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High End Luxury Cars

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  • ljflxljflx Posts: 4,687
    After going through lease pricing the past 24 hours and looking at the article on residuals of a few days ago I must say I am quite surprised on the fall off in 3 year residual values from 2001 when you view it on a stand-alone basis. At that time when I was shopping MB and Lexus I was getting residuals in the 62-67% range on the LS430 and S430/500. I looked at my LX470 lease and it had a 62% residual while my 2001 LS430 has a 64% residual. These were all 3 year, 36k mile lease residuals. So why are car residuals in general falling. The only thing that comes to mind is the big drop in interest rates. In late 2000 and early 2001 you could have safely gotten 6.25% - I know as I tied up money in a 5 year Cd at 6.5%. So if you laid out $60k to buy a car you effectively had foregone $71,500 (using 6% compounded) in cash after 3 years. Today with rates about 3% lower that same car ends up being $65,600 interest affected after 3 years. Thus in order to keep everyone from leasing instead of buying and in order to keep lease prices stable to 2001 type levels you need to lower the residual percentages. If interest rates go back up the residuals will probably rise with them. I guess it's the only way for the lease market to keep itself stable and in check in such a rapidly declining interest rate period.

    So I went and checked Edmunds TMV's for 2001 and I found that the LS430 I bought was at $37,319 on a dealer trade-in or 61% (vs the 64%) of 2001 MSRP and at around 66% on a private party deal. The S-class however was a bigger problem as it retained 58% of its value on a trade-in whereas it was supposed to keep 67%. In fact it only held to 63% on a private party deal. MB must be hurting on this given the sales dollars were higher. How they are not concerned is beyond me. Regardless though both of these percentages - even just at trade-in are well above those being set today.

    Per Edmunds - Lexus and MB dealers will sell you both cars at 71% and 67% of the 2001 MSRP though. So what is a car worth 3 years and 36k miles out? I don't think it will be in the 50-54% range but I'm not sure it will be as high as 2001's retained percentages either. Hybrid technology may hurt future values of today's cars but the biggest factor may be interest rate changes and their effect on lease residuals.
  • ljflxljflx Posts: 4,687
    I'm really surprised as to how far the pre-owned market has fallen for them. The S-430 which was $14k more than the LS430 when I was cross shopping in 2001 is now worth only $5k more per edmunds. The S-500 that was $23k more is now worth only $11k more. The E-430 4-matic I priced which was $1500 cheaper than the LS430 is now worth $4k less. The dealer retail is equal to the buyouts I would have gotten and in the case of the E-class is lower!
  • footiefootie Posts: 636
    ljflx

    The other issue is that the dollar has weakened relative to both the Yen and Euro. This means that it takes more $ to buy a yen or a Euro than it did in 2000.

    So by reducing residuals the captive Toyota and MB finance businesses increase the dollars they get over the course of the leases they issue now. They do this to hedge the price of dollars to purchase the yen/euros they need at the right interest rate to return the yen/euros they loaned out to lease or finance the car.

    Given the U.S.'s Starfleet-sized trade deficits (which are financed with money borrowed from these same two sources) and our huge forecasted deficits the dollar is likey to stay weak unless we raise interest rates. That won't likely happen until after the next election because of its impact on the housing market and car sales.

    As you suggest, I would guess that we'll continue to see these residuals until the interest rates go up.
  • ljflxljflx Posts: 4,687
    Good points.
  • ljflxljflx Posts: 4,687
    My wife loves it. Now I don't know what I am going to do. It does indeed ride beautifully and is more car like.

    Tasillo - only one LS430 at my dealership (a big volume guy) and it was the demo. All of the LS430's at this place are sold out through Nov. 30 so this car is hot. I hope you got your chance to drive one let alone a Euro.

