# Customer Loyalty Quote Adder Fee



## Cobu (May 4, 2007)

Has anyone buying out there lease heard of or paid this fee ?


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## saranr (Dec 22, 2006)

No. For a 2010 335xi I just leased I did get a .0005 discount on the moneyfactor due to Owner loyalty program that was in place for May.


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## JW_BMW (Oct 3, 2007)

saranr said:


> No. For a 2010 335xi I just leased I did get a .0005 discount on the moneyfactor due to Owner loyalty program that was in place for May.


OPs question is not leasing a new car but rather buying out his current lease.

The answer is yes; there is a loyalty adder.


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## AMP (May 1, 2002)

This has been discussed here many times, but I don't know if any one ever used BMW's term for it (as you did).

The fee is completely legitimate, at least in the sense that your dealer isn't making it up. It is an actual cost that they pay to BMW if they sell the car back to the original lessee or other "related party or business." There is no legitimate way for them to get around paying this fee so it will be passed on to you.

The idea behind it is that BMWFS took such a huge hit in residual values that they simply can't sell the car to the original lessee at the residual value. They have always sold the cars to dealers at market, but the delta between market and residual was rarely as large as it is now. The point of the fee is to collect some of that delta from the original lessee should he decide to keep the car. After all the car is being sold for less than the residual even though a contract exists between BMWFS and the lessee for a much larger amount.

Calling it the Owner Loyalty Adder wasn't the greatest marketing idea...


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## JW_BMW (Oct 3, 2007)

AMP said:


> *Calling it the Owner Loyalty Adder wasn't the greatest marketing idea*...


:rofl: He/she must have came up with this tag on a Friday @ 4:59pm...


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## MarcusSanDiego (Jan 7, 2002)

AMP said:


> This has been discussed here many times, but I don't know if any one ever used BMW's term for it (as you did).
> 
> The fee is completely legitimate, at least in the sense that your dealer isn't making it up. It is an actual cost that they pay to BMW if they sell the car back to the original lessee or other "related party or business." There is no legitimate way for them to get around paying this fee so it will be passed on to you.
> 
> ...


Thanks for the great explanation.


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## Cobu (May 4, 2007)

Thanks for the info !


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## mclaren (Jan 5, 2005)

Ivan said in another thread he had to pay $1500 for the adder.


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## kyfdx (Aug 4, 2003)

JW_BMW said:


> :rofl: He/she must have came up with this tag on a Friday @ 4:59pm...


Funny... New lease contracts from GMAC have a purchase option price that is $2500 higher than the residual. (no kidding)..


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## MarcusSanDiego (Jan 7, 2002)

kyfdx said:


> Funny... New lease contracts from GMAC have a purchase option price that is $2500 higher than the residual. (no kidding)..


Now that is funny.


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## galahad05 (Aug 11, 2007)

Ha! At least they're honest. They tell you up-front that they expect the *real* market value of the car is something around $2500 (or more) lower than the residual they set.

Either that, or they really really want you to buy or lease a new car at lease turn-in.


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## HPIA4v2 (Mar 30, 2006)

AMP said:


> This has been discussed here many times, but I don't know if any one ever used BMW's term for it (as you did).
> 
> The fee is completely legitimate, at least in the sense that your dealer isn't making it up. It is an actual cost that they pay to BMW if they sell the car back to the original lessee or other "related party or business." There is no legitimate way for them to get around paying this fee so it will be passed on to you.
> 
> ...


I thought BMWFS already charge disposition fee (around $450) on lease buy? So this loyalty is on top of that?


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## AMP (May 1, 2002)

HPIA4v2 said:


> I thought BMWFS already charge disposition fee (around $450) on lease buy? So this loyalty is on top of that?


This fee is charged if you purchase your vehicle back from a dealer. On the bright side if you do that then you avoid the disposition fee 

The interesting thing is that the fee is charged even if the buyback isn't done in one transaction. Say, for instance, that you turn your car in and then in two weeks change your mind. You go back to the dealer and they still have your car... buy it from them and they will be charged retroactively by BMWFS (which means you'll still need to pay the fee).

In my case the fee is around $3800 on my M5. Still debating on whether or not I want to keep it.... Even with the fee the buyout would be significantly better than paying the full residual.


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## galahad05 (Aug 11, 2007)

Just get another M5.


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## HPIA4v2 (Mar 30, 2006)

AMP said:


> This fee is charged if you purchase your vehicle back from a dealer. On the bright side if you do that then you avoid the disposition fee
> 
> The interesting thing is that the fee is charged even if the buyback isn't done in one transaction. Say, for instance, that you turn your car in and then in two weeks change your mind. You go back to the dealer and they still have your car... buy it from them and they will be charged retroactively by BMWFS (which means you'll still need to pay the fee).
> 
> In my case the fee is around $3800 on my M5. Still debating on whether or not I want to keep it.... Even with the fee the buyout would be significantly better than paying the full residual.


Thanks for the info.
Makes me wonder if people tells me to lease then buy is good advice (if you already set to buy in the first place).


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## galahad05 (Aug 11, 2007)

HPIA4v2 said:


> Thanks for the info.
> Makes me wonder if people tells me to lease then buy is good advice (if you already set to buy in the first place).


I'm no expert, but....this is my thought process.

There are two ways to look at it:
1. lease then buy should be compared, financially, against how much it would have cost you to simply finance the car from the beginning.
2. lease then buy should be compared, financially, right at the point where you're going to buy.

