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Entry Level Luxury Performance Sedans

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Comments

  • robr2robr2 BostonPosts: 7,742

    Good point - but I'll turn it around:

    I'm guessing that those who are stretching to lease a 328 for $300 a month don't have $5K to tie up for 2 years.

  • flightnurseflightnurse 35K feetPosts: 1,590

    @MrShift@Edmunds said: Oh I don't know. There are some well to do people who are pretty tight with a buck. I have no idea how popular these MSDs are.

    The really sad part is, BMW dealers don't talk about MSD's. I would assume those in the KNOW about them use them.

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    Thinking back about MSDs, I should have taken the equity from my Acura and paid as many MSDs as I could to both lower the payment and get the cash back at the end of the lease (September). Problem is that the dealer that I bought from (who gave me the best price for my 3er and my trade) is in NY, a state that does not allow the use of MSDs. Instead I used the equity plus my $500 BMWCCA rebate to pay up front fees (Acquisition, DMV...) plus my 1st 9 lease payments. If I would have bought the car where I live in CT, I could have paid MSDs up front. Who knows, they might not have given me as much for my trade and hit me with a $499 doc fee. Thinking about it now, that would have been a better use of the "free money." Now I know for next time:)

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    @robr2

    You are right, they might not have the $5K to lay out for MSDs, but they'll "put down" $2995 as a cap cost reduction not realizing that if their car gets stolen or totaled at any point during the lease they loose that money.

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • flightnurseflightnurse 35K feetPosts: 1,590

    @nyccarguy I was not aware that MSDs were not allowed in NY.. In retrospect a deal in CT with the MSDs could have gotten you lower payments, but the sale price could have been more. We live and learn. What are you going to do when you 328i is up ?

  • m6userm6user Posts: 2,952
    edited January 29

    @MrShift@Edmunds said: Oh I don't know. There are some well to do people who are pretty tight with a buck. I have no idea how popular these MSDs are.

    Agree. Many, many people that could simply write a check for one of these cars if they wanted to are in that position by taking advantage of saving money when possible. There is a difference between being frugal and being cheap. I would do that deal if I was into leasing for that kind of return in a heartbeat. I've got a pretty good chunk in money market funds that return much less than 1%, so letting someone hang onto my money for two years for a 19% return would make all kinds of sense.

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    @flightnurse

    I do truly love the way my car drives. To put it simply, it is the car that I'll look to compare every other. It is the 1st, but don't think it will be the last E90 I own. I'm definitely not going to buy the lease out because the residual is too high and I'll have somewhere in the neighborhood of 50,000 miles on it when the lease is up at the end of September. I'm going to go for something less expensive for the time being. I'll lease something like an Accord or Subaru Impreza 5 door and share it with my wife for 15K per year (when she drives the new car, I'll drive her Pilot or my Prelude when the weather is nice). Once my BMW lease is up, I'll only have 18 months left to pay off the Pilot. I might be able to pay the Pilot off a little earlier too. 1 car payment would be nice.

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • kyfdxkyfdx Posts: 27,666

    I've done MSDs twice... Once on a BMW and once on an Infiniti. Plenty of leasers are looking for the killer deal. Believe me, there is no way I'd be in the market for a $40K-$50K car, if I was buying it. (even if I could technically afford it). So, if I can knock a payment down from $430/mo. to $378/mo. using MSDs, you can bet that weighs heavily on whether to get that vehicle....

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • kyfdxkyfdx Posts: 27,666

    Not that I'd call it conservative... or even, likely repeatable... but, my portfolio was up 35% last year (as were most of those heavily invested in equity index funds).

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • markcincinnatimarkcincinnati Posts: 5,069
    edited January 29

    Regarding the statements: " BMW probably does the most to subsidize their leases. I think Mercedes does, too." And: "I wouldn't call it subsidizes they have programs..."

    Well, the truth of the matter is that BMW [among others] does provide "financial support" for leases made through their financial companies. This support is often (usually) called a "sub-vented lease."

    Subventing makes leasing more attractive to the buyer who doesn't care so much about the MSRP of a given vehicle, but does care about the monthly payment. Either a purchase or a lease "deal" can be subvented -- but the real impact of subventing is going to be able to be much greater for a lease than a loan.

    The best thing that can be done regarding a loan to buy a new car is that the interest rate charged can be set to zero (0% apr). This way a $36,000 car can be purchased and the payments determined by dividing $36,000 by the number of months that payments will be made. $36,000 divided by 36 months, then, equals DOH! a $1,000 per month payment.

    I assume we could stretch the point and say that the manufacturer could offer a "loyalty" or "conquest" or even a "just because" bonus or rebate or discount of $1,000, making the amount financed be only $35,000, meaning the payment would be $35,000 divided by 36 months or $972.22/month.

    A subvented lease, on the other hand, is where the mfg can really influence your "purchase" decision. Here's why.

    When you lease a new car, the payment will be determined (generally speaking) by several things:

    1.The % of value (residual value) that the car will have at the end of the lease

    2.The money factor (think of it as the interest rate) that is used.

