# Lease Payoff, Customer Purchase Promotion



## jkjjpc (Sep 6, 2005)

The lease on my 2017 540i ends in April. I have been looking at options for a replacement car, but have not settled on anything in particular. Out of curiosity I logged on to BMWFS to check the payoff. I generated the payoff statement and was surprised to see a line for "Customer Purchase Promotion" that listed a value that is about 15% of the balance on the account (negotiated residual plus three remaining payments). The payoff amount is about $5K more than what a friend who is a car dealer quoted as the likely auction price and about the same as what Edmunds estimates the "private party sale" price would be.

I was not aware that BMW made these adjustments. Anyone else with this experience. I am very likely to purchase the car, it is in great shape with only 19,000 miles and still has over a year left on the original warranty.

Am I missing anything here?


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## 1968BMW2800 (Aug 13, 2016)

jkjjpc said:


> I generated the payoff statement and was surprised to see a line for "Customer Purchase Promotion" that listed a value that is about 15% of the balance on the account (negotiated residual plus three remaining payments).
> 
> Am I missing anything here?


Are you saying that BMWFS is offering you a 15% reduction from residual if you wish to purchase the vehicle?

Jon and Greg are offering to assist people who are considering lease-end buy outs. I'd reach out to one of them just to get their take on your options.


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## jkjjpc (Sep 6, 2005)

Yes, 14.4% reduction from account balance, which is contract residual plus the remaining three payments, 15% reduction for the contract residual (without the final three payments).


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## 1968BMW2800 (Aug 13, 2016)

jkjjpc said:


> Yes, 14.4% reduction from account balance, which is contract residual plus the remaining three payments, 15% reduction for the contract residual (without the final three payments).


Thanks.

I was offered net $700 lease-end buyout discount on a $27,300 residual last October. 

Your 15% sort of beats the _2.5%_ discount they offered me. Wholesale auction value of mine was, at best, estimated $18K. Dynamic pricing offer to my dealer was over $22K.

My car had 20,000 easy miles and brand new Pirellis on it when I turned it in and the dealer sent it off to the auction....


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## namelessman (Dec 23, 2004)

jkjjpc said:


> Yes, 14.4% reduction from account balance, which is contract residual plus the remaining three payments, 15% reduction for the contract residual (without the final three payments).


15% off on your 5-series is like $5k off then? It sounds like a good deal if your intent is to keep the car.

My guess is that this deal will be active till lease end(do call BMWFS to confirm), so u should have 3 months to consider. Regardless the last 3 payments are not waived, so it makes sense to wait it out and ponder on it.


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## Jon Shafer (Dec 15, 2001)

1968BMW2800 said:


> Are you saying that BMWFS is offering you a 15% reduction from residual if you wish to purchase the vehicle?
> 
> Jon and Greg are offering to assist people who are considering lease-end buy outs. I'd reach out to one of them just to get their take on your options.


Congrats if they have offered you a special reduction! I am here to help take care of Bimmerfest members and guide them through the process, the only caveat I am limiting to range/scope to California resident who are able to visit me at the dealership here in SoCal to execute the transaction..

If you are East Coast, I recommend reaching out to the closest Bimmerfest sponsor.

:thumbup:


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## jkjjpc (Sep 6, 2005)

Jon Shafer said:


> Congrats if they have offered you a special reduction! I am here to help take care of Bimmerfest members and guide them through the process, the only caveat I am limiting to range/scope to California resident who are able to visit me at the dealership here in SoCal to execute the transaction..
> 
> If you are East Coast, I recommend reaching out to the closest Bimmerfest sponsor.
> 
> :thumbup:


Jon, thanks. Per my read of the payoff letter, there is no need for involvement of a BMW dealer. I simply need to send a certified check along with an odometer statement and BMWFS will send the clear title. I would then need to go to the local DMV to register the car and pay taxes.

I was mainly interested in learning how unusual this promotion might be and why it was offered? Perhaps the auction value of the 540i is low enough that BMW hopes to increase revenue by selling to the leasee?

I am seriously considering the offer. While the offer price is still well above auction value for the car, it appears to be in line with the value of the car from a private sale or buying a similar car from a dealer. The car is in very good shape and I have the advantage of knowing its history and how it has been treated. Plus, I have not been able to identify a replacement car that I am excited about. Buying the car will give me more time to consider options as new cars are released over the next year or two.


