Owner's Choice and down payments

[TheStanman]

I am purchasing a 2015 M3 which will be delivered around early July. As I live in Georgia which has tax laws that make leases unfeasible, I will be financing through Owner's Choice. For those of you who don't know, it's a lease-like financing option that involves a balloon payment equal to an agreed upon residual value for the car. As such, it's like a lease but I actually own the car.

My question: Is there a reason not to put money down on Owner's Choice?

My thought is that the typical reasons for not putting money down on a lease do not apply (no lease trading and if I total the car, I still owe the outstanding loan balance). I'm thinking I will put money down as it represents a risk-free 3% return on my cash, but want to make sure I'm not missing anything.

Any help is appreciated!

PS - my build:
2015 M3
Mineral Grey
Silverstone Full Leather
19 in Light alloy
DCT
Executive package
Adaptive suspension
HK Sound
Moonroof

[bradleyjb]

In Georgia you have to pay for taxes on the entire price of the car, not just for the timeframe you are leasing.

OP - if Owner's choice is like Select, then yes, go ahead and put money down - you are buying the car (unless you have something better to do with your money of course). I'm not sure if Owner's choice has a turn in option (Select does not).

[boss2k]

Originally Posted by TheStanman

I am purchasing a 2015 M3 which will be delivered around early July. As I live in Georgia which has tax laws that make leases unfeasible, I will be financing through Owner's Choice. For those of you who don't know, it's a lease-like financing option that involves a balloon payment equal to an agreed upon residual value for the car. As such, it's like a lease but I actually own the car.

My question: Is there a reason not to put money down on Owner's Choice?

My thought is that the typical reasons for not putting money down on a lease do not apply (no lease trading and if I total the car, I still owe the outstanding loan balance). I'm thinking I will put money down as it represents a risk-free 3% return on my cash, but want to make sure I'm not missing anything.

Any help is appreciated!

PS - my build:
2015 M3
Mineral Grey
Silverstone Full Leather
19 in Light alloy
DCT
Executive package
Adaptive suspension
HK Sound
Moonroof

If you are buying/refinancing the car at the end of the term then it makes sense to put money down

[TheStanman]

Not only do you pay tax on the entire value of the car, but if you lease and decide to buy it out at the end of the term, you have to pay tax again on the residual value! The law also ruins lease assumptions. I looked into assuming a lease on an M5 until I found out I would have to pay the full ~$6k in tax.

Originally Posted by bradleyjb

In Georgia you have to pay for taxes on the entire price of the car, not just for the timeframe you are leasing.

OP - if Owner's choice is like Select, then yes, go ahead and put money down - you are buying the car (unless you have something better to do with your money of course). I'm not sure if Owner's choice has a turn in option (Select does not).

Owner's Choice does have a turn-in option (though the goal is to trade it in and get a tax credit, depending on how the value holds up)

Originally Posted by boss2k

If you are buying/refinancing the car at the end of the term then it makes sense to put money down

I'm not really sure what I will do at the end of the 36 months, but why would it only make sense if I intend to buy it? If I turn it in instead, shouldn't the cash down still reduce the loan balance and be better than keeping the cash in savings? (1% savings interest rate vs. 3% on Owner's Choice loan)

Thanks for the input!

[TheIceStormOf06]

Originally Posted by TheStanman

I am purchasing a 2015 M3 which will be delivered around early July. As I live in Georgia which has tax laws that make leases unfeasible, I will be financing through Owner's Choice. For those of you who don't know, it's a lease-like financing option that involves a balloon payment equal to an agreed upon residual value for the car. As such, it's like a lease but I actually own the car.

My question: Is there a reason not to put money down on Owner's Choice?

My thought is that the typical reasons for not putting money down on a lease do not apply (no lease trading and if I total the car, I still owe the outstanding loan balance). I'm thinking I will put money down as it represents a risk-free 3% return on my cash, but want to make sure I'm not missing anything.

Any help is appreciated!

PS - my build:
2015 M3
Mineral Grey
Silverstone Full Leather
19 in Light alloy
DCT
Executive package
Adaptive suspension
HK Sound
Moonroof

I was considering the same thing. I choose not to do Owners choice b/c the double tax and on the back end, you end up paying more if your going to finance. It's like buying it twice. Plus you never know what the rates are going to be in 3 years from now. It was designed to get around the crazy lease tax (Ad Valorem) they do here in GA for those that will just pay cash instead of refinancing again. Plus I believe the buy on the back end is like buying at MSRP all things considered if you choose to buy it at the end similar to a lease..(I could be wrong about this part though). Plus when you buy it at the end, you've already paid the full 6% tax or whatever.

You can buy them at invoice now and you can get 72months @ 1.9%. Put the money on the DP for that.

That said, I think owners choice is only good if your going to trade it for the tax credit. That's the true benefit IMHO

[yaymitch]

Originally Posted by TheIceStormOf06

You can buy them at invoice now and you can get 72months @ 1.9%. Put the money on the DP for that.

Can you get 72 months thru BMWFS?

