex, BMW is happy to front you the $7500k and will discount that off the original sales price, with the expectation that you pay it back before your lease is up. …

I assumed BMWFS would discount the sales price by $7,500, too. Actually, they bump the residual value by the Flex amount of your choosing. Say you're interested in a loaded BEV, 2yr/24k term with the max OC+Flex, and the base residual for that month is 62%:

24/12k term
$50350 (MSRP)
x.62 RV
31217 + 7500 Flex = 38717

38717/50350 = 76.8% RV

77% residuals — in addition to a selling price that is 15%-20% off MSRP — are why the monthly payments are so low with some deals. It's an artificially high RV care of the U.S. taxpayer.

Does it matter if you pay that amount back early?

In Maryland, it doesn't matter if I pay back the $7,500 flex tomorrow or on the last day of my term. The finance charge is set for the term. But I am borrowing an additional $7,500 in the deal, so am paying more in interest. At 3% and 24 months, I think it was an additional $300 for the Flex. That's still a net savings of ~$2,300 over the traditional lease.

Lots of financial chicanery. For some, it's a turn-off.