    Roughly speaking you can calculate the lease payment (remember the word "roughly") by subtracting the residual value from the MSRP of the car to get your anticipated usage cost.

    If the car is $36,000 and its residual is 50%, your usage over 36 months is $18,000. If you put money (out of your pocket) as what you might term a "down payment" you will reduce the amount of the "agreement" by that amount (this is called a capitalized cost reduction).

    This "down payment" [in your mind] does not reduce the residual value of the car, meaning that if you decided to buy the car at the end of the lease the amount you will have to come up with will still be $18,000. Please, don't call any money down on a conventional (closed-end) lease a down payment and I won't either. It is a "cap cost reduction" -- and the purpose of this cap cost reduction is solely to reduce the monthly payment. You are NOT building up any value, post lease, whatsoever.

    The money factor (or the implied cost of money -- or interest rate) is applied to recognize the value of the "time" you have the auto mfg's finance arm's money tied up.

    Far more detailed explanations -- and explanations that are specific to your lease deal -- are available here on Edmunds and of course at your dealership.

    The bottom line, however, is this: the auto manufacturer's financial outlet may offer a lease to you that has been subvented by the manufacturer. The subventing can take the form of:

    • A reduction of the money factor -- including taking it to zero; or,
    • An increase of the residual % -- including taking it to a very optimistic % (+5% or even more) -- meaning the car will be said to be worth a much larger percentage of its brand new value than market conditions would likely support.

    This manipulation of the residual cannot be done when the car is financed outright -- so perhaps you can see that a subvented lease could produce a very very low monthly payment if the mfg decides to reduce the money factor to zero or near zero and increases the residual value significantly over the expected depreciation.

    Subvented leases often carry with them terms that are not as "friendly" to you as a straight buy with a loan or a lease that has not been subvented.

    If the manufacturer says the residual is 62% after 36 months and the reality of the situation is that the 36 month value should only be 55%, you may not be able to get out of your lease early without a huge $ penalty (plus perhaps a standalone early termination fee or penalty).

    If you buy and finance a car, you can sell or trade you car almost at any time and only pay the potential difference between the outstanding loan amount and the amount you can sell the car for. It may feel like a prepayment penalty, but the reality is that there will be no literal prepayment penalty (it is uncommon for an auto loan from a bank, for instance, to have a prepayment penalty -- if you want to get out of the loan, you can sell the car and give the proceeds to the bank plus a bit more out of your pocket or perhaps a check from the bank.)

    So, leases give, leases take. Leases are sometimes of the very, very low payment variety -- meaning there is some subventing going on and suggesting that you'd better be prepared to not fall out of love with your new baby for "about 90%" of the lease's term. I say that because it is also common practice to put customers in 39 month leases and then around month 33 start to seduce "owners" into the showrooms with the promise of letting them out of their leases without penalties if they re-lease the new model.

    BMW does have a reputation -- I assume well founded -- for "supporting" (subventing) leases. This can make getting into a $50,000 Bimmer "within reach." It also pretty much locks customers into the cycle of "lease, burn through the lease, and re-lease" again and again.

    Nothing wrong with that for a lot of consumers. But not for all.

    • If you want to keep your car 5 years or longer, you may not find leasing economics works for you;
    • If you drive more than 18,000 miles per year (and probably the message could be "more than 15,000 miles per year), you may not find leasing economics works for you (as your residual will likely drop sharply, meaning the monthly payment will rise sharply in response);
    • If you own a business, on the other hand, leasing may mean you can "expense your lease payment" to the company (with proper and available proof), which many would consider to be a good thing;
    • If you want to build equity in your car, well that is "highly" (or at least "fairly") unlikely in a leased car, but more likely in a car that you are making payments on to buy.

    And the pros of leasing AND buying go on.

    Neither my wife nor I had ever purchased a car, until late 2013 when we bought her '14 Audi SQ5 Prestige; we also lease a '14 Audi S4 (and are fully intending, 4 months into the lease, to buy the thing at the end of the lease -- and we put NO money down on the lease). This is a new experience for us and we keep rationalizing that -- at this time -- buying (for us) will likely turn out to be a better deal since we intend on keeping the cars more than 5 years.

    So, my point in all that is above is this: Auto manufacturers DO indeed provide financial subsidies (i.e., named subvented lease programs). Multiple security deposits are NOT, strictly speaking, subsidies, however.

    • DILYL :o
  • robr2robr2 BostonPosts: 7,742

    @nyccarguy said: robr2

    You are right, they might not have the $5K to lay out for MSDs, but they'll "put down" $2995 as a cap cost reduction not realizing that if their car gets stolen or totaled at any point during the lease they loose that money.

    Don't forgot the MSD's are on top of the capital cost reduction. They can't get the $300 a month deal without the $2995 and they couldn't afford the $410 or so monthly lease without the CCR.

  • markcincinnatimarkcincinnati Posts: 5,069
    edited January 29

    I would NOT put any cap cost reduction money into this; I would, however, consider MSD's since you do get it back at the end of the lease -- cap cost reduction money is gone forever and even worse if the lease has no GAP coverage to account for the delta between value and owed (the gap between, so to speak) should the leased vehicle be totaled.