[TheStanman]

Originally Posted by TheIceStormOf06

I was considering the same thing. I choose not to do Owners choice b/c the double tax and on the back end, you end up paying more if your going to finance. It's like buying it twice. Plus you never know what the rates are going to be in 3 years from now. It was designed to get around the crazy lease tax (Ad Valorem) they do here in GA for those that will just pay cash instead of refinancing again. Plus I believe the buy on the back end is like buying at MSRP all things considered if you choose to buy it at the end similar to a lease..(I could be wrong about this part though). Plus when you buy it at the end, you've already paid the full 6% tax or whatever.

You can buy them at invoice now and you can get 72months @ 1.9%. Put the money on the DP for that.

That said, I think owners choice is only good if your going to trade it for the tax credit. That's the true benefit IMHO

Owner's Choice is a way around the double taxation that would occur with a lease. At the end, if you choose to buy, you just pay off the residual value of the car (or refinance) - like a typical lease.

The trade-in for the tax credit is the main benefit of the Owner's Choice. However, it has all the other benefits of a lease.

And same question - is 72-month loan @ 1.9% through BMWFS? That's pretty appealing, though think I would still stick with Owner's Choice.

[TheIceStormOf06]

Originally Posted by TheStanman

Owner's Choice is a way around the double taxation that would occur with a lease. At the end, if you choose to buy, you just pay off the residual value of the car (or refinance) - like a typical lease.

The trade-in for the tax credit is the main benefit of the Owner's Choice. However, it has all the other benefits of a lease.

And same question - is 72-month loan @ 1.9% through BMWFS? That's pretty appealing, though think I would still stick with Owner's Choice.

The 1.9% are available through credit union not BMWFS. Consider a credit union as Many are offering it. My credit union is offering GAP insurance included.

[illson20]

Stanman, what did you end up doing?

I'm in the same boat here in GA. I'm trying to decide between owner's choice vs. BMW Select / Penfed.

Select and Penfed I believe are financing at 1.7-1.9% range on a comparable 36 mo time frame vs. BMW owners select at 3%. The math on these programs are the same (balloon payment financing) but if you go the select route you're saving ~$90 / month on payments (I have an ~80K build out) and ~ $2400 in finance charges over the course of the 3 years...

It seems like the two things you're paying for with owner's choice are:
1) The ease of a guaranteed turn in to BMW at end of term - It seems like this is really just hedging a bit of risk? If we were to go select, provided value of these cars hold as they should, a dealer should be offering similar or better trade-in value on a car we "own" through Penfed/Select. The risk would be if value tanks for some reason, or you wreck the car and you have to sell / trade for less than the residual you would've gotten via owner's choice

2) The tax break on turning the car in - I'm a little hazy on this one... is the difference that with owner's choice, the difference between taxes I paid on the car up-front and taxes on value car is worth at trade-in are transferred in to "equity" on a new car if I choose to trade in? Vs. with select or penfed.. if I sell or trade the car and buy a new one out-right I have to pay taxes on the full value of the car again? In theory this would likely make the finance savings on select a wash

At the end of the day it seems like, go owner's choice if you're more likely to trade the car in and want to hedge risk a bit. Go Select route if you're pretty likely to buy the car at the end of the term (in that case you should really be financing the car outright but that's another discussion).

Thoughts? Anything I missed?

[boss2k]

TheStanman -- did you end up with Owners choice and i am also scheduled to do that in next couple of months when my car arrives.

Interested in know what exactly is mentioned in the contract particularly at the end of 36 months when i return or buy the car. Does it work exactly like lease except i dont pay acquisition fees or other fees in Owners choice.

[dmk08]

Originally Posted by illson20

Stanman, what did you end up doing?

I'm in the same boat here in GA. I'm trying to decide between owner's choice vs. BMW Select / Penfed.

Select and Penfed I believe are financing at 1.7-1.9% range on a comparable 36 mo time frame vs. BMW owners select at 3%. The math on these programs are the same (balloon payment financing) but if you go the select route you're saving ~$90 / month on payments (I have an ~80K build out) and ~ $2400 in finance charges over the course of the 3 years...

It seems like the two things you're paying for with owner's choice are:
1) The ease of a guaranteed turn in to BMW at end of term - It seems like this is really just hedging a bit of risk? If we were to go select, provided value of these cars hold as they should, a dealer should be offering similar or better trade-in value on a car we "own" through Penfed/Select. The risk would be if value tanks for some reason, or you wreck the car and you have to sell / trade for less than the residual you would've gotten via owner's choice

2) The tax break on turning the car in - I'm a little hazy on this one... is the difference that with owner's choice, the difference between taxes I paid on the car up-front and taxes on value car is worth at trade-in are transferred in to "equity" on a new car if I choose to trade in? Vs. with select or penfed.. if I sell or trade the car and buy a new one out-right I have to pay taxes on the full value of the car again? In theory this would likely make the finance savings on select a wash

At the end of the day it seems like, go owner's choice if you're more likely to trade the car in and want to hedge risk a bit. Go Select route if you're pretty likely to buy the car at the end of the term (in that case you should really be financing the car outright but that's another discussion).

Thoughts? Anything I missed?

No tax differences in the end between Owners Choice and Select. Both of them you owe GA TAVT up front and wouldn't be taxed again.