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## namelessman (Dec 23, 2004)

jkjjpc said:


> Jon, thanks. Per my read of the payoff letter, there is *no need for involvement of a BMW dealer.* I simply need to send a certified check along with an odometer statement and BMWFS will send the clear title. I would then need to go to the local DMV to register the car and pay taxes.


Since BMWFS is OK with an odometer statement (signed by lessee) without inspecting the car before clear title transfer, it does look like Greg is correct that lease buyout can be done remotely/out-of-state without physically inspecting the car.


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## Jon Shafer (Dec 15, 2001)

namelessman said:


> Since BMWFS is OK with an odometer statement (signed by lessee) without inspecting the car before clear title transfer, it does look like Greg is correct that lease buyout can be done remotely/out-of-state without physically inspecting the car.


I've been to Law School, understand what prudence is.

He can do whatever he wants.


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## namelessman (Dec 23, 2004)

Jon Shafer said:


> I've been to Law School, understand what prudence is.
> 
> He can do whatever he wants.


Would BMWFS also get into trouble without physically inspecting the odometer reading?


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## Jon Shafer (Dec 15, 2001)

namelessman said:


> Would BMWFS also get into trouble without physically inspecting the odometer reading?


If somebody is fraudently entering data on a Federal Odometer Disclosure and somebody notified relevant legal entity wouldn't they be exposed to criminal prosecution as expressly stated on the federal form?

:dunno:

In practice, who knows. It's not my problem, because I choose to conduct business to the letter of the law. Many car people haven't/don't, hence forms like this.

One could argue that a key read should qualify as an odometer reading, that wouldn't be a problem, as long as the dealer doing the deal is the one making the disclosure.

In any case this thread is not worth spending any more time on. There are plenty of important things to discuss.


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## namelessman (Dec 23, 2004)

jkjjpc said:


> Jon, thanks. Per my read of the payoff letter, there is no need for involvement of a BMW dealer. I simply need to send a certified check along with an *odometer statement* and BMWFS will send the clear title. I would then need to go to the local DMV to register the car and pay taxes.


Does BMWFS provide a link to BMWFS's lessee odometer disclosure form?

A typical lessee odometer disclosure form only requires lessee to sign, so the lessor(e.g. BMWFS) does not seem to be legally responsible.

So if BMWFS in black and white instructs lessee to send in signed odometer statement without dealer involvement, then BMWNA's lawyers must have thoroughly vetted the process, and there is no legal issue to follow the process.

https://wcm.adesa.com/wps/wcm/conne...=url&CACHEID=23fec6004752378b8c64cc741ae03c37


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## ard (Jul 1, 2009)

IMO any rules around 'physically inspecting a car' are due to the dealer or manufacturers decisions. They are not legal or federal requirements.

I can think of two reasons BMW (or any marque) has these requirements in place - to make compliance w federal laws more complete and less subject to screw up...AND ..to protect dealership territories and make it more difficult (impossible) for any given dealer to do business with a customer not in their territory.

You can guess which of the two I believe is 100% the actual reason....


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## namelessman (Dec 23, 2004)

ard said:


> IMO any rules around 'physically inspecting a car' are due to the dealer or manufacturers decisions. They are not legal or federal requirements.


In BMWFS case, the lessee signs lessee odometer form under penalty of perjury.

There is a second step that involves lessee to eventually register with CA(e.g.) DMV, and the Vehicle/Vessel Transfer and Reassignment Form REG 262 does need both transferor(BMWFS?) and transferee(original lessee, who now becomes new owner) to sign under penalty of perjury.

But BMWFS does have an out on this, with lessee's signed(under penalty of perjury) odometer form on file and on hand.

Another confusing point is, if BMWFS says no dealer involvement is OK, then how will involving the dealer help in lease buyout? :dunno:


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## namelessman (Dec 23, 2004)

ard said:


> IAND ..to protect dealership territories and make it more difficult (impossible) for any given dealer to do business with a customer not in their territory.


If dealer does get involved, there will be a legal issue with dealer signing as "tranferor"(as alluded by Jon).

Do note odometer snapshot per physical key is based on last usage of the key. So if lessee does mail in a key, the dealer will have to check the timestamp of key read to make sure it is not, say, 2 weeks old.

Or dealer requires lessee to sign a lessee odometer form just like BMWFS does.

In my mind dealers should not involve with remote lease buyout, just let BMWFS handle those remote cases, *especially when BMWFS runs 15% off promo*.


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## 1968BMW2800 (Aug 13, 2016)

namelessman said:


> *especially when BMWFS runs 15% off promo*.




