Does BMWFS limit how much a dealer can markup the money factor?
Do MF markups go entirely to the dealership?
Is there any reason a dealership would prefer offering a larger discount and higher MF or a smaller discount and buyrate?
Can I request that a dealership markup the MF and offer a larger discount so that I can meet a purchase price cap?
What would happen if MF was marked up and I purchased the vehicle before the end of the lease?
Yes; how else are they supposed to make a profit? They have sales targets, ownership goals and whatever other KPI that a business has. Plus backend targets that are not apparent to buyers.
You can always ask, but if you have a target deal, does it matter how you get there?
Nothing
I believe you misunderstood my question: as you say in your next line, “If you have a target deal, does it matter how you get there?” I am asking if dealerships have any incentive to prefer one way over another when at the end of the day they are ending up in the same place.
It makes a difference in this case as I prefer a MF markup “so that I can meet a purchase price cap.”
To refine the question: would the dealership be losing out on any profit if I purchased the vehicle before the MF markup had a chance to accrue?
Does BMWFS limit how much a dealer can markup the money factor?
-Yes, the max is 40 basis points
Do MF markups go entirely to the dealership?
-The MF markup is the interest rate on a lease, so the bank (BMW Financial Services) gets the interest, and they pay the dealer a percentage or fixed dollar amount based on whatever agreement they have with the dealers.
Is there any reason a dealership would prefer offering a larger discount and higher MF or a smaller discount and buyrate?
-Discount is usually a “front-end” item whereas the money factor is a “back-end” item for a dealer’s financials. Depending on the dealer and their financials for the month, quarter, year, etc., and how they are paid and in turn how they pay their sales people and their finance folks, it may be more beneficial for them to do a larger discount in exchange for a higher rate, or vice versa. There is no one-size-fits-all answer to this one.
Can I request that a dealership markup the MF and offer a larger discount so that I can meet a purchase price cap?
-You can request whatever you like, but whether that makes sense for the dealer is a different question and one that depends on various factors such as those in the response to the prior point 
What would happen if MF was marked up and I purchased the vehicle before the end of the lease?
-For you, nothing. But if this is done within the first 4 months (120 days) of the contract being funded, the dealer could get charged back for whatever incentives they received from BMW Financial for the markup.
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