# Disadvantages of Owner's Choice



## JDW_ATX (Nov 15, 2016)

Hello - I'm new here. I'm looking into getting my first BMW and have what seems like a good OC deal from my local dealership (TX). I have researched traditional lease vs. OC extensively, but I can't seem to determine any major disadvantages of going with OC. If I plan to turn the car in at the end of the lease either way, why would I not opt for the lower monthly payments that come with the OC deal?

Any insight is greatly appreciated!


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## jjrandorin (May 8, 2013)

JDW_ATX said:


> Hello - I'm new here. I'm looking into getting my first BMW and have what seems like a good OC deal from my local dealership (TX). I have researched traditional lease vs. OC extensively, but I can't seem to determine any major disadvantages of going with OC. If I plan to turn the car in at the end of the lease either way, why would I not opt for the lower monthly payments that come with the OC deal?
> 
> Any insight is greatly appreciated!


Owners choice is not a lease, its a purchase contract with a ballon payment that you can turn in at the end.

OC is only offered in lease unfriendly states. It does not have a money factor (has interest rate like a regular loan). Just think of it as a regular car purchase with a balloon payment at the end that you can walk away from.

You can trade the car in (no worries about lease pull ahead) as YOU are listed as the owner of the car unlike BMW FS. No idea if owners choice comes with gap insurance or not. There is no pull ahead opportunities if you are on owners choice at the end of the deal, because there is no lease.


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## Canhouter (Oct 29, 2013)

OC does not come with gap insurance - I am in Georgia and am on an OC. That's why OC does not have the 925 lease acquisition fee. One advantage of the OC is potentially being able to lower the sales tax on the next vehicle if you decide to trade it in and the terms are favorable. I doubt this will ever be the case though since residuals are no where near the actual market value.


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## Canhouter (Oct 29, 2013)

However the lack of the lease acquisition fee is very much made up on the crazy doc fees - 699 here in GA (non negotiable) and pretty much the same insane rates in FL and TX IIRC


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## jjrandorin (May 8, 2013)

Canhouter said:


> OC does not come with gap insurance - I am in Georgia and am on an OC. That's why OC does not have the 925 lease acquisition fee. One advantage of the OC is potentially being able to lower the sales tax on the next vehicle if you decide to trade it in and the terms are favorable. I doubt this will ever be the case though since residuals are no where near the actual market value.


There is no lease acquistion fee on OC because its not a lease (so there can not be a lease acquisition fee). It is a purchase contract.


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## JDW_ATX (Nov 15, 2016)

Thanks for all of the insight! I confirmed with my dealer that OC does not include GAP insurance. However, I can get this added to my policy for a tiny increase in my overall premium.

Outside of that, I'm just wondering if there is something that I'm missing. Seems like a no-brainer to go with the OC over the lease.


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## jjrandorin (May 8, 2013)

JDW_ATX said:


> Thanks for all of the insight! I confirmed with my dealer that OC does not include GAP insurance. However, I can get this added to my policy for a tiny increase in my overall premium.
> 
> Outside of that, I'm just wondering if there is something that I'm missing. Seems like a no-brainer to go with the OC over the lease.


In a state like texas that charges tax on the entire value of the lease (instead of just the portion you are paying) and then charges tax again on transfer of sale, I think OC is a nice alternative from what I hear.

Thats why BMW offers it in lease unfriendly states. Just know that its NOT a lease, there is no "pull ahead" or anything like that possible on OC. Nothing from a lease applies, because its not a lease. It is a purchase with a ballon payment that you can turn in at the end. I also dont think you can re negotiate the value at the end of the OC like you can on a lease (not sure of this) because you already own it.

On a lease, you can negotiate the price to buy it at the end because you dont own it, you are renting it and can turn it back in. On OC you already own it with a ballon payment at the end. I dont think there is any negotiating the price at the end because why would there be.. you already own it, and already OWE that money... so you can re finance the ballon, pay it off in full, or turn the car in, but I dont think there is any re negotiating anything at the end.

I mention this because many people lease, then re negotiate the buyout at the end of the lease if they want to keep the car... like I said I dont believe you will be doing that with owners choice because you already own it.


