# Owners Choice vs Leasing



## MTech8 (Oct 24, 2006)

Hi. I'm looking into getting into an i3.

Wanted some feedback at what the pros/cons are between Owners Choice and Leasing.

What I currently understand:
1. Both OC (Owners Choice) and L (Leasing) provide lower payments that outright Financing.
2. Both OC and L give option to walk away or buy the car (Balloon vs Residual).

So what's the benefit/disadvantage of OC vs L?

I'm guessing in OC calculations are based on an interest rate and with L it's based on a money factor.

Is there any difference in how the Tax Credit it applied?

Thanks


----------



## Stevej2001 (Jan 26, 2008)

I'm no expert on this but I know that with Owners' Choice, the 'residual' needs to be paid at the end of the term. If the car's value is greater than this number, you come out ahead. If its value is lower than the baloon payment, you have to make up the difference. As I understand it, Owners' Choice is a loan, just like standard financing. In the latter, you agree to make each payment. In OC, you do as well, the the final baloon is the last payment you have to make. You take on the risk if the car is worth less than the baloon. In a lease, you really do walk away, regardless of the value of the car at the end of the term.


----------



## MTech8 (Oct 24, 2006)

Thanks for the information. I didn't realize that about the residual difference. So with Owners Choice, I can walk away from not buying the car at the end of the payment term, but if it's worth less than the residual, I need to pay that difference.

If that were the case, than there is less risk for the lending company as they can offer higher residuals (lower payments), right?


----------



## Arciga18 (Mar 3, 2012)

Owners Choice is available in Texas and Illinois due to the terrible tax laws in these states.


I live in Chicago and have an Owners Choice on my F30. Where I live, you have to pay tax on the entire value of the car regardless if it's a lease, cash, finance, etc.


At the end of the term, I can walk away just like a lease. If I choose to keep the car, I will have to pay the residual value just like a lease. That final balloon amount can be re-financed, or paid in cash.


----------



## spinnaker7 (May 9, 2007)

With Owners Choice, the car is titled in your name. With a lease, the car is not titled in your name. 
At the end of the term with an owners choice, you can 1. Turn the car back in, just like on a lease, 2. Pay the balloon amount and keep the car, 3. Refinance the ballon amount and keep the car. 

The advantage of the owners choice in Texas is that you don't have to pay Personal Property Tax on the car (whereas if you lease in many counties you will be subject to the tax), and at the end of the term, you don't have to pay sales tax again if you decide to keep the car. With a lease, you would have to pay sales tax again if you choose to keep the car.


----------



## [email protected] (Jun 28, 2012)

Stevej2001 said:


> I'm no expert on this but I know that with Owners' Choice, the 'residual' needs to be paid at the end of the term. If the car's value is greater than this number, you come out ahead. If its value is lower than the baloon payment, you have to make up the difference. As I understand it, Owners' Choice is a loan, just like standard financing. In the latter, you agree to make each payment. In OC, you do as well, the the final baloon is the last payment you have to make. You take on the risk if the car is worth less than the baloon. In a lease, you really do walk away, regardless of the value of the car at the end of the term.


100% incorrect ... Sorry

Sent from BimmerApp mobile app


----------



## [email protected] (Jun 28, 2012)

MTech8 said:


> Hi. I'm looking into getting into an i3.
> 
> Wanted some feedback at what the pros/cons are between Owners Choice and Leasing.
> 
> ...


The residuals for OC and lease for the i3 is the same. Both options you can walk away free and clear.

The reason BMW is offering OC for the i3 is because of the $7500 federal tax credit for EVs. Since OC is a loan you will be able to apply for the credit. For a lease you will not be able to claim the credit. You will get the BMW Corporate EV credit of $4875.

Which programs works better for you is something you will have to calculate yourself.

Sent from BimmerApp mobile app


----------



## MTech8 (Oct 24, 2006)

Thanks Justin.

But with OC, if during the time where I choose to keep/return, if the car is valued less than the residual, do I need to make up the difference (as Stevej2001 mentioned)?

Besides the difference in federal tax incentive. How does the finance/interest charge differ between OC and L? Would one be better than the other?

How about payment? Would one be higher/lower than another?

Thanks


----------



## [email protected] (Jun 28, 2012)

MTech8 said:


> Thanks Justin.
> 
> But with OC, if during the time where I choose to keep/return, if the car is valued less than the residual, do I need to make up the difference (as Stevej2001 mentioned)?
> 
> ...


