since this is tagged NJ and BMW, I decided to dig up my policy. I also am unable to find any language about overpayment from insurance. The clause only speaks to underpayment.
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When a 0.9% financing option is available and you can invest to earn better than 0.9% return on your money, your advice is to pay cash for a car purchase or don’t buy at all? Also while this is a leasing forum, it is ultimately a forum where people discuss how to find the best deals and there could be situations where financing is the better deal.
Agreed but it also has benefits (other than the extreme example of the OP’s situation) such as no mileage limit and ability to modify the car. I also remember BMW incentivizing finance deals more favorably than the lease deals on certain models. I am not saying balloon financing is better than leasing, just saying there are some BMW models that would make more financial sense to balloon finance than lease depending on one’s situation especially with PHEVs with the tax credit opportunity.
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The OP has read their contract and despite tagging NY there’s no mention of their having this clause.
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Select Financing is not like a lease where you can just turn in the car. You either have to make the balloon payment at the end (refinance or cash) or trade in the car. So you can on the hook if the car is worth 15% and the balloon payoff was 25%.
BMW Owner’s Choice is identical to leasing (although no GAP or acq fee) where the car is turned back in after the term.
I think it really comes down to whether the amount the insurance company paid to BMW FS was solely intended to be the market value of the car OR whether it was meant to both pay off the car with BMW FS and reimburse OP for his loss of the car.
If the funds were solely intended to pay the owner of the car for the fair market value of the car (which happened to exceed the current payoff), then I think BMW FS can keep it because it’s their car. The fact that OP negotiated with the insurance company to get a higher payout sucks because BMW FS ultimately reaped the benefit of it, but not sure OP has much legal recourse. Just because his contract doesn’t say anything about excess payments whereas other contracts do does not mean OP would automatically keep the excess. BMW FS has the stronger leg to stand on (so to speak) because they own the car and they are also a named insured.
However, if the insurance company meant to pay off the car with BMW FS and reimburse OP for his loss of the car (and just accidentally paid the entire amount to BMW FS), then that’s a different story because that additional amount was meant for OP, not for BMW FS. OP needs to talk to his insurer and find out whether he will be getting an additional check from them for his loss of the car. Ultimately, insurance is intended to make the insurer whole again. In this scenario, if OP is forced to go lease the same car and pay a premium now because of the crappy market, then he’s not being made whole. He is worse off than he was before the accident happened, which defeats the point of having insurance. This seems like it’s more of a fight with the insurer, not BMW FS. But curious to see how it plays out!
This has been a fun read.
I would never expect to be paid any insurance overages based on market value alone. If my bank pays me the market adjustment overage from a total crash, I would be super gracious and jump for joy, if not; I would just appreciate I didn’t have to pay anything owed and be thankful gap is a thing.
The car in a lease doesn’t belong to me. Do I expect a rental car company to pay out the market profit on a totaled car I paid insurance on? Crazy. A lease is just an three year long rental agreement.
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Here’s a thought … if you have no chance of getting the money, you could, if so inclined, let the insurance company know they were only required to pay up to the balance of the lease, per the contract. 
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It’s an interesting point, but insurance companies by design don’t promise to compensate you for a really great lease deal. They only agree to pay out the market value of the vehicle. If the RV took a massive hit on the same vehicle between when the insurer leased it to when it’s totaled, they’re not going to pay you extra to ensure your payment is as low as the first lease.
While the OP is certainly worse off now and unlikely to get the same lease deal, all the ins co will solve for is the market value, which they’re already paying out extra on. The question still then comes back to whether the market value vs payoff overage ultimately should go to the owner (FS) or the lessee. If OP gets the overage, he’s certainly more than whole. But if BMWFS cites a far higher market price-based payoff to the insurance carrier as they are a 3rd party, there may be little or no overage on the books. Same as if he sold it to Carmax and BMWFS made the 3rd party buyout high enough to eat away any ‘profit’.
Until we know more (which I don’t know if we even can find out), it’s hard to say.
That’s generally how insurance works. Exception would be a policy that pays out a pre-agreed value $X regardless of market value (usually for collectible car policies).
It’s too bad there’s no way to protect interest in a lease deal. I.e. “lease protection” so that if a car is totaled insurance will reimburse the difference in payments. I suppose that would only appeal to a small niche of shoppers, and Leasehackrs with unicorn deals. Those can take a lot of time and effort.
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My car was flooded in a hurricane a few years back in NYC. Buy out at the time was $2000 less than my insurance appraisal. Whole amount was sent to Honda bank. Honda then sent me the difference. Not sure what are the current rules/laws are in your state, but review your Lease Contract with a lawyer. Could be worth even paying a lawyer fee.
No, my advice is to not be stupid. A balloon loan on a new BMW is financially stupid. This is the same logic that was used prior to 2008 for balloon loans on McMansions. Except that it’s even stupider - tell me what the finance/rent charge savings are by doing a 0.9% balloon loan on a $60k BMW, versus a lease at base MF with max MSD’s. Then compare that to your theoretical $GME investment profit versus the risk profile on a vehicle that, in normal times, will have like a 40% residual after 3 years because they are so cheap to lease.
Which is why we lease BMW’s.
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Insurance coverage doesn’t exist only to pay off a car, it can cover over things too (e.g., property damage other than to the car, rental expenses, medical bills, etc.). It’s up to the insurance company to pay these amounts to the right recipients. If part of the overage above the payoff amount was due to OP, but the insurer paid it all to BMW FS instead, then that presents a problem.
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With any investment there is risk, I knew this before going into it. I knew I was going to wholesale it within a month or two of buying it and would only take it out a handful of times (put 500 miles on).
I lease because I don’t want to deal with any of the risks therefore I don’t expect any rewards in terms of positive equity. It is a little frustrating to see BMW taking all the equity but it is a bit much to say they stole it. They are the ones assuming all the risks. Had the car not been totalled and was repaired, BMW would have taken a massive hit to the value of the car. Would you have compensated them in that scenario?
Let me attempt to be illustrative:
Lessee has a leased vehicle worth $30,000. Payoff on vehicle is $25,000. Vehicle becomes totaled.
Example A: Lessee has a policy with a $500 deductible and pays $200/mo for this coverage. Ins Co pays $29,500 to the FS ($30k minus deductible), Lessee sees jack squat: payment ($0).
Example B: Lessee has a policy with a $2000 deductible and pays $150/mo for this coverage. Ins Co pays $28,000 to the FS ($30k minus deductible), Lessee sees jack squat: payment ($0).
In both examples Lessee ends up the same position, except has only been paying out $150/mo for insurance vs $200/mo and the FS gets the payoff plus some extra to cover Veuve Clicquot in the breakroom to go with the caviar for Filet Mignon Fridays.
Exactly. After four years it becomes a money pit anyway, so essentially there’s really no benefit to buying or doing Owner’s Choice unless it’s a) for ego b) somebody really likes the car and wants to keep it for an extended period regardless of cost.
Ok I just wanted to know if you thought of it like that. So that the fact you were leasing the equity was at risk. I thought you had it covered some slick way lol
Unrelated to OPs exact scenario but IIRC @ethanrs mentioned having show/exotic insurance on it? Something that covers diminished value. That may also have been one of the 6-figure flips that immediately preceeded/succeeded the lease with $50k DAS