    For the Lexus guys on the board - The LS, GX, RX, SC and ES are selling so quickly that it is not easy to deal on them and in some cases even get them.. The LX is more negotiable but is also selling well. The GS and IS are slow.
  • b4zb4z Posts: 3,372
    I guess that would have a positive effect on LS400/430 resale value.
    Have dealt with a couple of Lexus dealers who have ridiculously high asking prices on their used LS400s.
    Augusta lexus had a '97 with 90K miles and was asking $23,900, about choked when he told me.
    It was in amazing condition for a '97.
    On the other hand I have seen 90K mile '98-99s for sale at 18.9-20.9K.
    I have pretty much given up on working with Lexus dealers because of their high asking prices.
  • merc1merc1 Posts: 6,081
    If you're going to compare a Euro LS, you should compare it to a Sport S-Class, otherwise the comparison is not truly of alike cars, and isn't fair. The S-Class in the C&D comparo had ABC on top of the regular "Sport" package. I would just get a sport model, I wouldn't order ABC on a S430, it's too expensive.

    BTW, I got a chance to finally see the Phaeton. I saw a rather large car sitting in the VW dealers showroom, so it could only be....

    My Prediction: The Phaeton won't make it. VW's sales mentality won't cut it with a 88K (W12 model on the floor) car. The salesman that were present were telling everyone to schedule an appointment to see the car, and wouldn't even open it....even for the older (older than me) people there that looked able to buy such a car. The car itself looks ok, though it might be a little on plain side. The A8 definitely looks a lot better. Most people will either like or hate the stretch, upsized Passat look. VW's dealer body simply isn't ready for this car. If you get a chance check one out and let us know what you think.

    M
  • ljflxljflx Posts: 4,687
    VW - amazing that they could go through all that investment and then turn off people at the sale process. They are starting to remind me of Infiniti at its inception with the clouds. The car is off limits to feel and explore but they will at least make you see it instead of the sky.

    If you had - say $40k - to plunk down on a car today what would you buy or lease?
  • lenscaplenscap Posts: 854
    I'm curious, were there any brochures available on the Phaeton?

    I've mentioned before my girlfriend's terrible experiences at two different VW dealers back when she owned a Passat. So I agree with you, regardless of how good the car I can't see too many people spending that kind of money only to have a poor ownership experience.
  • sysweisyswei Posts: 1,804
    I think it will fail here too.

    Dealership experience is surely a factor, but isn't brand image or badging just as or even more important? How many $70k-range buyers want to show off a VW badge?

    MB launched a new brand to address the $300k market. Toyota in 1990 launched a new brand, and Nissan did too. Wouldn't the LS and Q have sold much less well had they been badged as Toyota and Nissan cars?

    I remember when the Mazda Millenia came out, originally the plan had been to launch a new upscale brand, but in the end Mazda had to scrap that plan because they couldn't afford it. Sure didn't help sales of the Millenia.
  • vchengvcheng Posts: 1,284
    ...doesn't VW already have an upscale division called Audi?
  • sysweisyswei Posts: 1,804
    Yes, you're right of course. Makes one wonder why VW introduced the Phaeton at all (anywhere worldwide).
  • WOW!!! The U.S. economy must really be picking up steam. Volkswagen has now re-defined the peoples (luxury) car as costing between $66k and 92k! Can anyone honestly believe that VW, with it's not too distant checkered reputation is the US (remember the Rabbit's built in Pennsylvania?) can successfully market to and satisfy the aduience that spends 60-90k on an automobile? The Passat at 25-29k is a great car and competes favorable with the Accord, Camry and assorted other bread and butter models available in the family sedan range. Now however, they're taking on Mercedes, BMW, Lexus and cousin Audi. All without the stand alone dealer facility and customer care those makes have built into their marketing strategy. I don't get it.