So I am offered 2.5%, as it is explained to me by the helpful folks at Financial Services that the auction system has been established at great effort and expense as a way to give franchised dealers equal and fair shots at inventory at wholesale market prices, etc.

I read articles that discuss how up in arms the BMW Dealers Forum members are -- they want to hold gross and they want to protect the "value" of the BMW brand.

Manufacturers load more and more money back of invoice in an attempt to support dealer retail sales profitability and they claim to only offer discounts on lease returns to dealers through the Dynamic Pricing system. That system is supposed to "protect the integrity" of BMWFS lease contracts, wherein the buyer agrees in the contract to an option to purchase the vehicle at lease end for residual.

Right.

The invisible hand of the marketplace is much more dynamic and the reality is the ongoing, relentless need to keep the metal moving.

An unintended consequence is a 15% discount offer to a lease returnee in the same world where other lease customers have been told, for the sake of the integrity of the system, there can be no substantial discounting to leasees at lease end...

End of rant. Thank you for reading.:bawling:


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## Squeak (Sep 13, 2014)

namelessman said:


> In BMWFS case, the lessee signs lessee odometer form under penalty of perjury.
> 
> There is a second step that involves lessee to eventually register with CA(e.g.) DMV, and the Vehicle/Vessel Transfer and Reassignment Form REG 262 does need both transferor(BMWFS?) and transferee(original lessee, who now becomes new owner) to sign under penalty of perjury.
> 
> ...


Question I had in the other thread, with no answer. Only thing I can think of is to help promote CPO warranty.


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## Squeak (Sep 13, 2014)

1968BMW2800 said:


> So I am offered 2.5%, as it is explained to me by the helpful folks at Financial Services that the auction system has been established at great effort and expense as a way to give franchised dealers equal and fair shots at inventory at wholesale market prices, etc.
> 
> I read articles that discuss how up in arms the BMW Dealers Forum members are -- they want to hold gross and they want to protect the "value" of the BMW brand.
> 
> ...


It is not a global 15%. The discounts are based upon the models, incoming inventory, and residual rate versus market values.


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## 1968BMW2800 (Aug 13, 2016)

Squeak said:


> It is not a global 15%. The discounts are based upon the models, incoming inventory, and residual rate versus market values.


Exactly!!

Makes total business sense. Also makes total prevaricators out of the good people at BMWNA who change the rules and move the goal posts.

They give us inflated residuals and subvented lease money rates, which we love. Even though, de facto, those subsidized leases are concealing the lower true market value of the leased vehicles.

Then when the reality of the true market value of the cars comes into play at lease end, they vacillate between allowing the market to work on its own, which would mean we could buy the cars at lease end for whatever the market determines is the fair price -- or they can try this, and then try that, in a death spiral scramble to "manage" the market.


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## namelessman (Dec 23, 2004)

1968BMW2800 said:


> The invisible hand of the marketplace is much more dynamic and the reality is the ongoing, relentless need to keep the metal moving.
> 
> An unintended consequence is a 15% discount offer to a lease returnee in the same world where other lease customers have been told, for the sake of the integrity of the system, there can be no substantial discounting to leasees at lease end...


This is analogous to Tesla cutting MSRPs and enraging large number of Tesla faithfuls.

Your statement is valid, namely, the need to move metal(and to survive) is relentless, and in the process, loyalty and ego and sensibility(?) of customers take a backseat.


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## namelessman (Dec 23, 2004)

1968BMW2800 said:


> So, has this penalty thing changed? Or is it still in place? If it is still in place, is BMWFS basically saying to dealers that, if dealers buy for dynamic price and resell to the original leasee, they pay the penalty yet if BMWFS sells to the original leasee for a discount, in competition with dealers, that's now okay?


My guess is that penalty is still in play.

Do note the penalty takes effect when the price paid by lessee is less than BMWFS's lease buyout price(which at one point has $4k discount for 3-series, and now $6700 discount for OP's case).

So in this latest incarnation of BMWFS direct buyout, as long as dealer still sells at "RV minus discount "or above, the penalty still should not kick in.

For lessee, dealing directly with BMWFS can be simpler than involving another party(e.g. dealer) unless CPO(e.g.) is needed.


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## 1968BMW2800 (Aug 13, 2016)

namelessman said:


> My guess is that penalty is still in play.
> 
> Do note the penalty takes effect when the price paid by lessee is less than BMWFS's lease buyout price(which at one point has $4k discount for 3-series, and now $6700 discount for OP's case).
> 
> ...


Excellent summary.

