Been fleeced on a lease

Ask the Hackrs
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Here to ask for some advice on a lease I have with BMW. Let me begin by saying this was my first lease and I made a terrible mistake by not reading and understanding the lease agreement before I signed.

In October 2017 I leased a 2018 X5M for 36 months/10,000 miles. I prepaid the lease and it expires this October. My local dealership has sent several letters wanting me to come in and “get into a new car at a lower monthly payment”. They apparently haven’t noticed that my lease was prepay, because there’s no way they would give me credit on the remaining months of the lease towards a new car. Plus I’m not going to lease again, but will possibly finance.

I pulled out my lease agreement to see what value I had in the remaining months and found some disturbing items.

Here are the specifics of the lease:

MSRP: $115,445
Dealer Discount of $2,040
Acquisition Fee + Perma Plates: $1531

Gross Cap Cost: $114,936
Cap Cost Reduction: $0 *(see below)
Adj Cap Cost: $114,936

Residual Value: $68,112
Depreciation/Amort. Amounts: $46,823
Rent Charge: $15,485

Total Base Single Payments: $62,309
Sales Tax: $1416
Fees: $732
Total Single Payment: $64,447

Aside from getting an embarassingly bad deal, there are two items that look off to me.

My Single payment of $64,447 consisted of a Trade in valued at $15,000, and a check for $49,447.

  • Why didn’t they reduce the Cap Cost by $15,000? Shouldn’t they?

The Money Factor they appeared to use was .00235. When I was going through the lease papers with the finance guy, I did ask what I was paying in interest, and he said he didn’t know - “I don’t have those numbers in front of me”. That was a big lie - I now know “Rent Charges” are the interest. Again I was at fault for not pressing the issue and rushing to get out of there.

By looking at Edmund’s, the BMW money factor for October, 2017 should have been .00152.

My credit score was 786. I had no idea what a money factor was at the time, I thought everything was figured using APR. Now I understand that I probably should have received a discount of .0003 off the MF because my credit was pretty good.

So here is my question - Can the dealer set the MF at just whatever the heck they want with no oversight from BMW FS or BMW NA? Isn’t there like a MF range with a max?

Secondly, do I have any recourse in going back to them now (6 months from the end of the lease) and pointing out that my trade in wasn’t used in reducing the Cap Cost?

Aside from me getting totally ripped off, I’m wondering if the dealership did something wrong (like unethical).

The sales associate, finance manager and sales manager have all left the dealership since I signed in 2017. I had planned to make an appointment with the current sales manager and tell him I’m interested in buying a 2020, but was taken advantage of in the prior lease, show him the lease numbers and see if he would work with me. If I’m stonewalled, do I have any recourse?

Thank you for reviewing my post.

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You shouldn’t have received a discount for good credit… Edmunds quotes tier 1 numbers. You should have, however, received one for doing a one-pay.

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I bet they did. They probably retired after executing this deal…

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Not really. You willingly signed the contract.

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Putting a down payment in the form of a cap cost reduction on a one pay doesn’t really make sense with what a one pay is. This is in theory part of why you get a reduction in MF on a one pay.

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There’s no recourse other than not giving your business to that dealer again. I highly suggest you use a broker next time around, the dealer hit a home run on your deal.

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Looks more like a first pitch grand slam.

OP, you signed the contract. You can’t go back almost 3 years later at this point and say “but but but.” Chalk it up as a learning experience and move on.

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Even if OP doesnt lease again I would recommend using a Broker like Joe said. Brokers can also help with Purchases

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You didn’t say where you live but people often ask me why deals are so hard to come buy in Florida. This is why. Why would they give me a deal when the next person will come and sign this.

Live and learn. Now you know for next time.

There isn’t a single BMW or Mercedes dealer in the state that will give buy rate money factor. They just won’t do it.

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As for your trade, they accepted that plus your check to satisfy the $65k, so it doesn’t matter where it went.