    I cannot imagine the absolute bath the (few) owners of Phaeton's will take at trade in time. Good luck, VW!
  • vchengvcheng Posts: 1,284
    ....VW were so excited about the Passat W8 selling beyond their expectations, that they decided to move even more upmarket.
  • sysweisyswei Posts: 1,804
    In this country, imho few people outside of VW employees and VW dealership owners are going to buy one.
  • oac3oac3 Posts: 373
    of course is that the whole business plan/model put out by VW stinks, even by their lowly standards. VW had problems explaining or justifying this plan to their home base, much less the lucrative US market. The Phaeton is a dud, plain and simple ! At least the Audi had much more upscale brand image with the beautiful A4s and TTs (my daughter wants a TT so badly; its her dream car), A6s, a bevy of S4/S6/S8 and RS8. Despite these, the A8 has been, by lux car standards, a dud in the US market. So what does VW have to support the Phaeton ? Passats and Jetta's (the BUG is now gone, hopefully permanently)..... I suppose the $25K Passat owner looking to move upscale will look to a, YES, a $66K V8 VW and forgo the likes of Mercedes, Infiniti, BMW, Lexus, Jaguar, Cadillac, etc.. How much is the A6 4.2 Quattro again ? $50K-ish, and a VW is listed at $66K ? Yikes !!!
  • merc1merc1 Posts: 6,081
    "If you had - say $40k - to plunk down on a car today what would you buy or lease?"

    Good question since 40K is about 5K or so above what I can really spend next time around. I'm not sure. Right now the choices would be a C320 Sport (05' model w/changes), A4 3.0, G35 Coupe, Acura TL, and Saab 9/3 Aero (shocked?)....pretty much in that order.

    Why these? Well being a big Mercedes-Benz fan I have to consider whatever Mercedes has in the class. Right now the C-Class is in desperate need of a interior facelift. If I had to buy a car right this minute it would NOT be a new C-Class. I can't stand the seats, having to purchase the Comand system to get a in-dash CD, and the overall interior look. I spoke to a couple of MB reps at the Detroit autoshow this past year and they said that these things would be corrected on the 2005 model, and sure enough its been all but confirmed. Question for me is whether or not the freshened car gets here in the spring or next fall.

    The only issue I have with the A4 is the ugly, unpainted lower section Audi has forced on the A4 Sedan, curiously enough the A4 Cabriolet is painted all the way down. I don't know if you've noticed the A4 on the road, but this shade of grey that all their lowers are painted in doesn't match anything. Yuck. There was a strong rumor for 2004 that this would be corrected, a very, very close inspection of my Audi dealers entire lot of A4s (20 or so) says that they haven't corrected this most unsightly detail.

    What can I say about the G35 Coupe? Driving it almost makes you forget the cheap interior and that rather thickish looking rear bumper. A strong contender for my money.

    The Acura TL is a little contrived, inside and out. It seems they've over compensated for years of bland looking, forgettable cars, by trying to give the new TL too many design cues from other cars. That "character" line down the side is most out of place. The interior, which knocks the G35 on it's behind as far as quality of materials/assembly goes, is too busy with aluminum and fake wood all competing for attention. They missed the Audi target by a good mile. You should check out the stereo though, its a first...a DVD based system. Even a Mark Levinson devotee might be impressed.

    The Saab would be just different purchase, it too like the G35 was a real hoot to drive. Don't know if I want another turbo I4 though, and the interior takes some getting used too, you know Swedish design/ergonomics.

    Another shocker: I don't want a BMW!

    lenscap,

    No brochures or anything, just the handing out of cards with the "Phaeton Specialist's" name on it. No luxury car sales tact at all.

    M
  • ljflxljflx Posts: 4,687
    My 2001 LS430 has a $37k buyout. I think that is the best car for you.

    On the serious side I think the TL and G35 would be great cars for you despite the Japanese origin. They are fresh. The C-class is tired looking and it's too small in size to fit the grill and tail lights that were really designed for and work beautifully on the S-class. I really thought Lexus would get the first DVD audio player into a car. Hats off to Acura for it. I know a few people who had Saabs and they regretted it so be careful there.

    What is the problem with BMW? I thought you loved them.