    If you can or want to put money down on the lease and it gets you where you want to be, I have no issue with it. However, if you've got that money, I would assume you also can justify lighting your cigars with paper money instead of matches (wooden, of course).

    Seriously, money to lower a lease payment is somewhat hard to justify these days. If $2,995 lowers the mo pay by $100 for 36 months, wouldn't it be acceptable to put the money in an account and know that at least you've got 30 of the next 36 payments (the $100 difference, that is) accounted for?

    Let's not assume we know how better to spend someone else's money.

    I've learned a lot from Edmunds and Audi World, etc; I used to think putting something toward the lease was at least OK. Now I think differently -- but that is certainly in part due to the participation of many folks here. I found my stupidity is incurable, I found my ignorance could be cured, however.

    DILYL

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    @robr2

    Right again!

    @flightnurse

    @markincincinnati brought up a great point about GAP insurance. It's automatically written into every auto leasing and financing contract in New York State. So there's another "if" that could have potentially cost me more money by leasing from a dealer here in Connecticut. Depending on the dealer, they charge $400 - $700 for this optional protection. So between the high doc fee, the GAP insurance, the possibility of being offered significantly less on the trade, and even a little more on the price of the car, maybe it would be a wash.

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    @markincincinnati

    When I leased my BMW, the financing rate at 0.9% was significantly cheaper than the money factor I'm paying to lease (somewhere in the 4% range). Where I believe I'll come out ahead is in the end. According to my car's leasing contract, it will be worth around in the $28K range. According to "the auctions," my car with 50K miles will be worth much less.

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • stickguystickguy Posts: 14,168

    @Bradd, I know I wouldn't pay 28K at the dealer for your car with 50K on it. And that would be a refreshed CPO. So certainly wouldn't be buying it out (as it sits) for that much!

    2013 Acura RDX (wife's), 2007 Volvo S40 (when daughter lets me see it), 2000 Acura TL (formerly son's, now mine again), and new Jetta SE (son's first new car on his own dime!)

  • nyccarguynyccarguy Stamford, CTPosts: 7,407

    @stickguy

    Especially when there are cars very similar to mine with 1/2 the miles listed for $25K CPO.

    2001 Honda Prelude Type SH/ 2011 BMW 328xi / 2011 Honda Pilot EX-L w/ Navigation

  • stickguystickguy Posts: 14,168

    @nyccarguy said: stickguy

    Especially when there are cars very similar to mine with 1/2 the miles listed for $25K CPO.

    well yeah, there is that too.

    2013 Acura RDX (wife's), 2007 Volvo S40 (when daughter lets me see it), 2000 Acura TL (formerly son's, now mine again), and new Jetta SE (son's first new car on his own dime!)

  • flightnurseflightnurse 35K feetPosts: 1,590

    @robr2 said: Don't forgot the MSD's are on top of the capital cost reduction. They can't get the $300 a month deal without the $2995 and they couldn't afford the $410 or so monthly lease without the CCR.

    The price shoppers will plunk down 3K to get that 50K car for 410/m but the people who really understand how it all works wouldn't do that. Lately BMW has been offering some "incentive cash." $750 for having BMSCCA account, $500 for being a USAA member, and currently BMW has $750 back on all 3 series. So right there you are talking $2250, this will cover fee's and first month payment, and a slight cap reduction (remember all this is ZERO out of pocket.) then add 7 MSDs, so basically you could just walk into the dealer, with $3500 and walk out with a payment of $540/m on that 50K car, and at the end of your lease get that $3500 back. Those 7 MSD's well save you roughly $50/m x 36 = $1800. So you could walk into and have a cap reduction that doesn't cost you a cent but helps to lower the payments slightly. When I did my deal on my 320, I was very temped to lease since BMW was giving me 2K built credit and 1K for my grad degree, a total of 3K, plus add $2400 for 7 MSDs, my payments would have been $280/m.

  • m6userm6user Posts: 2,952

    A few days back someone asked the question about buying a Chinese manufactured BMW or something like that. I replied that I wouldn't anytime in the foreseeable future. This is one of the reasons why:

    http://www.autoblog.com/2014/02/05/aston-martin-recalling-majority-of-cars-built-since-late-2007-ov/

  • flightnurseflightnurse 35K feetPosts: 1,590

    @m6user said: A few days back someone asked the question about buying a Chinese manufactured BMW or something like that. I replied that I wouldn't anytime in the foreseeable future. This is one of the reasons why:

    http://www.autoblog.com/2014/02/05/aston-martin-recalling-majority-of-cars-built-since-late-2007-ov/

    Besides that, if you have ever seen a Chinese car up close you would have another reason not to buy.. I think it was 2009 I went to the North American Autoshow in Detroit, It's a must show to see, the Chinese were showing off cars for the first time. It was so hard to look at the car without laughing. The paint jobs on the cars were horrible, orange peel all over the car, the fit and finish was really bad, the gaps in body panels were worse then the late 60's and early 70's GM cars. The designs were blatantly stolen from other car manufactures. One car company had a rip off MB SLK, It was scary to see...

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