Doing a lease you would be taxed GA TAVT at purchase and then again pay Fair Market Value TAVT if you bought out the lease as it would be have an ownership change at the tag office.

Owners choice gives you the security of a lease should the car be wrecked, a shitbox, or something else. But it is really a purchase with a guaranteed buyback option.

Select and Penfed Payment Saver are the same type of program. I would use whichever gives you the best rate.

Contact Billy Futey at United Roswell if you're local to Atlanta. He can help you get the right info on any of the programs. Not to mention hook up great deals.

[boss2k]

Originally Posted by dmk08

No tax differences in the end between Owners Choice and Select. Both of them you owe GA TAVT up front and wouldn't be taxed again.

Doing a lease you would be taxed GA TAVT at purchase and then again pay Fair Market Value TAVT if you bought out the lease as it would be have an ownership change at the tag office.

Owners choice gives you the security of a lease should the car be wrecked, a shitbox, or something else. But it is really a purchase with a guaranteed buyback option.

Select and Penfed Payment Saver are the same type of program. I would use whichever gives you the best rate.

Contact Billy Futey at United Roswell if you're local to Atlanta. He can help you get the right info on any of the programs. Not to mention hook up great deals.

Great info. did you do owners choice?

[dmk08]

Originally Posted by boss2k

Great info. did you do owners choice?

My X1 is Owners Choice and my M3 is standard financing. Wish I would have done Owners Choice on both.

[boss2k]

Originally Posted by dmk08

My X1 is Owners Choice and my M3 is standard financing. Wish I would have done Owners Choice on both.

in the owners choice contract does it say clearly ( like lease) that you have the option of returning the car at the end of the lease or buy it at residual. Never done it and want to know before i get into it

Thanks for checking

[dzaborn]

I'm confused. Is Owner's Choice offered by BMW or someone else? Is it the same thing as BMW Select Financing or is that something different?

[Clark_Kent]

Originally Posted by dzaborn

I'm confused. Is Owner's Choice offered by BMW or someone else? Is it the same thing as BMW Select Financing or is that something different?

Owners Choice is a program offered by BMW that is essentially simple interest balloon financing featuring monthly payments similar to a lease (typically lower than traditional financing). It's an option in states where laws make leasing an unattractive option. Georgia and Illinois are two that quickly come to mind as states that aren't lease friendly.

[MavRick]

Originally Posted by boss2k

in the owners choice contract does it say clearly ( like lease) that you have the option of returning the car at the end of the lease or buy it at residual. Never done it and want to know before i get into it

Thanks for checking

There is a $350 (or something like that) disposition fee at the end of OC. And then any wear and tear or over mileage fees when if you turn it in...just like a lease. We ultimately decided to do PenFed because it saved us over $2500 in financing fees because of the lower rate. The balloon payment was within a couple hundred dollars of what BMW was offering.

[boss2k]

Originally Posted by MavRick

There is a $350 (or something like that) disposition fee at the end of OC. And then any wear and tear or over mileage fees when if you turn it in...just like a lease. We ultimately decided to do PenFed because it saved us over $2500 in financing fees because of the lower rate. The balloon payment was within a couple hundred dollars of what BMW was offering.

What is Penfed, is it BMW select ? Is it a finance offer from BMW? Can you please provide more details as i would like to explore if i can save costs

thanks

[dmk08]

Originally Posted by boss2k

What is Penfed, is it BMW select ? Is it a finance offer from BMW? Can you please provide more details as i would like to explore if i can save costs

thanks

Penfed is Pentagon Federal Credit Union. They offer a 'Auto Payment Saver' loan which is like BMW select. A balloon loan. It does not have a turn in option like Owners Choice.

My BMWFS interest rate was pretty close to the Penfed rate when I signed.

[boss2k]

Question for those who did Owners choice

I took O/C and yesterday got the statement from BMWFS and it showed the entire loan amount as the Amount financed , like a lease it does not show actual loan amount which is Loan amt-- Residual. Is that the way it shows up in the loan statement?

My O/C contract clearly shows balloon payment at the end of 3 yrs and the contract states the option i have at the end of 3 yrs for Balloon payment.

[SamS]

Originally Posted by TheStanman

Not only do you pay tax on the entire value of the car, but if you lease and decide to buy it out at the end of the term, you have to pay tax again on the residual value! !

Yeah that is brutal. I'm in TX, considered leasing, but really hated the concept of paying tax on the full amount. And it is likely I'll keep this M3 longer than 36 months, because 3 years from now, the M3 production will have ended. Buying out the lease would have meant I'd be paying tax twice! Since I had a big trade-in, my actual tax amount was under $3k.

[boss2k]

Originally Posted by boss2k

Question for those who did Owners choice

I took O/C and yesterday got the statement from BMWFS and it showed the entire loan amount as the Amount financed , like a lease it does not show actual loan amount which is Loan amt-- Residual. Is that the way it shows up in the loan statement?

My O/C contract clearly shows balloon payment at the end of 3 yrs and the contract states the option i have at the end of 3 yrs for Balloon payment.

Can you please comment on this who has done O/C