QuestionSomeone ran a red light and totalled my 2006 BMW M3 leased vehicle last Thursday. He was at fault and was given a ticket for running a red light. My insurance has already told me that the vehicle is a total loss and will be written off. It so happens that we both carry the same insurance. I leased the brand new BMW for 3 years beginning last year and I'm exactly at the half way point - I've paid 17 of the 36 payments for a total of $12420. I put down $16745 upon leasing and that together with the lease payments would make the total amount of payments $42542.40 to the bank of which I've already paid $29165 ($16745 + $12420). The total value of the vehicle at the time of the lease was $63924. I did some research and the lowest I've seen this car with similar mileage selling for is $47,000. Can you calculate from the figures above the approximate amount I will be getting back based on a settlement cost of $47,000 and $13882 owed to the bank? If you require further information to give a ball park figure, please let me know. And I understand that this will be your best guess and not something I hould rely on.
Thank you.
Barry
AnswerHi Barry,
Allexperts.com gives me a choice as to whether answer your question or automatically reject it.
By automatically rejecting your answer, you are unable to give me a 'low' rating for my answer.
No one at allexperts or any other site you might write is going to be able to provide a satisfactory answer to your question without spending at least 3 hours reviewing your lease contract and being thoroughly knowledgeable of your own state laws.
I chose to spend an hour of my time to provide you some general, non-specific answers that will be extremely helpful but will not satisfactorily answer your question as worded. I am doing this because I feel that you are really in need of an answer that will provide some guidance and feel that if I reject your answer, anyone else that you write will do the same. If after reading my answer, you don't feel that you can provide a feedback of 10-10-10-10-Y, then please do not bother to rate my answer.
Leasing a car is not a good idea unless you use your car in business. I leased my business car during my entire working career because it made filing my 'business deductions' on my state and federal income tax very simple.
I simply stated that 85% of that cars usage was business and deducted 85% of the monthly lease payment, gasoline, maintenance and insurance. By using an owned vehicle in business the tax requirements were for a daily log showing the round trip mileage of each business trip, itemizing each gasoline purchase and each maintenance charge, plus a very complicated depreciation method. At the time you sold the car, if you had overestimated the depreciation, you had to make and the car sold for than you had depreciated, you had to pay extra taxes.
In the early years of leasing (I'm talking about 1963-64), all lease contracts were open-ended. You were able to get into a brand new car with a $100 payment, which was the Banks fee for setting up the lease contract. Your contract stipulated the exact begining amount that you owed on the car and exactly what percentage of your monthly lease payment went toward reducing that balance. Their 'service fee' was slightly higher than you would have paid in interest, but again you were getting into a brand new car with only $100 down. The contract stipulated that you could purchase the car anytime after 24 months for the balance owed, but at any time, be it 2-3-or 4 years, you always owed a balance just the same as if you had financed the car.
During the oil chrisis of the mid '70's, the bottom fell out of the value of large cars and leasees suddenly learned that they owed many thousands of dollars to get out of their lease contracts.
Over the next 3-4 years the volum of new leases fell to a very low level.
At that time manufacturers started designing their own 'closed end' leasing contracts. Now, every manufacturer has it's own 'closed end' lease and each one is slightly different.
Under todays manufacturers 'closed end' lease, you are able to get into a new car for a lower down payment and a lower monthly payment as opposed to purchasing the vehicle.
You are allowed from 9,000-to 12,000 miles of driving per year. At the end of the lease term, you simply return the car to the dealer and walk away, unless you have exceeded the allowable mileage, then you owe $0.25 for each mile over the limit. You have no right to purchase the car and you have built up no equity in the car. You have merely RENTED the car for 3 years. If you return the car in an undamaged condition and with only the normal 3 year wear and tear and have not exceeded the mileage limit, you simply walk away owing nothing, even if the car has depreciated to a value less than the total amount you have paid. Of course, with the high up-front payment the manufacturer has assured themself that they can resell the car for a large profit. You have simply paid dearly to drive an M3 for 3 years.
The car that you chose to lease is in very high demand and does not depreciate as rapidly (percentage wise) as many other makes and models.
The odds are very strong that you leased through BMW and have a 'closed end lease'. For your particular car, you would have been much better off to have found a Bank that offered an open-end lease and took the minimal risk that the car would be worth less than the balance owed at the end of the lease term.
You need to spend about 3 hours studying the lease. If you still do non fully understand it, you should hire an attorney ro review it.
Although I have not answered your question in the manner that you desired, I do feel that I have provided you with valuable history and information.
If you do not feel able to properly rate my answer, then I have just wasted an hour + of my time.
Sincerely,
Bennie
San Francisco Bay Area 10-28-07 3:55 PM PST