In case 1) you have total out of pocket costs->
monthly lease payment X number of payments + total purchase price at the end (in the case of financing, monthly finance payments X number of payments). Compare against how much you would have paid if you had simply financed the car in the first place (monthly payment X number of payments + down payment).

In case 2) you simply say, "is the negotiated buyout price higher, the same, or lower than comparable used cars?" Simpler math.

Personally, I tend to think option #1.


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## Alpine300ZHP (Jan 31, 2007)

AMP said:


> This fee is charged if you purchase your vehicle back from a dealer. On the bright side if you do that then you avoid the disposition fee
> 
> The interesting thing is that the fee is charged even if the buyback isn't done in one transaction. Say, for instance, that you turn your car in and then in two weeks change your mind. You go back to the dealer and they still have your car... buy it from them and they will be charged retroactively by BMWFS (which means you'll still need to pay the fee).
> 
> In my case the fee is around $3800 on my M5. Still debating on whether or not I want to keep it.... Even with the fee the buyout would be significantly better than paying the full residual.


Whoa. I think something needs to be clarified regarding this adder fee. BMWFS contractually allows you to buy your car at lease end for the residual. If you pony up the cash and send it to BMWFS via certified funds there is no adder fee. However, if you turn it in and tell the dealer you want to buy it, CPO it, ect then you get charged the adder fee because the market value is below resdidual. I just want to make sure you guys realize that you can buy your car for residual as long as you buy it straight from BMWFS and do not try to CPO it and get all of the CPO benefits. If you have cash this may be the way to go if your residual is lower than or equal to market value.


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## Alpine300ZHP (Jan 31, 2007)

HPIA4v2 said:


> Thanks for the info.
> Makes me wonder if people tells me to lease then buy is good advice (if you already set to buy in the first place).


It is not good advice. You will always overpay if you lease then buy. The only exception are those people whose lease contracts expired 3rd and 4th quarter 2008 when BMWFS was letting you buy out your car for thousands below residual and giving 0 percent interest. That was a rare exception to the rule and I am confident it ll never happen again. If you want to buy then buy it from day one. If you want to buy when your lease is up you can do that, but often you pay more. Having the option to turn it in or buy is worth it to some people...McLaren in particular is fond of this.


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## Alpine300ZHP (Jan 31, 2007)

galahad05 said:


> Just get another M5.


He might not be able to find one now. The new ones are pretty much gone and clean CPO's are hard to come by. Maybe he does not want to wait for the F10 M5....


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## erdoran (Feb 29, 2008)

Alpine300ZHP said:


> It is not good advice. You will always overpay if you lease then buy. The only exception are those people whose lease contracts expired 3rd and 4th quarter 2008 when BMWFS was letting you buy out your car for thousands below residual and giving 0 percent interest. That was a rare exception to the rule and I am confident it ll never happen again. If you want to buy then buy it from day one. If you want to buy when your lease is up you can do that, but often you pay more. Having the option to turn it in or buy is worth it to some people...McLaren in particular is fond of this.


Well actually in Z4 land those of us who were fortunate enough to lease in 2008 got great residuals for 2 yr leases - mine was 73%. My residual at lease-end was about $38k and dealer offered me a buyout for $34.9k CPO'd. I ended up buying a new Z4, but had I wanted to keep my '08 that would have been a much better deal than just buying from the beginning. I leased because I wanted a two year test drive, wasn't sure about a 2-seater 'vert, and was pleasantly surprised at what a great deal it ended up being!


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## mclaren (Jan 5, 2005)

There are a couple of circumcisions ( I mean circumstances ) where it makes sense to lease if you want to buy the car. One case is if the money factor is so low that you are paying very little interest, BMWFS offers .0005 occasionally on cars they want to move. I got this on a '06 Z4 and my current 135. When you get this MF it is better to lease because you may be able to buy the car at the end of the lease for less than the residual or walk away if we have electric cars and it is worth nothing. Another case is what happened on my '09 328, BMWFS offered $2,000 lease cash or low financing. I leased the car getting the lease cash then bought the car shortly thereafter. This was cheaper than buying the car day one or financing and paying off the loan right away.


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## MarcusSanDiego (Jan 7, 2002)

Alpine300ZHP said:


> Whoa. I think something needs to be clarified regarding this adder fee. BMWFS contractually allows you to buy your car at lease end for the residual. If you pony up the cash and send it to BMWFS via certified funds there is no adder fee.


No kidding. If you're paying full residual, then there is no reason for BMW to assess the adder fee. The fee is only assessed when you buy the car for below the residual price.



Alpine300ZHP said:


> However, if you turn it in and tell the dealer you want to buy it, CPO it, ect then you get charged the adder fee because the market value is below resdidual.


That's what AMP said in his first post.


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## saranr (Dec 22, 2006)

*We are talking different things*

I just purchased my 2007 328xi form BMWFS at exactly the residuas value on the lease contract.

I believe you guys are talking about having the dealer CPO the lesased car and repurchasing it.


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## pilotman (Feb 2, 2006)

I would attempt to avoid it by having my wife buy it.

I know it supposed covers "related parties" but I doubt BMWFS would catch it.

as long as the social sec. is different.


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## chrischeung (Sep 1, 2002)

To do this, your dealer would likely "have to be in on it" with you. And I doubt any dealer would risk the wrath of BMW finding out. Better for them to just send the car to auction, or sell it to someone else instead of the quick sale.


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## galahad05 (Aug 11, 2007)

This is just one other reason to *not buy out your car.* You pay extra for the privilege, no matter what. Screw that, I'd just go and buy another '07 335i. Save 2-3K in the process too.


