OwnersChoice and turn in option

Does anyone know what exactly the "pre-determined price" is for the turn in option with OwnersChoice?

Namely, the following is given on BMW FS http://www.bmwusa.com/Standard/Content/FinancialServices/BMWiFinancing/Compare.aspx. It states that OwnersChoice has the option to "Turn it in and walk away” at the end of the term, according to that table. Footnote 3 than states:

"An OwnersChoice or OwnersChoice with Flex customer may be eligible to sell the financed vehicle back to BMW Financial Services at the end of the contract term for a pre-determined resale price (etc)"

How is this (turning the car back in) then different from the same option in a traditional lease (setting aside the fact that one is the owner of the vehicle in OC)?

Is the "pre-determined" price the balloon amount plus some regular fees as it is stated below (same footnote on that web page)?

"If you sell your BMW i vehicle back to us at the end of your contract term, the difference between the pre-determined resale price for your BMW i and the final balloon payment amount due may include (i) the Flex Amount (the amount the balloon payment is increased), (ii) a $350 disposition fee, and (iii) any applicable excess wear and use and excess mileage charges.”

Essentially, I am trying to make sure I understand these terms as I have not been able to see an actual copy of the OwnersChoice contract yet. When I asked one sales consultant at my local dealership about the "may be eligible" wording, he simply said that they may decide to take the vehicle back or not. Based on some uncertain terms. That of course did not sit quite well with me.

Any clarification of these terms would be highly appreciated!

vip007 said:

Does anyone know what exactly the "pre-determined price" is for the turn in option with OwnersChoice?
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The predetermined price of the vehicle is the residual value plus the balloon amount (typically $7500). FYI, I'm referring to OwnersChoice with Flex (OC/F), since I don't know anyone who has opted for simply OwnersChoice without a balloon. I'll also assume you're aware that OC/F was designed into incorporate the $7500 Federal tax credit into the deal, thus lowering the monthly payment obligation.

HTH,
David

davidrshelton said:

vip007 said:

Does anyone know what exactly the "pre-determined price" is for the turn in option with OwnersChoice?
...

Click to expand...

The predetermined price of the vehicle is the residual value plus the balloon amount (typically $7500). FYI, I'm referring to OwnersChoice with Flex (OC/F), since I don't know anyone who has opted for simply OwnersChoice without a balloon. I'll also assume you're aware that OC/F was designed into incorporate the $7500 Federal tax credit into the deal, thus lowering the monthly payment obligation.

HTH,
David

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I did owner's choice without the flex. So, if I decide I want to keep the car at the end of the term (in my case, two years), I would owe BMW a "balloon" payment equal to the two year residual value (for the 12k miles per year mileage rate I opted for). But if (as I assume will be the case) I in fact just want to hand the car back over to BMW at the end of the two years, then (assuming I have not exceeded the acceptable wear and tear, and assuming I have not exceeded my allowance of 12k miles per year) I will owe nothing other than something like a $350 disposition fee. And meanwhile, I will get the full $7,500 credit on my federal taxes for 2014.

Owner's choice is really the same as a lease. It's just BMW's way of letting you get the benefit of all $7,500 of the federal tax credit, because if you lease BMW gets the credit but somehow they then get taxed on it so the value to them is only something like $4,875 -- which is all they pass on to you in calculating the lease payments.

Confusing, I know. But -- assuming you have enough income to qualify for the full $7,500 in federal tax credit, Owner's choice will cost you less on net than a lease.

I would think the other factor is that if you lease, you pay sales tax only on the payments. When you buy (including flexchoice), you get taxed on the entire sale price of the car.

So with a lease, you would "lose" $ 2,625 of the credit ($ 7,500 - $ 4,875), but you would save on taxes - in California, assuming a $ 45k price and 52% lease residual (36 months/36,000 miles), you save $ 45k*52%*8.75% or $ 2,047. So net, net you do come out ahead with flexchoice, and the net benefit depends on your state's sales tax rate (In this example, about $ 600).

@davidrshelton - Do you know if the residual value you were offered on FlexChoice was the same as the residual on the lease, had you gone for a lease?

ras550 said:

I would think the other factor is that if you lease, you pay sales tax only on the payments. When you buy (including flexchoice), you get taxed on the entire sale price of the car.

So with a lease, you would "lose" $ 2,625 of the credit ($ 7,500 - $ 4,875), but you would save on taxes - in California, assuming a $ 45k price and 52% lease residual (36 months/36,000 miles), you save $ 45k*52%*8.75% or $ 2,047. So net, net you do come out ahead with flexchoice, and the net benefit depends on your state's sales tax rate (In this example, about $ 600).

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FYI, this doesn't apply in all states - some states calculate sales tax based on the full purchase price even on a lease.