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## TXPearl (Apr 16, 2010)

OP, this question comes up from time to time. Read this thread.....

http://www.bimmerfest.com/forums/showthread.php?t=901974

Basically, OC removes the double taxation at contract term if you decide to keep the car. However, no option to use MSDs for OC. And as already stated, no GAP, but no Acq fee on OC.


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## jjrandorin (May 8, 2013)

TXPearl said:


> OP, this question comes up from time to time. Read this thread.....
> 
> http://www.bimmerfest.com/forums/showthread.php?t=901974
> 
> Basically, OC removes the double taxation at contract term if you decide to keep the car. However, no option to use MSDs for OC. And as already stated, no GAP, but no Acq fee on OC.


Thanks for posting that... that thread is where I got what little knowledge I have on how Owners choice works, but I did not know how to find it.


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## Arciga18 (Mar 3, 2012)

jjrandorin said:


> In a state like texas that charges tax on the entire value of the lease (instead of just the portion you are paying) and then charges tax again on transfer of sale, I think OC is a nice alternative from what I hear.
> 
> Thats why BMW offers it in lease unfriendly states. Just know that its NOT a lease, there is no "pull ahead" or anything like that possible on OC. Nothing from a lease applies, because its not a lease. It is a purchase with a ballon payment that you can turn in at the end. I also dont think you can re negotiate the value at the end of the OC like you can on a lease (not sure of this) because you already own it.
> 
> ...


Ilinois Resident Here,

Not to mention I live in Chicago which is a whole different problem with taxes........

ANYWAY

Pull Aheads DO apply to OC contracts. Been there done that.

As far as nothing from a Lease applying, that's not really true. The residual is the same. The base money factor can be converted to an APR. In my experience, dealers have always marked it up by 1%.

I have never been able to get a Chicagoland dealer to budge on the APR.


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## GumboChief (Feb 7, 2007)

Orland Park BMW (Zeigler) came at me with 4.25% on initial quote.
I said no go. Base rate or I'm gone. I received the base 3.25%



Arciga18 said:


> Ilinois Resident Here,
> 
> Not to mention I live in Chicago which is a whole different problem with taxes........
> 
> ...


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## jjrandorin (May 8, 2013)

Arciga18 said:


> Ilinois Resident Here,
> 
> Not to mention I live in Chicago which is a whole different problem with taxes........
> 
> ...


It would not be a pull ahead, right (because you own it). It would be selling the car to the dealer... not ending the lease early. Maybe its a matter of symantecs but on a lease you are obligated to carry the lease to the end or get someone to assume it (or get the dealership to buy it).

On an OC you own the car, so you would simply be selling it to the dealership (not being pulled ahead)... or am I missing something? Residual value is the same, but there is interest rate, not money factor (its converted but its still called interest rate not money factor). Markups are similar, but again its not a lease so its interest and not money factor.


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## ard (Jul 1, 2009)

semantics....

You could "pull ahead the planned sale of the car back to BMW"..as opposed to 'piull ahead the return of the lease'...

What matters is BMWs underlying policy, not what they call the various features.


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## Arciga18 (Mar 3, 2012)

GumboChief said:


> Orland Park BMW (Zeigler) came at me with 4.25% on initial quote.
> I said no go. Base rate or I'm gone. I received the base 3.25%


You are my hero.


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## TXPearl (Apr 16, 2010)

ard said:


> semantics....
> 
> You could "pull ahead the planned sale of the car back to BMW"..as opposed to 'piull ahead the return of the lease'...
> 
> What matters is BMWs underlying policy, not what they call the various features.


I'm skeptical of many of the "pull aheads" reported here, especially the discretionary ones. A dealer can always get you out of any payment early.......and bury it in the deal. And even those officially funded by BMWFS could be a "cover up to 3 lease payments for existing lessees, or offer $1000 cash for new customers" situation.


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## jjrandorin (May 8, 2013)

ard said:


> semantics....
> 
> You could "pull ahead the planned sale of the car back to BMW"..as opposed to 'piull ahead the return of the lease'...
> 
> What matters is BMWs underlying policy, not what they call the various features.


