Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!





High End Luxury Cars

1357358360362363771

Comments

  • It is more profitable for BMW to offer competitive leases than Lexus! Why? The primary reason is BMW's competitive advantage : The highest anticipated resale values in the industry.

    That's not true at all. The lease residue for BMW-financial leases are set by the car maker itself. The residue does not have to reflect actual resale value at all. Think of this finacial engineering trick this way: the car company can lease out a 330i convertible at $50k MSRP with a residue of $30k, or lease the same car out at $40k MSRP with a residue of $20k, or lease the same car out at $100k MSRP with a residue of $80k . . . so long as the money factor is subsidized to near-zero, the payments will be exactly the same for all three trasactions. Obviously the car is not fetching both $80k and $20k at the same time three years later. There is a lot of room for financial engineering there, and indeed it is an important activity for car companies to engage in order to maintain marque value. In fact, if you thnk about it, it is almost the only reason why car companies need a financial arm at all: to engage in vendor financing, thereby lowering the true cost of acquisition without having to lower nominal selling price (which may upset buyers of previous model years). By doing so, the car company can also delay the adverse market condition by three years (or whatever the lease term is) before it is reflected in the accounting books. Usually the high rate of lease vs. purchase is reflective of the degree of lease subsidy book-cooking; after a while, the phenomenom show up in lower consolidated margins, as the case for a while now at MB, and starts to happen at BMW, too. The nominal price in a lease written by the car company itself is no reflection of true sale price.
  • deweydewey Posts: 5,243
    I think a lot of people who have to have a BMW don’t worry about that stuff. I own. Cars are expensive and require a lot of attention no matter how reliable they are.

    I agree! Although it may appear at least in this forum that I am the only BMW driver on this planet earth who has justified his purchase with reliability statistics, I can assure you that is not the case at all. I bought and I will buy any car based on how it drives, reliability stats be damned.

    The fact that I keep on using reliability/resale stats to justify my arguments is because that is the only ammunition that can be used against those Lexicans!

    The car I am lusting after is a sport wagon. Unfortunately BMW does not believe wagons and power are compatible. I find both the 325xi and 530xi tourings underpowered. I would buy a 330xi or 550xi touring right now if they were avaiable at my local dealer. An A4 Avant does not excite me and the Audi S4 is priced like a BMW 550i in Canada( I would rather forgo the wagon idea and stick with the 550i)
  • deweydewey Posts: 5,243
    That's not true at all. The lease residue for BMW-financial leases are set by the car maker itself. The residue does not have to reflect actual resale value at all.

    What you are saying applies equally to Lexus and BMW. It is the subsidy component that was the source of our debate!

    You can refer to our prior discussions from today and yesterday for further riveting details since it would make no sense for me to repeat my point over and over again.
  • Is the difference in lease costs between a Bimmer and a comparable Lexus sufficient get the prospect to change brands?

    Or just change how he is going to acquire the brand of his choice from leasing to buying (or vice versa).

    On a side note, I'm surprised that a board full of such smart, savvy business guys is a board full of guys who lease or turn cars over rapidly. I would think that a savvy guy would ladder his cars (like his bonds) and have a family fleet full of cars of varying years, beginning say with a 11 year, 125K miles, s***box and ranging up to himself's daily driver. Sure, a 5 year old Bimmer might have some maintenance issues but they will be a lot less costly to fix than to reset the depreciation clock and pay another hit of sales tax. The people who I see doing well in this world do not have a driveway full of newish leased cars. Moreover, the affluent driveway usually contains a pickup or two.

    Speaking of retail "equity investment advisors" (see post a day or so ago), those with a 250K ride are telling anyone with a brain that they don't really have any good ideas. In other words, they bought the car because they had zero opportunities to invest. People like Warren Buffet would laugh all the way to the bank at the sight of an "investment advisor" in a Lambo. Interestingly enough, high net worth financial types (i.e., hedge fund partners etc., not retail advisors) in the Northeast, much prefer a chaufer driven Tahoe or Denali.
  • deweydewey Posts: 5,243

    I would think that a savvy guy would ladder his cars (like his bonds)


    ;)
  • What you are saying applies equally to Lexus and BMW. It is the subsidy component that was the source of our debate!