No, you do not need to make up the difference

The best thing to do is sit down with the dealer you are working the deal with to run the figures so you can see out it plays out numbers wise.

Looks like you are in my neck of the woods...which dealer are you currently working with? They should be able to explain the differences and details to you. If they can't you are working with the wrong seller.


----------



## mselheimer (May 24, 2010)

Other advantages with owner's choice over a lease

* You can sell it before the term is over (get a payoff quote just like a straight finance but you might be underwater; nevertheless, you can sell it which you can't with a lease and breaking leases before term is not possible, sometimes a dealer will help you get out of a lease a few months early if you are buying a new car from them that's the same make as the lease)
* No disposition fee like on a lease

OC is better if the finance terms are same/similar to lease Money Factor.


----------



## Haris335 (Dec 26, 2006)

mselheimer said:


> Other advantages with owner's choice over a lease
> 
> * You can sell it before the term is over (get a payoff quote just like a straight finance but you might be underwater; nevertheless, you can sell it which you can't with a lease and breaking leases before term is not possible, sometimes a dealer will help you get out of a lease a few months early if you are buying a new car from them that's the same make as the lease)


You can also sell your leased car anytime. same payoff/underwater concept applies. no penalties.


----------



## mselheimer (May 24, 2010)

Haris335, I believe you need BMWFS approval to swap/sell a lease to someone else. I could be wrong though. I remember reading that on this board a few years ago. You can't break a lease / walk away though.


----------



## Haris335 (Dec 26, 2006)

mselheimer said:


> Haris335, I believe you need BMWFS approval to swap/sell a lease to someone else. I could be wrong though. I remember reading that on this board a few years ago. You can't break a lease / walk away though.


I'm not talking about swapping. You can buyout your lease anytime you like. You can go to BMWFS site and request a buyout quote just like a loan (rough formula: residual + sum of remaining payments - interest portion of remaining payments).


----------



## CTSoxFan (Oct 20, 2006)

Haris335 said:


> I'm not talking about swapping. You can buyout your lease anytime you like. You can go to BMWFS site and request a buyout quote just like a loan (rough formula: residual + sum of remaining payments - interest portion of remaining payments).


This is 100% correct. Don't forget: your formula+disposition fee+sales tax (possibly)


----------



## MTech8 (Oct 24, 2006)

Thanks for the info.. greatly appreciated


----------



## EricTsang (Apr 12, 2012)

Is there a formula to calculate OC? It's not quite the same as a lease?

MSRP: $63,350
Cost: $52,600
$1000 down payment
MF: 0.00038
36 Months
10k/year
61% residual


----------



## TXPearl (Apr 16, 2010)

CTSoxFan said:


> This is 100% correct. Don't forget: your formula+*disposition fee*+sales tax (possibly)


There shouldn't be a disposition fee if you're paying it off early (or trading it in, which requires a pay off).


----------



## TXPearl (Apr 16, 2010)

EricTsang said:


> Is there a formula to calculate OC? It's not quite the same as a lease?
> 
> MSRP: $63,350
> Cost: $52,600
> ...


Not exactly the same as a lease payment, but close enough, so OK to use a lease calculator if that's all you have handy. The OC should be just slightly higher as payments are made at the end of each month as opposed to the beginning, thus more interest charges. It's really just a simple interest loan with a balloon amount that you have the option to walk away from.

It's been a few years since I've done an OC, but another advantage was no acquisition fee. Not 100% sure if that's still the case. However, I seem to recall the OC interest rate was just slightly higher than that implied by the lease MF, so that could be intentional to offset the lack of acq. fee.

What's up with that MF? Seems low, unless your decimal place is off (then it seems too high).


----------



## EricTsang (Apr 12, 2012)

I see. I guess my main question was if the balloon payment was residual x msrp or some other calculation. 

The MF is right, they quoted me 0.9 interest as owners choice


----------



## tturedraider (Nov 11, 2005)

EricTsang said:


> I see. I guess my main question was if the balloon payment was residual x msrp or some other calculation.
> 
> The MF is right, they quoted me 0.9 interest as owners choice


I can't say with 100% certainty, but I've always understood the MSRP based residual and the balloon to be the same. I've never seen anyone post otherwise.

Here's a useful loan calculator that allows you to solve for any unknown. I use this for leases, before taxes, because all a lease is is a balloon note where you return the car rather than paying the balloon. http://bretwhissel.net/amortization/amortize.html


----------

