BMW Weird Calculation for Cap Reduction

I posted this in another thread but thought it merits its own thread.

I went to a BMW Dealership in LA county last night to see how close I could get to the recent i3 deal. Look at how they are calculating “Total Cap Reduction.” They are not subtracting the down payment from Cap Cost, as they should. They are taking the difference between down payment and “Minimum Drive Off” and subtracting this difference from Cap Cost.

Using this method creates a larger spread between Net Cap Cost and Residual and thus increases Monthly Depreciation, which in turn increases monthly Rent Charge.

Has anyone experienced this before? Is this common with BMW?

Your post is hard to follow. Are you putting money down (cap cost reduction) over and above the $7,500 lease credit?

Yes, I wanted to put $2500 down plus 7 security deposits totaling $1750. The “customer cash” is the sum of these two numbers.

In California we get $2500 refund from the state after we lease the car, so in effect it was going to be a zero down lease.

What about the drive-offs? You want that rolled into the cap cost?

That’s exactly what they did. They rolled the drive offs into the cap cost. I expected them to take the Cap Cost ($41,000) and subtract the $7500 rebate and subtract the $2500 down payment and arrive at a Net Cap Cost of $31,000.

They have done it correctly. Your upfront money – acq fee, license fees, first payment, MSDs, etc. – appear to total $4,157.79 according to them. Since you are putting $4,250 down, the difference between those two numbers is $92.71. That $92.71 is then being used as ADDITIONAL cap cost reduction, i.e., it’s being added to the lease credit of $7,500.

Please keep in mind that you are not putting $2,500 down as a cap cost reduction if you are not rolling the fees into the monthly payment. Right now, the deal is structured with you paying the fees upfront. It seems from your questions that you are seeking the benefit of the cap cost reduction as if you were rolling the fees into the monthly payment.

Even if you get to $31,000, you still have to pay for the fees and MSDS that amount to $4,157.79 (give or take because the tax situation may change). You basically end up in the same spot.

Yes, you are exactly correct Electrifi38. So is it unheard of to request fees to be rolled into monthly payment? Do most leases work this way or is this unique to BMW?

I think the difference is about $10 per month. But it seems the difference would increase of this were a much more expensive car.

Where do you expect the upfront fees to go if you aren’t paying for it upfront? If you pay the acq, TTL, etc, upfront, your total drive-off will be closer to $6k.

I would have liked the upfront fees to be rolled into the monthly payment and not rolled into the cap cost.

You can style the lease in any way that you want. You can capitalize all upfront fees, do one fee and not another, and even a portion of one fee, etc. etc. etc. BMWFS does not care so long as the terms of the credit approval are satisfied (and that isn’t likely a consideration of concern here). Tell the dealer to do it your way, and don’t let the salesperson tell you otherwise.

This is great information! So in my situation, how would I phrase my request so they understand what I want? “Please do not capitalize any amounts due at lease signing. Roll amounts due at lease signing into monthly payment.” ??

How does that work? At what interest rate would you pay on these upfront fees vs it being charged the MF rate if it’s in the cap cost?

You can say, “I want the following fees to be rolled into the monthly payment: fee A of $XXX, fee B of $YYY, etc. I don’t want Fee X of $AAA, etc. to be rolled in and I will pay these (this) at signing.”

The goal is usually to find the right balance between the next $50/$100 marker when using MSDs.

They just add the $925 acquisition fee to the sales price. So, yes, you pay interest on it.

Separately, you can choose to waive the acquisition fee *i.e., reduced to $0) for a money factor increase of .005. So, here, the money factor would go from .00146 to .00196. @pkiledji, run the numbers to see if there is a cost savings by waiving the acquisition fee.

So if I understand correctly, the $925 acquisition fee is the only fee that cannot be rolled into the monthly payment - correct?

It can certainly be rolled in. People do this all the time

All fees can be rolled in. With the acq fee, however, you can choose to waive it in favor of a money factor increase discussed above.

For my situation, lease payment came to $1 more with acquisition fee waived.

But more to the point, it seems to me that lease payments will ALWAYS be less if we roll all upfront fees (i.e., "Amount Due at Lease Signing) into monthly payments and use upfront cash as a cap cost reduction, as opposed to using upfront cash to pay upfront fees. Correct?

Define “less”. Each situation is different and depends on MSRP, sales price, incentives, money factor, fees, and taxes.