    Also - why not a three year old off-lease car. Most 3 year old lux cars are better than anything new.
  • u get a s class for the presidential image, and with everything even a s430 costs 87K, so yes its expensive, but the seats are like first class, and do not tire you out on long trips, everything inside is rich looking and large and open. the rear is like a limo, you can cross your legs even.
    the lexus 430 new model is a good copy of the mb. it does have nice wood and soft leather and a nicer nav with touch screen, but the back seat is not the same and nor is the image. the name is totally different.

    the vw would sell if it was priced right, at about 20k less than the a8, but its not and so it will not be a big seller, i dont think they expected it to be as they make their new factory.
  • merc1merc1 Posts: 6,081
    Well we obviously differ greatly on design concerning the C-Class. I think it's one of the best looking cars in its class, especially in "Sport" trim with the bigger wheels/tires. Between the G35 Coupe and TL, I'd probably have to go with the G35. They both have about the same power, but the G35 Coupe looks so much better than the TL. If only the G35C had a better interior.

    Something about BMW's new choice of direction in styling has turned me off to the whole brand. That combined with not wanting a new 3-Series (the last good looking one left) have ruled BMW out for me. It used to be Mercedes, BMW and Audi in my book. Now it's Mercedes, Audi, with BMW a distant third. Can't explain it, just don't want one now.

    Though we disagree on some things your advice is always appreciated. Wouldn't you know it the only used Euro cars I would want are either too expensive (CLK430) or are a little too troublesome for even me to buy....would love a 2001, or 2002 Audi A6 4.2. Still debating that one.

    M
  • mariner7mariner7 Posts: 509
    I bought a Hugo Boss winter coat, knew I had to have it the minute I tried it on. It retailed close to one grand, I bought it on sale, didn't pay anything close to that price. After wearing it for about five days, the cheap zipper doesn't work anymore. Luckily I can still wear it because of the buttons. But come on, for that price, they use a zipper that Kmart would be ashamed to use!

    Makes me think other German upscale companies also face market pressure and cut corners.
  • sysweisyswei Posts: 1,804
    Once I was talking with a US company that had a German operation, and they said that they were issued a summons by the police because they had someone working at the office after 5:30pm...I guess that was illegal because you can't have your workers work too hard or too long hours in Germany. With that kind of worker productivity, yes maybe they have to cut corners elsewhere to compete with Chinese factories.
  • ljflxljflx Posts: 4,687
    Most of Europe is that way. On a Friday the beer starts coming out around 3:30. Everyone is gone by 4:30. It's hard to find people at the exec level around in August at any time. Remember also stores are closed on Sundays. Most people get 5-10 weeks vacation per year. You also don't worry much about getting fired. Different culture and work ethic than America.

    Contrast all that with Japanese that are shoved onto subway cars and work till they drop. Europe is lax, America is efficient and a bit crazy and the Japanese are totally gone. There is more to life than work.
  • mariner7mariner7 Posts: 509
    Having said that, I know that the Japanese admire German cars. There's a Japanese grocery store nearby that I visit, usually just to look at the auto mags. There are several glossy thick mags that are seemingly devoted exclusively to Italian and German cars.

    In this country, we may see Lexus and Infiniti as coming close to MB & BMW, and superior to them in some ways. But I doubt if people in Japan will feel that way, even when they get a chance to drive Lexus and Infiniti in the future.
  • ljflxljflx Posts: 4,687
    Why not a three year old 5 series or E320? I'd prefer either over the Audi and I still think the old E is a classic looking car.
  • a 3-yr old Merc if out of warranty may cost more to maintain than, say, a new G35C with full warranty, all for about the same price. You can really overlook the less than stellar interior of the G35C, and enjoy the ride. It is truly a great riding and handling sports coupe. A true hit from Infiniti. It's just that the name just doesn't resonate as much as a BMW or MB, but you really don't lose anything in ownership. Nissan/Infiniti is one understated brand, or that diamond in the rough, imo. A few left turns does not really detract from the bright stars in the den.
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