    In case you missed it, BMW Financial leases have lower money factors, and at the tail end of a lease, there is greater difference between auction returns and the projected residues by BMW Financial. These are signs that BMW has been subsidizing leases; also at the root of why BMW financial statements starting to deteriorate.
  • Is the difference in lease costs between a Bimmer and a comparable Lexus sufficient get the prospect to change brands?

    I for one would. Everything has a price. If BMW wants to give me a car for free, or nearly so, I will take it, assuming I'm not using the car for business purpose. Lease subsidy does come in here in a significant way. For example, an unsubsidized lease of IS350 (or even IS250) sedan can push over $500 per month. On the other hand, with lease subsidy, BMW 330i convertible can be had for a little over $500 a month. In effect, BMW is giving away 330 convertible at about $38k, not anywhere near the $50k MSRP. If you are in the market for a convertible and your use of the car can put up with some unscheduled service visits, the 330i convertible may just be the ticket.

    As to how one maintains a family fleet, there are a couple issues besides just money:
    (1) time. I probably don't have the time to put up with an 11yr old car with 125k miles, with all the attendent maintenance issues, especially unexpected ones, unless it is a collector's car;
    (2) safety. New safety technologies come up every few years. We all put a price on our own lives.

    For what it's worth, I think Warren lives out of a plane.
  • tiny1tiny1 Posts: 26
    Wondered if you guys could answer a question or direct me to a maintenance or troubleshooting forum...I have a noticeable "shudder" between 40-50MPH with my 2002 CLK55 AMG. Dealer has balanced tires twice with no significant improvement. I still have factory warranty for another month, but they keep wanting to go the balancing route. Any thoughts or experience with this? This is starting to bug me as it's causing a couple of squeaks to emerge in the dash. Can really feel it on the wheel and pedels. Seems fine under 40 and at higher speeds. Would appreciate any thoughts..

    thanks!
  • deweydewey Posts: 5,243
    In case you missed it, BMW Financial leases have lower money factors, and at the tail end of a lease, there is greater difference between auction returns and the projected residues by BMW Financial. These are signs that BMW has been subsidizing leases

    No Kidding!!

    Have I said that BMW does not subsidize leases? So what is your point?

    If you think you can win a debate by having the last word with pointless information then so be it! I will let you have the last word!

    BMW Financial Statements are deteriorationg? You seem greatly misinformed! Here is a link to BMW Group's Interim June 2005 and Annaul 2004 Financial Statements!

    BMW F/S
  • ljflxljflx Posts: 4,687
    Dewey - there were a number of financial reports recently that said BMW's results were disappointing and profits dropped. Maybe you missed it. And - I have no intention of proving those reports to you.
  • designmandesignman Posts: 2,129
    A steering wheel shudder in a specific speed range is usually characteristic of front wheels being out of balance. If the shudder is in the seat, it’s usually a balance problem with the rear wheels. The problem is, if they already balanced them incorrectly on two occasions, I would be hesitant to let them make another attempt. But if you do I would make sure it is done by a different technician. It will obviously cost you extra to take the car to someone else. Are these new or old tires you are talking about? In any event the place you want to go on Edmunds is the “Maintenance and Repair” section in the thread entitled “Tires, tires, tires.”
  • designmandesignman Posts: 2,129
    The car I am lusting after is a sport wagon. Unfortunately BMW does not believe wagons and power are compatible.

    Dewey, haven’t you heard about the M5 wagon coming next year? I think they have rocks in their heads. They would be better off leaving it to a 330, 530, 550 and even an M3. Based on engines and transmissions, I would prefer the RS6 and E55 wagons over the M5 Conestoga. But indeed, nothing would outhandle an M5 wagon loaded with a stack of sheetrock! ;-)

    http://www.autoweek.com/news.cms?newsId=103566
  • designmandesignman Posts: 2,129
    And - I have no intention of proving those reports to you.