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## chrischeung (Sep 1, 2002)

That's why BMW can charge more. They are selling you YOUR car - not any other car owned by someone else with less known history. There is only 1 car like it.

As you said - there isn't a lack of choice here.


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## erdoran (Feb 29, 2008)

I think the only thing worse than the loyalty adder is calling it that! It boggles my mind that we would have to pay EXTRA to buy out our car (yes, I know it is still below residual, but if the lessee doesn't buy it, then they have to floor it and maybe or maybe not sell it). It seems to be a sure sale is something of value, not something to drive away by charging EXTRA!

Sure, BMWFS took a bath on the residuals by setting them too high, but trying to take it out of the lessee is just insulting. If the car is truly worth whatever price it comes to with the loyalty adder, then put it on the lot for that price and see if it sells! 

makes no sense to me....seems like they'd WANT us to buy out our lease, not want to discourage it.


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## adrian's bmw (Feb 14, 2003)

erdoran said:


> I think the only thing worse than the loyalty adder is calling it that! It boggles my mind that we would have to pay EXTRA to buy out our car (yes, I know it is still below residual, but if the lessee doesn't buy it, then they have to floor it and maybe or maybe not sell it). It seems to be a sure sale is something of value, not something to drive away by charging EXTRA!
> 
> Sure, BMWFS took a bath on the residuals by setting them too high, but trying to take it out of the lessee is just insulting. If the car is truly worth whatever price it comes to with the loyalty adder, then put it on the lot for that price and see if it sells!
> 
> makes no sense to me....seems like they'd WANT us to buy out our lease, not want to discourage it.


Who cares what it's called. It's an internal payoff that's shared between the *center and BMW FS*. Personally, I think it's used to actually discourage lease buyouts and encourage leasing a new BMW. Has nothing to do with BMW taking a bath on residuals, IMO. It is what it is. It only insults some people because they know where the vehicle stands on the market. But since you have a contractual guarantee that the car residual is at say 60% and you got to take advantage of a good residual, now one's insulted that they have to pay residual or close to it even though they enjoyed good payments because of a good residual, they're gonna boohoo that the leased car owned by BMW FS should be given away by the dealer? I think not. And what about some models where the cars worth more than residual? :rofl: That's happened on occasion.

That's right. Put it on the lot. And yes, turn in the car, we'll buy it for what BMWFS feels is market less excess wear and tear plus recon, CPO, and let us deal with *selling* it, rather than being asked to *give* it away. Thankfully, it's not your business to have to worry about whether we sell it or not. But that's the key. It's our business. It's what we do best. Let BMW FS and the center deal with selling it. You just walked away without any obligation to deal with selling it. You get another car and keep it moving. And someone else gets a nice preowned BMW driven and taken care of by you. Thank you!

How are you paying extra when it explicitly states in your lease agreement that you can buy your car for residual value??? If you don't feel that residual is fair, *walk away!* That's the beauty of a lease.

Plus, you had this frenzy of lease buy outs where lessees were treating lease buy outs like buying new cars with "how much can I pay over" language (not that there's anything necessarily wrong with that). That's not how selling preowned cars works. It's the market and the car. It's a *retail* opportunity, not a *wholesale* one (unless the cars got a bad carfax and has more ko's than Joe Lewis).

I will say that if you leased a European Delivery, it might be a good opportunity to purchase your vehicle because you enjoyed low payments and that would represent a good purchase opportunity if you're not doing another one.

And it might not make sense to you because you're not in the car business. It's okay. I'm here for you. :angel::grouphug:


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## erdoran (Feb 29, 2008)

No, my issue is with penalizing loyal owners and associating the word "loyalty" with the adder aka penalty tax. In the end the car is worth what it's worth, no more and no less, no matter who the buyer is. Just business.


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## adrian's bmw (Feb 14, 2003)

erdoran said:


> No, my issue is with penalizing loyal owners and associating the word "loyalty" with the adder aka penalty tax. In the end the car is worth what it's worth, no more and no less, no matter who the buyer is. Just business.


How is it a penalty when you entered into a lease where you can walk away unscathed from market conditions and leave the bank holding the bag if market conditions worsen?  How is a penalty when going into the lease agreement, you have *the option to buy at residual*? I didn't read in the contract "client can buy car at below residual because the client wants to and feels that the market is lower than residual"? And how are you associating it with a tax? To me, it's profit for BMW FS. IMO, the market is the market for the lease return. One can make an informed decision or whether to buy or walk. Beautiful thing about a lease. :thumbup:

Yes, I agree, the "loyalty" wording is a misnomer. But it's wording in an internal payoff document to the dealer, not you. When you call BMW FS, they revert you to the dealer and they refer to residual. The dealer can make a business decision of 1) whether to sell you back your leased vehicle for a discount below residual, 2) determine how much they want to make after BMW FS fee. Then you can make your business decision to buy or walk. Simple.

Yes, just business indeed. You either want the car or you don't. For every butt, there's a seat. So someone will buy it whether it's more or less.


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## galahad05 (Aug 11, 2007)

It's a penalty because it targets the original driver and ONLY the original driver. By definition it discourages certain behavior. That same driver can go pick up another, identical car, for market value.

I call it a "you're stupid" tax.


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## SARAFIL (Feb 19, 2003)

galahad05 said:


> It's a penalty because it targets the original driver and ONLY the original driver. By definition it discourages certain behavior. That same driver can go pick up another, identical car, for market value.
> 
> I call it a "you're stupid" tax.