Soooo, if dynamic price is _less _than BMWFS promotional discounted price, the dealer can buy for dynamic price, sell to original leasee for promotional price and everybody sort of wins. No penalty.

In my last deal in October of 2019, the dynamic price was less than residual but so close to high retail that the car went to auction, where it was worth way less than dynamic price. And the $700 discount from residual I was offered from Financial Services nudged me right into a new lease, which, I imagine, is what everybody (including me) wanted to see happen.


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## namelessman (Dec 23, 2004)

1968BMW2800 said:


> In my last deal in October of 2019, the dynamic price was less than residual but so close to high retail that the car went to auction, where it was worth way less than dynamic price


My impression is that BMW lease auctions are mostly restricted to BMW dealers.

So dealers buy at depressed auction prices and resell at FMV to new customers, or RV minus discount to original lessees.

Either way BMWFS is donating free money to dealers, so why not try to sell direct to original lessees?


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## namelessman (Dec 23, 2004)

quackbury said:


> From Jon's posts and Greg's posts, I gather there is some financial incentive / spliff for a dealer to facilitate / broker these transactions. How does that work? Does a dealer (maybe the originating dealer?) get a little something on every retail conversion? If not, why would Jon and Greg spend any of their valuable time on these conversions?


My thinking is that dealer benefits when lessee buys back leased car indirectly through dealer.

E.g. dealer buys back leased car from auction at depressed price that is *below *"RV minus discount" that BMWFS offers for lease buyout.

The auctioned car can be sold back to original [email protected] minus discount, to maintain integrity of lease contract?!? .....

The profit from an indirect lease buyout can be a lot more than a $500 over invoice deal.


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## Squeak (Sep 13, 2014)

namelessman said:


> My thinking is that dealer benefits when lessee buys back leased car indirectly through dealer.
> 
> E.g. dealer buys back leased car from auction at depressed price that is *below *"RV minus discount" that BMWFS offers for lease buyout.
> 
> ...


Why would BMWFS allow that to happen, because now they take that spread hit, and allow the dealer to profit on it?


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## Jon Shafer (Dec 15, 2001)

If a dealer is involved isn't there a high probability or likelihood that the customer will purchase something _extra?_

For example, an extended service contract? Aren't these intended to be profit centers for a dealership's F&I Dept.?

Doesn't taking good care of good people increase the chances that the next time that they are in the market for a _new_ BMW that they will consider that dealership?

Wouldn't in make sense for someone with a great reputation and longstanding history of superior Customer Service for them to spread good-will? To pay back for the great fortune that has been bestowed upon them?

Do you always have to make the dealer be the stealer, or can there not just be genuinely good people on this Earth, people who are not driven purely by profit motive? People like helping other people.

:dunno:


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## 1968BMW2800 (Aug 13, 2016)

Jon Shafer said:


> This thread really making me wish I never started it.


Jon, I for one am really glad you started the conversation in the other thread. You were clear that you were offering assistance in negotiating the process of lease-end buyouts.

What I'm fascinated with is the dynamic -- BMW dealers are constantly talking to BMWNA about profitability concerns, criteria for back end payments, and keeping the playing field level.

BMWNA seems unsure of the best way to manage resale of lease returns. Do they give retail customers (who have completed a lease and are likely in the market for a replacement vehicle) extra incentive to purchase their leased cars? Do they nudge them into a new lease? Do they channel whatever the transaction is through the dealer, creating more retail opportunities for the dealers who sell BMWs to retail customers? Or do they_ horn in on the action _by offing discounts to lease customers at lease end -- discounts that exclude the dealer from the transaction and, in fact, put dealer's resale inventories in competition with BMWFS discounted lease end deals to retail customers?

if I were a BMW Center owner I would want _all _resale transactions channeled through me. I would not want any penalty for selling a returned car to the original leasee -- I'd want to be able to have first shot at buying the car at true market wholesale and then have the opportunity to offer that car to the original leasee at a fair price that provided profit opportunity for me and a good deal for the customer.

Jon, it's not about "stealerships" in my mind. I apologize if I've said anything that sounded like that.

For me, it's about examining the complexities of how BMWNA manages its relationships with retail customers and with BMW dealers. I think sometimes BMWNA's efforts to micro-manage the economics of BMW retailing are counter-productive, and I think getting in the middle of BMW dealers' retail relationships is problematic.

I think BMWNA and BMWFS should be in the business of helping their franchised dealers move BMW metal.