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I think your trade was used, but it’s in the down payment section. You always need to “translate” to how it’s presented in the lease document, since the consumer banking laws (which vary by state) require things to presented in different ways. Also, state tax laws vary – in most states you don’t save sales tax on a lease when you do a trade-in (whereas you’d only pay tax on the net amount if you bought the car outright).

While your discount was small (maybe this was a high demand car), and the interest rate was marked up based on what you say, they didn’t forget about your trade in. It’s somewhat coincidence that the “rent” charge is about the same as your trade in, so your trade in covered the “rent”, and your check covered the depreciation.

Here’s a version of the calculator that many on LH use to assess a lease, that comes very close to your deal. I put your numbers in the buckets closest to where they belong, but I had to guess how to calculate the sales tax.

If you had no trade-in and simply wanted this car on a one-pay, you’d need to write a check for $64k. So with your trade, you wrote a check for $49K and handed over the title to your trade for the other $15k.

One other observation: next time don’t do a one pay. They charge interest basically the same as if you did monthly payments (other than a small discount on the money factor), even though you give them all of the depreciation up front and prepay all of the interest. So you really paid $15k of interest to borrow $68k for 3 years (which is more like a 7%+ interest rate). One pay usually doesn’t make sense, unless there is a low depreciation rate (e.g., you get 15% off MSRP on a car they want to move and it has a 65% residual). If you click the check-box for one pay in this calculator, you’ll see the total cost only increase by about $2k for monthly payments, but you have $60k in your pocket that you’d draw down to make the payments. Whether one-pay makes sense or not depends on your return on that money…

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Ouch. Not even a 2% discount. I get it this is an X5M, but still.

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I think he leased this during the period when bmw discontinued their MSD program, which means they almost certainly didn’t have a one pay program as well.

In his situation, he gained/saved almost nothing by doing a one pay lease.

But, there are plenty of instances when one-paying saves a significant amount of rent charge over a standard lease. Whether a one-pay is more beneficial vs a standard lease + MSD is a different discussion.

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A one pay can also be beneficial for Texas residents sometimes. For instance a with BMW, you can often get a “tax credit” (I hate calling it one because it isn’t in the true sense of the term) and only pay 1% tax instead of 6.25%. We had a buyer do a one pay on an X7, and the tax was something like $900 instead of $7,000.

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What confuses me most about this is the mf. Doesn’t BMW have a limit to how much it can be marked up?

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Can’t really do much about this but you can make sure you don’t get fleeced again by learning about leasing.

Also, just curious, if you had 50k to make a prepayment, what was your motive to not just make monthly payments?

I’m not sure why this statement didn’t throw big red flags to you.

Just be careful when you return the lease. Get pre-inspection done and take pictures.

Don’t do any New deal until this one is completed.

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Thank you all for your replies. Yes, I learned a valuable (and painful) lesson. I like the idea of using a broker for the next deal.

High Technology you’re right about this being a high demand car, or at least it was limited edition. It was the Black Fire edition and I fell in love with it when I saw it. The sales guy said he could give me a couple of thousand off MSRP but no more because of its limited availability.

The main problem I had (so very long) after the fact was the unreasonable MF and the fact that had the $15000 trade in been applied to a cap cost reduction, I would have paid a lower rent charge.

Anyway, thank you all for your time and advice.

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I just didn’t want a monthly car payment, and honestly I thought I would avoid paying interest on the portion allocated to the one pay. At the time I didn’t know “rent charge” meant interest.

Yes, it did raise a big red flag when he said that about not knowing what I was paying in interest. The dealership must have had a big day, because I had to wait a couple of hours to see the finance guy, and it was after 8:00 before I got out. He rushed me through the whole ordeal (I accept the blame) because there was a line of customers waiting to sign their papers also so they could drive their cars off the lot.

This was an emotional buy, and I was so giddy about this car that I allowed myself to be rushed. Plus I didn’t do my homework about leases or money factors. A valuable lesson indeed.

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No need to be down on yourself, we all have had a moment like this and just helps to learn for the future deals.

Keep up the learning…

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