Funny, I call it a "you signed a contract that specified the price you could purchase the car for so stop bitching that we won't let you have your cake (lower payments) and eat it too (buyout way below residual)" tax.


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## erdoran (Feb 29, 2008)

It's totally market-driven. When you lease you probably pay more interest than when you buy. You also pay the LAF of $725-$925 and possibly the lease disposition fee. Yes, you have the option to buy for residual or walk away--that's inherent in leasing. 

Now, if the residual was, say $40k and the market value of my car was $39k-$41k I would have no issue buying at residual. But if I can buy the identical car cpo'd for $32k then why would I be stupid enough to pay $40k for a buyout?? I'll just turn it in and walk. That's the reason to lease rather than buy!

The point was made of "why should you get a price below residual" because the bank takes a hit--well, how about the reverse of this situation? My residual is $40k, value is $50k and I turn it in because I don't know any better. I've paid the extra $10k I'm responsible for, and BMWFS makes a minimum $10k on it above and beyond what they already made.

Leasing is a double-edged sword. If bmwfs predicts the market right they make $$$$; if not it costs them. 

You are right that I shouldn't expect any buyout price other than the contracted residual. but in turn, if my residual is much hgher than the open market it becomes a no-brainer to turn the car in and walk. Why would BMWFS or any dealership expect a well-informed buyer to pay $40k for the same car they can buy for $32k off another lot, most likely cpo'd as well? \

The one point that makes total sense is that bmwfs probably doesn't want the lessee to buy out their lease, they want them to buy a new car. Nothing wrong with that, it's business!


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## JW_BMW (Oct 3, 2007)

Im sorry but some of you are total idiots...u guys make baseless comments with zero understanding of what any of this actually means. 

Option A buyout is always lower than market price...ALWAYS ...by thousands! Even if you choose option A and CPO the car you will STILL be below market price each and every time. 

FS is offering "you" the lessee the opportunity to buy the car at BELOW market value BEFORE the dealer gets a hold of it and retails this car for market price. No other car company does this....period. 

Yes, calling it the loyalty adder is damn stupid....BUT...the winner in the end is still YOU.


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## galahad05 (Aug 11, 2007)

Wat

@JW:

So...you're saying that if I go to a dealer lot and buy random--same-year-335i-with-my-car's-options-and-mileage, I'll end up paying *more* than if I negotiated a deal with the same dealer for my car (plus this loyalty fee)?
Funny math, there.


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## erdoran (Feb 29, 2008)

JW_BMW said:


> Im sorry but some of you are total idiots...u guys make baseless comments with zero understanding of what any of this actually means.
> 
> Option A buyout is always lower than market price...ALWAYS ...by thousands! Even if you choose option A and CPO the car you will STILL be below market price each and every time.
> 
> ...


Let me get this straight. The residual on my '08 Z4si was about $38k. Asking price for similarly optioned/similar mileage CPOs at the time from dealerships was in the range of $32-$36k. Manheim was around $28-29k. I think the Edmunds or KBB retail value might have been around $34k for a cpo. So I could buy it for $38k before the dealer retails it for $32-$36k before negotiation if I bought it for residual?


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## chrischeung (Sep 1, 2002)

erdoran said:


> So I could buy it for $38k before the dealer retails it for $32-$36k before negotiation if I bought it for residual?


Per your lease contract, BMWFS HAS to sell you your car at residual if you want it. They CANNOT take it back if you choose to keep it. So if your car became famous - perhaps it was driven for a burnout by Lewis Hamilton http://www.carsguide.com.au/site/news-and-reviews/car-news/hamilton_burnout_car_sold - and became highly sought after, you would have every right to buy that car at residual, no matter what BMW wants to do with it.


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## chrischeung (Sep 1, 2002)

galahad05 said:


> Funny math, there.


This is not academia - it's the real world, where BMWFS and BMW Centers are trying to maximise profitability. What would be your suggestion that increases overall profit?


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## JW_BMW (Oct 3, 2007)

galahad05 said:


> Wat
> 
> @JW:
> 
> ...


Thats is 100% what I am saying...why are u so shocked about it.


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## Alpine300ZHP (Jan 31, 2007)

adrian's bmw said:


> Who cares what it's called. It's an internal payoff that's shared between the *center and BMW FS*. Personally, I think it's used to actually discourage lease buyouts and encourage leasing a new BMW. Has nothing to do with BMW taking a bath on residuals, IMO. It is what it is. It only insults some people because they know where the vehicle stands on the market. But since you have a contractual guarantee that the car residual is at say 60% and you got to take advantage of a good residual, now one's insulted that they have to pay residual or close to it even though they enjoyed good payments because of a good residual, they're gonna boohoo that the leased car owned by BMW FS should be given away by the dealer? I think not. And what about some models where the cars worth more than residual? :rofl: That's happened on occasion.
> 
> That's right. Put it on the lot. And yes, turn in the car, we'll buy it for what BMWFS feels is market less excess wear and tear plus recon, CPO, and let us deal with *selling* it, rather than being asked to *give* it away. Thankfully, it's not your business to have to worry about whether we sell it or not. But that's the key. It's our business. It's what we do best. Let BMW FS and the center deal with selling it. You just walked away without any obligation to deal with selling it. You get another car and keep it moving. And someone else gets a nice preowned BMW driven and taken care of by you. Thank you!
> 
> ...