I also think, deep in the hearts of the BMW Mothership, they would rather have dealers be delivery and service centers, with the sales end managed by the Mothership.

So we see the ambivalence with this strange hokey-pokey, wherein BMWNA has one foot in and one foot out in their relationships with retail lease customers. And it is the dealers who get shaken all about, IMHO.

Jon, your insights about this are appreciated.


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## Jon Shafer (Dec 15, 2001)

1968BMW2800 said:


> Jon, your insights about this are appreciated.


I have to apologize. My post above was more about sharing my internal process in thinking about this topic. I don't mean to question anyone..

Your points are all extremely valid and well laid-out.

I have to run, off to the gym. I am also behind on responding to quote requests, I don't want to get busted posting when I should be structuring leases.. 

Will try to reply more in depth this evening.

:angel:


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## 1968BMW2800 (Aug 13, 2016)

Jon Shafer said:


> I have to apologize. My post above was more about sharing my internal process in thinking about this topic. I don't mean to question anyone..
> 
> Your points are all extremely valid and well laid-out.
> 
> ...


Thanks.


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## Squeak (Sep 13, 2014)

I think part of the challenge is that some of your postings have a vague feel to them (the ***8216;dunno***8217; emoji doesn***8217;t help) about whether you are stating facts, or hinting at things that we should read between the lines because you can***8217;t tell us the full story. 

Couple that with a group of posters that are hyper-analytical and wanting to find the absolute best deal (without damaging a human in the process), it makes for a mix of expecting answers, and not really sure if that is what we are getting. 

Keep doing what you are doing ***8212; just wanted to give some insight as to why these controversial topics tend to spin a bit.


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## Squeak (Sep 13, 2014)

1968BMW2800 said:


> Jon Shafer said:
> 
> 
> > This thread really making me wish I never started it.
> ...


See, that is where there is confusion for some.

Negotiating the process (as in helping to complete it)

Or

Negotiating the lease-end buyout number, with the implication that there is room to move on that number.

I am assuming you and he meant the first, but I think it is fair to assume others read the second and were confused.


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## namelessman (Dec 23, 2004)

Jon Shafer said:


> If a dealer is involved isn't there a high probability or likelihood that the _customer will purchase something extra?_
> 
> For example, an extended service contract? Aren't these intended to be profit centers for a dealership's F&I Dept.?


F&I's usually are number one, while the used car business is also quite robust. Lease end CPO'ed units bought at distressed auction prices and sold at FMV should be a great one-two punch for local dealers and sales. However the house is changing the rules, and local sales are affected.



Jon Shafer said:


> Do you always have to make the dealer be the stealer, or can there not just be genuinely good people on this Earth, people who are not driven purely by profit motive? People like helping other people.
> 
> :dunno:


As much as dealers/CAs are navigating and negotiating, the same is true of customers navigating and negotiating, so a respectful and transparent discussion like this thread is gold, and really missed, from bimmerfest.

Without understanding the moving process it is hard for both sides to operate smoothly.

Technically if the process allows customers to pay the same RV minus discount, either direct through BMWFS or indirect through dealer, then why not go through one's favorite CA for a win-win for both sides?

And as alluded above, "customer will purchase something extra", if customers choose not to purchase anything extra, hopefully those customers will be liked and helped just the same. :thumbup:


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## namelessman (Dec 23, 2004)

Squeak said:


> Why would BMWFS allow that to happen, because now they take that spread hit, and allow the dealer to profit on it?


It depends on the rules of BMWFS, but in practice it is likely lose-lose from both sides.

E.g. lease end triggers charges(disposition fee minimum) that lessee needs to pay, that already pushes lessee's price above RV minus discount in best case scenario.

And dealer has to do the legwork to get same car from auction.


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## namelessman (Dec 23, 2004)

Jon Shafer said:


> I have to apologize. My post above was more about sharing my internal process in thinking about this topic. I don't mean to question anyone..


Please pardon some of us who go through similar internal thought processes on this too.:angel:


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## Jon Shafer (Dec 15, 2001)

namelessman said:


> Please pardon some of us who go through similar internal thought processes on this too.:angel:


Of course...

:bigpimp:


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## namelessman (Dec 23, 2004)

Squeak said:


> Question I had in the other thread, with no answer. Only thing I can think of is to help promote CPO warranty.


Is CPO possible on a BMWFS direct lease buyout?

CPO should be on dealer inventory, and that implies paying disposition fee and other lease end charges if applicable.

Has BMWNA changed the rules to allow lease end buyout to qualify for CPO?


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