    Now there’s a confident man with no desire to do an ounce of work on Thanksgiving day. I’ll give you a pass today, but come Monday morning I want the spreadsheets in full regalia. And, in your report I want you to go straight to the bottom line… the details bore me!

    ;-)
  • Brightness, how did you compute the actual cost of a 330i rag top at 38K when leased?

    PS Warren actually leads a very stolid life (albeit his marital status was always curious). There are no computer monitors in his office and he receives no more than 12 calls a day. The antithesis of today's financial "advisor".
  • deweydewey Posts: 5,243
    Relative to the auto industry as a whole, the financials performance of BMW is doing quite well! I guess you are referring to the news item below:

    BMW said third-quarter net profit fell 6.5% to €448 million ($540.8 million) from €479 million a year earlier, hurt by the weak dollar and the revaluation of a Rolls-Royce convertible bond, as well as higher oil prices and other raw-materials costs.

    These are tough times in the auto market. Including for TMC which in its latest quarter saw decline in its operating margins !

    From Yahoo Finance Nov. 5, 2005

    Still, Koichiro Suzuki, senior investment manager at Sompo Japan Asset Management, said that investors -- who had high hopes for Toyota's earnings -- may sell the stock out of disappointment.

    "The fact that profits fell shows that costs were higher than expected. This is the same sort of pattern as Nissan ... The result certainly falls a little short of expectations," he said.
  • deweydewey Posts: 5,243
    But indeed, nothing would outhandle an M5 wagon loaded with a stack of sheetrock

    An M5 wagon would be my idea of a dream wagon. But the price tag hurts more than a sheetrock over my head, OUCH!!! :(
  • hpowdershpowders Posts: 4,269
    Without its subsidized leases from BMW Financial Services, BMW would be a loser in the USA.
    Who in their right mind would actually buy a BMW?
    Just the thought of it gives me the chills.

    The new 2007 LS. Now there's a car I will probably buy!
    Sometimes, you just have to think smart!!
  • deweydewey Posts: 5,243
    The new 2007 LS. Now there's a car I will probably buy!
    Sometimes, you just have to think smart!!


    Sounds very smart! But I prefer the lower IQ alternative!

    Thank God for those BMW-subsidized leases because now I can afford a BMW M5 versus paying the same amount for a unsubisidized lease on a Lexus ES330 ;)
  • hpowdershpowders Posts: 4,269
    An M5 will not be reasonable on a lease. It will cost you at least $1200 a month and could be as much as $1500.
    Unlike most BMW's, there is very little wiggle room off of MSRP for the M5.
    The residual is 61% for 36,000 miles but the money factor is an unsubsidized 0.00285 or 6.84%.
    I got my 545 for only 2.4%.
    No help from BMW on the M5.
    Also good luck with the horrendous gas mileage of 12 mpg city and 18 mpg highway.

    As John McEnroe used to say, "You can't be serious!
  • hpowdershpowders Posts: 4,269
    An ES330 can be leased for about $600 a month here in the states. Half the payment of the M5.

    As Ralph Kramden used to say to Alice: "Better stay away from that rum cake!"
  • deweydewey Posts: 5,243
    OK , Ok I will confess as long as I can have access to those rum cakes!

    Confession
    I was just kidding about that comparison!
  • hpowdershpowders Posts: 4,269
    Lexus leases would have to be really bad for an ES330 lease to be comparable to an M5!
    The M5 is one of the few leases where BMW financial services will show you no mercy.
    If you don't have access to a track, I can't see anybody getting one.
    Totally wasted on the street.
    Imagine the thrill of being allowed to test one out on the Autobahn at 235 kph!
  • designmandesignman Posts: 2,129
    Who in their right mind would actually buy a BMW?

    Hmm, are you trying to provoke me, get me back for my cracks about lame BMW styling?

    Heh, heh… ya dirty dog…

    ;-)
  • bdr127bdr127 Posts: 950
    It is more profitable for BMW to offer competitive leases than Lexus! Why? The primary reason is BMW's competitive advantage : The highest anticipated resale values in the industry.