Hey...I like a good deal as much as the next guy, but I have to side with the dealers (Adrian, JW, Sarafil) on this one. It is stupid naming to call it a loyalty adder fee, but reality is that BMW can do whatever they damn well want to do because they are selling you the car below CONTRACTED RESIDUAL. Has anyone considered the real possibility that BMW would be well within its rights to refuse to sell the car below residual to the lessee and require all lease cars be turned in or purchased with certified funds for contracted residual price? Come on guys.....I see nothing wrong with what BMW is doing here and, to an extent, see why they do it. They want people to buy a new BMW and if the lease return deal is too good they discourage that. I suspect they hope you turn your lease in and buy a new car and then they sell your lease return to a new BMW buyer thereby increasing sales overall. Its a pretty basic marketing strategy and one that makes complete sense. Obviously it will not work every time, but if all lessees buy out their lease the sales numbers for new cars will not be so hot.



erdoran said:


> No, my issue is with penalizing loyal owners and associating the word "loyalty" with the adder aka penalty tax. In the end the car is worth what it's worth, no more and no less, no matter who the buyer is. Just business.


You are right and it is just business. Think of it like this. You, for example, go to see a lawyer to take care of your estate planning needs. The lawyer is one of the best and is known for his quality work. You sign a three year retainer with him for $250.00 per hour. However, after three years his reputation has soared and his new rate is now $600.00 per hour and he has clients lined three deep at the door waiting to see him. He tells you that he loves your business, but now he is charging $600.00 and offers you a new three year retainer at, lets say, $450.00 an hour because you are a loyal repeat customer. You balk because he is charging you more than you paid before, BUT he is still charging you less than market rate. You have the option to staying with him or finding someone else that will give you the same quality legal representation for less. You have to decide if it is worth it to spend time looking for a comparable attorney at a better rate or to stick with your attorney whom you know and trust (like buying your lease return where you know the history vs. buying some random CPO where you don't know the history). If you think about it BMW is doing the exact same thing as my scenario. My opinion is this is perfectly acceptable since the lawyer can replace your business with other business and possibly make more money in the long run (just as BMW can do this with your lease return). Should you not be thankful that he did not raise your hourly rate in parity with what he is charging new customers???



adrian's bmw said:


> How is it a penalty when you entered into a lease where you can walk away unscathed from market conditions and leave the bank holding the bag if market conditions worsen?  How is a penalty when going into the lease agreement, you have he option to buy at residual[/B]? I didn't read in the contract "client can buy car at below residual because the client wants to and feels that the market is lower than residual"? And how are you associating it with a tax? To me, it's profit for BMW FS. IMO, the market is the market for the lease return. One can make an informed decision or whether to buy or walk. Beautiful thing about a lease. :thumbup:
> 
> Yes, I agree, the "loyalty" wording is a misnomer. But it's wording in an internal payoff document to the dealer, not you. When you call BMW FS, they revert you to the dealer and they refer to residual. The dealer can make a business decision of 1) whether to sell you back your leased vehicle for a discount below residual, 2) determine how much they want to make after BMW FS fee. Then you can make your business decision to buy or walk. Simple.
> 
> Yes, just business indeed. You either want the car or you don't. For every butt, there's a seat. So someone will buy it whether it's more or less.


I have to say that I agree completely. No one was moaning and groaning when BMW took a huge loss during 2008 when the market tanked. Everyone was ELATED they were getting great deals on lease returns. However, if you had purchased your car you would NOT have been happy.



JW_BMW said:


> Im sorry but some of you are total idiots...u guys make baseless comments with zero understanding of what any of this actually means.
> 
> Option A buyout is always lower than market price...ALWAYS ...by thousands! Even if you choose option A and CPO the car you will STILL be below market price each and every time.
> 
> ...


Agreed. Enough said.



erdoran said:


> Let me get this straight. The residual on my '08 Z4si was about $38k. Asking price for similarly optioned/similar mileage CPOs at the time from dealerships was in the range of $32-$36k. Manheim was around $28-29k. I think the Edmunds or KBB retail value might have been around $34k for a cpo. So I could buy it for $38k before the dealer retails it for $32-$36k before negotiation if I bought it for residual?


This is NOT what we are saying. We are saying that you will likely have brought it, loyalty adder fee included, for equal to or less than comparable CPO's sitting on the dealers lots and, unlike those cars, you have the peace of mind of knowing how your car was treated and maintained because you were the original lessee. IMHO that is worth a price premium of some sort...... Also, lets not forget that CPO's are also carrying additional benefits above and beyond buying the lease return car because you get CCA rebate (if a member), extended warranty, low rate financing and often new tires, brakes and other condition improvements that you probably would not have paid for yourself if you owned the car outright.



chrischeung said:


> Per your lease contract, BMWFS HAS to sell you your car at residual if you want it. They CANNOT take it back if you choose to keep it. So if your car became famous - perhaps it was driven for a burnout by Lewis Hamilton http://www.carsguide.com.au/site/news-and-reviews/car-news/hamilton_burnout_car_sold - and became highly sought after, you would have every right to buy that car at residual, no matter what BMW wants to do with it.


:thumbup:


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## JW_BMW (Oct 3, 2007)

erdoran said:


> Let me get this straight. The residual on my '08 Z4si was about $38k. Asking price for similarly optioned/similar mileage CPOs at the time from dealerships was in the range of $32-$36k. Manheim was around $28-29k. I think the Edmunds or KBB retail value might have been around $34k for a cpo. So I could buy it for $38k before the dealer retails it for $32-$36k before negotiation if I bought it for residual?


Thats 100% correct. You entered into a contract to either walk away or purchase the vehicle at lease end for xxx amount of $. It is call a closed end lease. The buyout was set at lease start.