"pull aheads" are usually sub funded by BMW FS in one manner or another (dealer getting a lower price on the car to purchase it from BMW FS). "Selling" the car is the dealer offering you a price on the car themselves.

So a pull ahead is sometimes incentivized and selling a car is not. A dealer can ALWAYS get someone out of a lease early.. by buying the car (usually the sales price will not be something the person leasing the car wants because of the inflated residual value).

On an OC since there is no lease and no "residual value" (just a ballon payment at the end of the lease), it would always be the dealer buying the car.

There was a post here earlier this year of someone in texas complaining (loudly if I remember) that they were not being allowed to pay the rest of their lease payments and turn the car in early. They had like 6-8 payments left, and wanted out of the car, and were willing to pay the last lease payments and drop the car of at a dealership. There was a lot of confusion, because you CAN do that. If you are in a lease you can simply make all your lease payments, and the lease end disposition fee, and get out of the car if you want to do that.

They wanted to pay all the money and were not able to drop off the car. They were told that they had to keep the car in their driveway until the end of their "lease", and no one (ninong included) could understand why.

Turned out the OP in that thread did NOT have a lease, they had an owners choice contract, which is why they simply could not "make their last 6-7 lease payments and drop the car off early".

So, I think its important that its not a "pull ahead" its a "sale" on an owners choice, and its not subvented by BMW FS.


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## TXPearl (Apr 16, 2010)

I see no reason why BMWFS couldn't offer the equivalent of a subsidized pull ahead for Owner's Choice just like they do a lease. They probably don't bother with it because it's a small subset of their lease business and they'd have to write a separate set of rules because the mechanics are slightly different.

Other than that, the economics are identical to a lease. The same, subsidized residuals are used so they're upside down at the end, and buyers usually walk away and get another lease/OC.


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## Canhouter (Oct 29, 2013)

GumboChief said:


> Orland Park BMW (Zeigler) came at me with 4.25% on initial quote.
> 
> I said no go. Base rate or I'm gone. I received the base 3.25%


+1 I got into an OC in GA last Nov - was quoted 4% but stuck to base rate MF 0.00125 at the time and got the 3% APR


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## Arciga18 (Mar 3, 2012)

jjrandorin said:


> It would not be a pull ahead, right (because you own it). It would be selling the car to the dealer... not ending the lease early. Maybe its a matter of symantecs but on a lease you are obligated to carry the lease to the end or get someone to assume it (or get the dealership to buy it).
> 
> On an OC you own the car, so you would simply be selling it to the dealership (not being pulled ahead)... or am I missing something? Residual value is the same, but there is interest rate, not money factor (its converted but its still called interest rate not money factor). Markups are similar, but again its not a lease so its interest and not money factor.


A couple things came to mind.

The Owners Choice is a retail finance contract with a balloon payment equal to the residual value when the contact matures (for example 36 months). The owner has 3 options at the end of the term

-Write a big fat check for the residual value. Own the car outright
-Refinance the balloon amount.
-Turn the car in to the dealer + pay the $350 disposition fee + wear and tear charges.

Yes, the car is titled under your name, but BMWFS still holds that lien. You never own the car.

BMWFS still has an incentive to get you into a new car because there is still that risk that the customer will walk away/ hop brands/ etc. Yes, BMWFS can offer the dealer a different price then the payoff amount on the loan. This is no different then what BMWFS does on leases.

All this to say, the Owners choice program is similar to a lease. However, there are differences like no GAP, no MSDS

......Sometimes people confuse this program with BMW select which does not offer the customer the option to walk away.


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## gohawks23 (Oct 27, 2008)

Just negotiate and most Chicago dealers will give you base rate on lease that I've found.

Big downside to OC is 3.25% interest as compared to about 2% on a lease with base rate and full MSD...also pay full taxes on purchase price...lease has benefit that taxation can change if you leave a tax heavy area like Chicago where I live...even with all of Chicago/IL taxes a lease is less expensive when looking at total cost of ownership over 3 year term.


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