[thereef510]

As I'm learning more about leasing, I saw an option on the leasehackr calculator to do a One pay lease to pay the whole thing off and save on the interest rate. Outside of having the capital to do so, what is the downside to doing this? Do dealers not want you to do so? Do they care either way? I would think that if they got 90% of the money up front they'd be happy and push this option but I've never heard about it till I saw it on the calculator.

Also, what happens if you get into an accident or your car is totalled? is it treated the same as it would be if you were paying your lease payment month to month?

[TurtleBoy]

You need to run the numbers to see if it is more advantageous to do it. Doing a one pay does not eliminate the interest you are paying but rather just lowers it. I think the MF is reduced by .0003 for BMW leases.

The dealers always get their money up front on leases since BMW Finance purchases the car from the dealer and leases it to you.

If a car is totaled, one pays are treated the same as month to month. Your insurance would pay the leasing company and any negative difference would be covered by the GAP insurance, any positive difference (rare) would be given to you.

That said, keep in mind that pre-paying a lease, or making a lease down payment, is just the same as if you were purchasing for cash or making a down payment when financing. If the vehicle is totaled the insurance company will pay the current market value (ignoring replacement policies) so you could be out money.

Here are a few links to check out:

https://www.leaseguide.com/articles/prepaid-lease/
https://blog.carvoy.com/51-single-pa...ase-explained/
http://www.realcartips.com/leasing/0...r-leases.shtml

[thereef510]

Originally Posted by TurtleBoy

That said, keep in mind that pre-paying a lease, or making a lease down payment, is just the same as if you were purchasing for cash or making a down payment when financing. If the vehicle is totaled the insurance company will pay the current market value (ignoring replacement policies) so you could be out money.

So this is the part I don't understand, I thought the GAP insurance included in all BMW leases covers me in case something like this happens, or is that only advantageous for month to month leases, and not 1 pay leases?


edit: nvm, I looked through your links. This scheme just adds more unnecessary risk we don't want to save a couple thousand. thanks

[sarafil]

Originally Posted by thereef510

So this is the part I don't understand, I thought the GAP insurance included in all BMW leases covers me in case something like this happens, or is that only advantageous for month to month leases, and not 1 pay leases?


edit: nvm, I looked through your links. This scheme just adds more unnecessary risk we don't want to save a couple thousand. thanks

On a one pay lease you run a negative balance on the lease account and BMW applies the payment each month. What that means is that if the car is totaled during the lease, you get a pro-rated refund for unused months. This is separate from the total loss payoff for your insurance company.

I'll use completely made up numbers here for a minute and ignore interest. Let's say you have a $18000 one pay lease for 36 months (=$500/mo) and selling price of $48000, residual $30000. You start with -$17500 credit (18k less first month deducted up front) and they apply $500 per month as the lease goes on. Half way through the lease, your "balance" on the payoff of the car if totaled would be $39000 and you'd have -$9000 unused payments on credit on the account, the insurance payoff and GAP would be based on difference in the $39000 in this example and actual ACV of the car. Separately BMW would refund you the $9000 credit left on the account. **note that the numbers don't work this way exactly because this ignores interest completely - but it shows you in theory how the payments are applied. In reality your payments, payoff, etc include interest so the math gets a bit more complex.

[Caltexan]

Originally Posted by sarafil

On a one pay lease you run a negative balance on the lease account and BMW applies the payment each month. What that means is that if the car is totaled during the lease, you get a pro-rated refund for unused months.

Can you point me to the language in a BMW one pay lease contract that explains all this? I have a draft BMW lease contract "Motor Vehicle Lease Agreement (Pre-Pay)" in front of me and see nothing that explains the above.

[TurtleBoy]

Originally Posted by Caltexan

Can you point me to the language in a BMW one pay lease contract that explains all this? I have a draft BMW lease contract "Motor Vehicle Lease Agreement (Pre-Pay)" in front of me and see nothing that explains the above.

I think the fact that it is not spelled out means that you would get any "extra" over and above what is owed for the car. The other week I was talking to someone who had a Genesis lease and in his paperwork it specifically stated that Genesis will keep any downpayment/prepayment/overpayment by insurance monies. The BMW lease does not say that so that should mean that any "extra" is returned to the lessor so BMW is not unjustly enriched. At least that is my understanding of the process but someone else may have more info.