All that other stuff about helping us, doing FS a favor is fluff. If you feel the buyout is too high...WALK AWAY...that is your right.

The residual write downs are already all accounted for in the books. I mean what did you think...they take it a car at a time?

With all this said...the bottom line is if you wanted to BUY the car you leased they will offer you the lessee the opportunity to buy it at below residual and market value...it is called Option A.


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## galahad05 (Aug 11, 2007)

JW_BMW said:


> Thats is 100% what I am saying...why are u so shocked about it.


I'm not shocked. I'm just wondering how you can call it where you, the leasee, is the "winner" as you say?
This is maketspeak. "Pay more! It's really less!"

Oh, and to Sarafin: "have your cake and eat it too"--of course! BMWFS decides to artificially inflate the residuals so that people will lease. Then, when someone thinks of buying the used car, there's the actual market price. This is all on BMW. *BMW* wants to have their cake and eat it too.


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## galahad05 (Aug 11, 2007)

JW: perhaps the problem here is that your and our definition of "market value" is different?

What do you mean when you say "market value"?
We're defining it to be "the actual price paid by a used car buyer from a dealership". *Not* the price at which the dealer initially offers a used car for sale.


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## JW_BMW (Oct 3, 2007)

galahad05 said:


> JW: perhaps the problem here is that your and our definition of "market value" is different?
> 
> What do you mean when you say "market value"?
> We're defining it to be "the actual price paid by a used car buyer from a dealership". *Not* the price at which the dealer initially offers a used car for sale.


The more you talk ...the deeper you dig the hole.

Market value is what people are paying for the cars...

If it was the other way I would have said retail price....of course on here retail is a bad word

Do you really think BMW solely decides on its own how high or low to set their residuals? :tsk:


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## JW_BMW (Oct 3, 2007)

galahad05 said:


> I'm not shocked. I'm just wondering how you can call it where you, the leasee, is the "winner" as you say?
> This is maketspeak. "Pay more! It's really less!"
> 
> Oh, and to Sarafin: "have your cake and eat it too"--of course! BMWFS decides to artificially inflate the residuals so that people will lease. Then, when someone thinks of buying the used car, there's the actual market price. This is all on BMW. *BMW* wants to have their cake and eat it too.


Right now all you are doing is talking....you have zero data to back up what you are saying.

Lets try it this way...

08 X3si 20K CPO base model....tell me what YOU think market value is on this car. Don't pull a # out of thin air...


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## galahad05 (Aug 11, 2007)

I don't get it then. *Why* are you saying that a leasee pays less then market value for their car?

That's the purpose of this subforum, no? Explain the process: I'm sure there are plenty of people who don't understand how it works--including me. Assume most people haven't gone through the process, so will simply assume the following:
1) leasee turns car in
2) leasee talks to dealer, says "I want to buy this car--get it for me, let's talk price."
3) dealer buys it off auction
4) leasee buys from dealer

Here's the stickler for me: you're claiming that, if, in your example, the car you turned in was an 08 X3si (NON CPO--I never count CPO, and let's not play with CPO for now), but there's also an 08 X3si non-CPO sitting on the lot. The turned-in car will be sold to the original leasee for less than that 08 on the lot.

I am perfectly willing to believe that this can and is done, but I'm missing some step in the process.


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## JW_BMW (Oct 3, 2007)

galahad05 said:


> I don't get it then. *Why* are you saying that a leasee pays less then market value for their car?
> 
> That's the purpose of this subforum, no? Explain the process: I'm sure there are plenty of people who don't understand how it works--including me. Assume most people haven't gone through the process, so will simply assume the following:
> 1) leasee turns car in
> ...


Yes, it can be sold to the lessee for less than what is on the lot....even if the 2 cars are exactly the same....U have the first shot at this used car at below market price.

Missing steps and/or not knowing how the system works is not the issue here...the issue is thinking you know how it works then writing about it when you really don't know how it works.

The actual term used for a below residual quote to a lessee if they are interested in buying the car they rented from BMW is called an Option A buyout. All that other stuff about loyalty adder etc is internal speak. Yes, there is an adder...and yes the term loyalty adder sucks...but the point is Option A is below market value because Option A is within dollars to MMR if not lower. So unless you can find me a front line unit you can buy for below MMR....this last few posts is just a waste of time.

Sorry, im so straight to the point...Im just tired of hearing it over and over and over again.

Listern, if you all think BMWs suck so bad or FS is ripping you off...do us/me a favor...walk away and buy something else. It is your right.


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## galahad05 (Aug 11, 2007)

Ah, *that* is the missing piece then.

My thanks.

Now BMW's add-on fee makes more sense.

Oh, but one remaining question: will the car be at a lower price than that X3 on the lot actually eventually sold at (on average)?


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## ///M Rakete (Apr 1, 2002)

This is all very amusing. I have no issue with the concept but I'm starting to wonder about its legality. Since this "fee" is not part of the original contract what BMW has done is establish a business practice that discriminates among potential buyers based on their previous relationship with the car. Now to be fair this is done all the time with people who are new customers and are offered discounted rates on cable TV, cell phone plans, etc. but existing customers are not afforded the same opportunity. I assume that is legal. This is a little different in that we're talking about a fee (adder) and not a discount. It's like a cash discount versus a credit card fee when making a purchase, an example that has seen regulation past and present. In other words a penalty is offered to the previous owner instead of a benefit to an unrelated potential buyer.

Just wondering. The good news is I am not a lawyer and I did not stay in a Holiday Inn Express last night.