    That's not true at all. The lease residue for BMW-financial leases are set by the car maker itself. The residue does not have to reflect actual resale value at all.


    First of all, it's "residual"...

    Yes, the final decisions on residual values are set by the financial institution. But ALG is the authority on residual values, and they set guidelines and recommendations for every vehicle on the market.

    Although you don't seem to believe, residual values do have an effect on resale values. When leases expire and the auctions are full of off-lease vehicles, the financial institution owns them for a certain amount. This amount has some impact on auction sales. This, in turn, all trade-in values at dealerships (since most look at auction reports), which influences KBB, Edmunds, and other car value sources. Although it isn't "gospel" and not universal, residual values do have an indirect impact (whether positive or negative) on most vehicles.
  • bdr127bdr127 Posts: 950
    Dewey - there were a number of financial reports recently that said BMW's results were disappointing and profits dropped. Maybe you missed it. And - I have no intention of proving those reports to you.

    Don't you love it when people just spew random, inaccurate information?.... I love the internet!!!

    Hey, did you hear about the latest report on the new Lexus GS and how a lot of people have died due to exploding engines! Wow, that is gonna kill resale value!!!!
  • hpowdershpowders Posts: 4,269
    Nope. Just don't trust BMWs' long term reliability.
    I don't mind leasing them every 3 years.
    I do not want to own a BMW outside of warranty.
    It's a risk I would rather not take.
    Leasing Bimmers. Perfect situation.
    Great car. No maintenance. No long-term hassles.
    New toy every 3 years to look forward to.
    Now if only they would pay for the gas...
  • So what is your point?

    I hate to repeat the obvious: subsidized leases make BMW nominal sale price and lease residue pointless as far as how much the car is actually selling for and how much it retains value. Like I illustrated earlier, a car that actually worth $40k and retain $20 on auction at lease end can go for $50k with $30k residue or even $100k with $80k residue; both would result in almost the same payment so long money factor is subsidized to near-zero as well. The car is not retaining 80% of its value after three years just because the car maker is making up ridiculous MSRP and residue numbers.

    The point is simply two fold: (1) your claim that people are paying up more for BMW is invalid, because subsidized lease make "sale price" meaningless without considering the money coming out of the pocket of BMWFS; (2) your claim that BMW's retain more value because their lease residue is higher is also invalid because BMW heavily subsidizes their leases.

    BMW Financial Statements are deteriorationg? You seem greatly misinformed! Here is a link to BMW Group's Interim June 2005 and Annaul 2004 Financial Statements!

    In case you did not notice, it is near the end of 2005 now. Bloomberg reported earlier this month that BMW saw its third consecutive quarterly profit decline:

    http://www.bloomberg.com/apps/news?pid=10000085&sid=aWuIJukMdeMA&refer=europe

    Notice, it's profit decline, not just profit margin decline! Huge difference!

    The currency exchange rate excuse is getting really old. The dollar has been increasing in value relative to Euro in the last three quarters, not declining! It just makes no sense to blame currency exchange if company finds it hard to do business with dollar both going up and going down. The real problem, IMHO, is that the lease subsidies from earlier years are coming back to bite the financial statements as the auction price shortfalls (compared to the sky-high residue) are forcing the upchucking of previously booked profits on phantom "sales."
  • deweydewey Posts: 5,243
    Nope. Just don't trust BMWs' long term reliability.
    I don't mind leasing them every 3 years.
    I do not want to own a BMW outside of warranty.
    It's a risk I would rather not take.


    It's a risk everyone is willing to take in the BMW used/resale market! If it is so risky, why are BMW resale values so high?

    I dont think a person who buys a used BMW has more money to burn in repairs/maintenance than someone who buys a new BMW, dont you?
  • patpat Posts: 10,421
    NOT a leasing discussion.

    Lots of good points have been made, but it is time now to get back to the makers and leave the leasing details for the other appropriate venues.

    Thanks.
  • deweydewey Posts: 5,243
    It ceases to amaze how you are not able to understand what was previously discussed about leases?
Sign In or Register to comment.