Maybe this was covered but why impose the fee, why not let the market take care of itself? Did this really become such an issue that BMWFS felt it needed to incentivize behavior? If the car is going to sell at a given price if the original owner walks why not sell it to that person at that price, regardless of the "residual" or this business practice? Seems that it must have really been a thorn in someone's foot.


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## chrischeung (Sep 1, 2002)

It's obviously legal - otherwise every car would have to have a non-negotiable price that is the same for all buyers. Off the top of my head, the only thing that you really can't discriminate against are age, race, and gender. You can discriminate on financial, knowledge, etc. - and whether they owned the car in the past or not.


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## ///M Rakete (Apr 1, 2002)

chrischeung said:


> It's obviously legal - otherwise every car would have to have a non-negotiable price that is the same for all buyers. Off the top of my head, the only thing that you really can't discriminate against are age, race, and gender. You can discriminate on financial, knowledge, etc. - and whether they owned the car in the past or not.


Yikes, I would be careful about saying "obviously legal". I don't disagree with you, it's just that what is and what isn't often is not obvious.

Making discrimination based on a status that is specific or protected illegal doesn't force a non-negotiable price by the way. It prevents preferential pricing based on selection made as a result of a characteristic that is protected in some fashion by law. Negotiations can still occur, they just can't be affected by decisions or policies driven by or prejudicial towards the person having that characteristic. You covered the ahem, "obvious" ones that most people are familiar with but there are all sorts of other factors that can come into play. There are all sorts of laws and regulations about restricting free commerce.

Anyway, end of hijack.


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## Elias (Jun 26, 2005)

///M Rakete said:


> Yikes, I would be careful about saying "obviously legal". I don't disagree with you, it's just that what is and what isn't often is not obvious.
> 
> Making discrimination based on a status that is specific or protected illegal doesn't force a non-negotiable price by the way. It prevents preferential pricing based on selection made as a result of a characteristic that is protected in some fashion by law. Negotiations can still occur, they just can't be affected by decisions or policies driven by or prejudicial towards the person having that characteristic. You covered the ahem, "obvious" ones that most people are familiar with but there are all sorts of other factors that can come into play. There are all sorts of laws and regulations about restricting free commerce.
> 
> Anyway, end of hijack.


Sounds to me like you are very familiar with the legal jargon, you must be a Lawyer of some kind or worked for one.:dunno:


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## JW_BMW (Oct 3, 2007)

Elias said:


> Sounds to me like you are very familiar with the legal jargon, you must be a Lawyer of some kind or worked for one.:dunno:


...Rakete, stayed in a Holiday Inn Express ...


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## AMP (May 1, 2002)

Regardless of whether or not it's legal one could argue that the final sale price of the vehicle is negotiated between the buyer and the dealer. The cost is being set by BMW, but there isn't anything stopping the dealer from selling the vehicle below their cost. Although not a good business practice there's no reason why the dealer can't set the sale price to be whatever they want it to be. They will lose money on the deal if they sell below cost, but it's really no different than the cases where a dealer is trying to move VERY stale inventory. I know for a fact that the dealer lost money on my M Coupe and M6 purchases. These weren't just below invoice deals... they were several thousand below invoice and both resulted in a net loss (once flooring costs, value add money, F&I profit, etc were all taken into account).


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## chrischeung (Sep 1, 2002)

That's a better explanation - thank you.


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## BMWofBloomfield (Nov 7, 2008)

The lease contract signed by the leasee and ratified by the lessor states the purchase option is residual. ANY discount below residual value provided to you by a dealer is a good deal for the leasee regardless of what the market value value is because--again, the leasee agreed at lease inception to pay residual as the lease end purchase option.

BMW FS & NA can do what they want. THEY are the ones that ASSUME 100% of the risk. If the car got into an accident which required $15K in repairs, the leasee wouldn't buy it and the BMW FS would be left holding the bag after all (and this happens quite a bit). If the car's residual which is partially what your payments are based on, happens to be $30K but, auction value is $26K and you don't purchase the vehicle, BMW FS is left holding the bag on the $4K as well. They only have one upside, and that would be if the auction value at lease end happens to be meaningfully higher that the residual which VERY RARELY happens (last time was probably on Z8's), and the leasee don't purchase the vehicle at residual.

I purchased my Z4MC at lease end and my dealer center paid more to resell the vehicle to me, so my ultimate price was higher as well. Did I blink... NOT EVEN FOR ONE SECOND! People should really be thankful there is still the possibility of saving money off the residual as BMW can do what all the other banks do and cease giving BMW dealers the possiblility of selling the leasee their vehicle for a discount ANYTIME they want.

The CPO program is tremendously successful. I imagine one reason for the change in BMW FS' operating procedure last year is to stimulate more returning leasee's into being new leasees again and adding to BMW new car numbers. BMW's used car numbers don't need any help after all.

This isn't necessarily a reply specifically to your post by the way.



///M Rakete said:


> This is all very amusing. I have no issue with the concept but I'm starting to wonder about its legality. Since this "fee" is not part of the original contract what BMW has done is establish a business practice that discriminates among potential buyers based on their previous relationship with the car. Now to be fair this is done all the time with people who are new customers and are offered discounted rates on cable TV, cell phone plans, etc. but existing customers are not afforded the same opportunity. I assume that is legal. This is a little different in that we're talking about a fee (adder) and not a discount. It's like a cash discount versus a credit card fee when making a purchase, an example that has seen regulation past and present. In other words a penalty is offered to the previous owner instead of a benefit to an unrelated potential buyer.
> 
> Just wondering. The good news is I am not a lawyer and I did not stay in a Holiday Inn Express last night.
> 
> Maybe this was covered but why impose the fee, why not let the market take care of itself? Did this really become such an issue that BMWFS felt it needed to incentivize behavior? If the car is going to sell at a given price if the original owner walks why not sell it to that person at that price, regardless of the "residual" or this business practice? Seems that it must have really been a thorn in someone's foot.


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## ///M Rakete (Apr 1, 2002)

BMWofBloomfield said:


> The CPO program is tremendously successful. I imagine one reason for the change in BMW FS' operating procedure last year is to stimulate more returning leasee's into being new leasees again and adding to BMW new car numbers. BMW's used car numbers don't need any help after all.
> 
> This isn't necessarily a reply specifically to your post by the way.


Well, with two BMWs that are going off lease in December I'm ready to be stimulated into something new! :thumbup:


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## obi.wan (Feb 14, 2007)

We bought our lease end 530Xit in 2/2010.

I was planning to go with Ivan but for a nexus of issues that prevented me from taking the car to him (sort of dog ate my homework!) based on my wife's schedule.

I ended up with a local dealer, paid more than I would have with Ivan but it prevented us from getting a minivan:yikes:

to ivan: I apologize, nothing but up front and the most competitive...

For perspective, the same car last year ie 2/2009 sale after 2 year lease were going for 2-3k less, search e60 thread on this forum.

I got a deal, better than residual, subvented financing and the "premium" plus some built in. it was still a deal

I could easily walk away and get a 2010 XiT, HPFP scared me. If there was even a hope of a F11, I would have extended the lease 18 months as BMW was offering but there is no hope

F11 touring makes its appearance, Ivan will get my business


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## quackbury (Dec 17, 2005)

Late to the thread, and lots of good info here. The lease on one of our x5's is up in August, and now that I missed the boat on the Eco Credit for an x5 3.0D I am thinking about CPO-ing and buying our '07. Much as I like the Diesel, there are some things I prefer about the '07 (base stereo, the quality of the leather on the steering wheel, etc.)

@JW (or another CA), can you clarify a couple things? In Post #35, JW infers a customer can get Option A pricing BEFORE "the dealer gets a hold of it." Does this mean Option A pricing is requested from BMWFS? Or from my regular CA before the used car manager gets the vehicle into his system?

Safe to assume excess wear and tear and dispo fee are waived if I am buying for Option A? (If so, that is an added incentive, regardless of the "Owner Loyalty Adder")

Third, I assumed the lease on this particular vehicle through Swap-a-Lease. I am contracted with BMWFS, but I am not the original lessee, Does that pose any problems?

Fourth, the original leasing dealer is out-of-state. Is there any difference in dealing with a local store rather than the originating dealer? (I seem to remember at one point that there was a program where dealers were obligated to take back vehicles they sold / leased rather than sending them to Mannheim, and that this could have an impact on lease-end purchase negotiations. Is that still the case? If not, any CA in New England interested in PM'ing me and discussing my purchasing from them?)

Thanks in advance!


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## ravnwood (Jan 14, 2016)

I know this is a very old thread but the original answer was very useful to me. I understand completely now what is going on. 

A lot of people here seem to be offended by the adder fee for no good reason. It'd be nice to not have to pay it, but you're still getting a car for less than market value. 

My current lease is up at the end of the month. We negotiated the lease down to a great payment by getting money off the purchase price and the residual value is $42k. Unfortunately for BMW, the used market has slipped quite a bit. KBB Retail is $39k. KBB Private Party is about $36.5k. I've seen similarly equipped used cars priced any where from $36 to $42k (though usually not with all the options I have). 

The MMR (auction price) is $30k flat, and they are offering me the option to buy the car for $32,700 ($30k plus a $2700 adder fee) plus $599 dealer processing (title, registration, etc). 

So, out the door I'm in for $33,200 for a car that would cost me anywhere from $36.5k to $42k on the open market. 

I understand the terminology is a bit messed up (customer loyalty should be a discount, not a fee), but I'm still saving thousands by buying the car instead of turning it in and taking my chance on a similarly equipped model. And I already know the car. 

Here's the math: 

MSRP was $64,200. 
Leased for $575 a month for 36 months with ~$3300 down to pay for tax, tags, title. 
Total of payments: 20,700 (Wifey negotiated a killer deal. She's a shark!)
Total paid to date (INCLUDING TAX, TAGS, etc): $24,000
Lease purchase price: $33,200 (out the door price)
Total paid: $57,200. 

Some notes.. Virginia doesn't hit me for sales tax a second time, so I don't have to pay it again to purchase the lease. 

The total paid includes the lease money factor (which was very low) but not the finance charges for any loan I get to pay off the balance (at 3% APR). 

The total paid includes the $3,300 taxes, tags, title, and dealer fees that I had to pay the first time around. 

So by leasing and then buying, I'm getting a $64,200 car (MSRP) for roughly $57,200 out the door (including all taxes and fees). 

And since the 335i cabriolet is now the 435i cabriolet, the prices of new models have all inflated about $7-$10k. I'm a happy camper right now.

Moral of the Story: 
The "Customer Loyalty Quote Adder" fee is poorly named, but it's not a raw deal for leasees. I'm still getting a car significantly reduced from the retail market price. I'm not in the business of buying cars, so getting the MMR Auction Price is not feasible. Meeting in the middle somewhere is a win for both me and BMW.


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