Luxury Lounge

circlew

I can't imagine liking, or disliking a car based on the business practices of the manufacturer.

I can. GM. I can not like one more car that a clueless management represents! But even 'dislike' is too strong a word. I vote with my wallet.

Regards,
OW

circlew

but it was definitely influenced by the LS styling, especially the rear end.




Disagree. Hyundai!!

Regards,
OW

circlew

BMW will develop turbo solutions ahead of the competitions. They do engines/suspensions best at this point in time. Period.

Regards,
OW

circlew

Case in point...if a 335d costs $50k and a 135i costs $42K, I take the 135i for the performance edge and the fact that I can never make up the cost difference with the fuel savings. Let alone the payback in fun! You's pays for what you's gets!

Regards,
OW

tagman

Good thought... but I really question the 335d to 135i, apples to oranges comp. Perhaps comping a 335d to a 335i would make more sense... depending upon what factor you are attempting to isolate... such as powertrain.

Or did I misunderstand your post?

TM

circlew

No, I was highlighting the differences in the 2 vs. the value return of cost/performance benefit if you consider performance high on the list. IOW, the 135i is a screaming bargain if you are weighting performance vs. economy of a diesel.

335i to 335d should be close to break-even after 5-6 years in my estimate for apples/apples regarding cost. That is, if Diesel stays more costly than PUG. The performance edge is less of a difference in this comparison but it favors the i.

Regards,
OW

briteone

"RX400H - not rated, but RX300's larger engine has only 251 lb-ft 4,700 rpm "

Don't forget the electric motors. If we want to talk about off the line kick in the pants, electric motor's 0RPM torque is far greater than that of any internal combustion engine. Once the vehicles get moving, it's the horsepower that matters, torque at the wheel can be obtained via gearing. Basic mechanical engineering. . . or basic physics.

"the diesel's real-life numbers are consistently as good or better then the EPA ratings, while the gas hybrid's are more often considerably less than the EPA ratings... "

That's no longer the case with the revised 2008 EPA ratings.

briteone

And yes, BMW will be ahead of others when it comes to making engines for personal flying machines. . . by at least 70 years. They will at least have the most relevent logo for that. Period. LOL

briteone

Diesel fuel has a number of primary applications besides light vehicle transportation: heavy duty commercial trucking fleets, jet aircrafts (kerosene, similar to diesel), power generation, ocean liners . . . etc. The current price difference between diesel vs. gas at the pump is only reflecting summer fuel use. In winter times, heating oil demand will drive up diesel price even more.

Besides light vehicle transportation, there isn't much use for gasoline (chemical solvent use is miniscule in comparison; camping "light gas" is actually kerosene).

Out of a barrel of crude oil, far more gasoline than diesel can be produced.

There are numerous countries, both developing countries and western Europe, that have lower diesel fuel standards than that of the US.

All these factors combine to make price difference offset fuel mileage difference between the two, probably making burning diesel more expensive per mile in the US in winter than even burning gasoline . . . because someone else somewhere in the world burning lower grade diesel can still come out marginally ahead and their demand arbitrarges the regulatory difference.

circlew

That's great news! Lexus and Merc will be last as usual! Period, AMEN!

Regards,
OW

circlew

That's why the diesel will not return the expected benefit considering the premium they will place on the price as well as the performance difference favoring GICE models vs. DF.

Regards,
OW

2001gs430

Welcome (back) Briteone.

I have not seen such quality postings since Brightness04 stopped writing.
What do think about TM shares, long or short? Looks like they are taking quite a beating as well.

Do you think either Infiniti or Lexus going to TT charged their V6's?

2001gs430

while the gas hybrid's are more often considerably less than the EPA ratings
We have had a real life report here not too long ago with Lou's RX400H loaner. I believe it was right on target from his one day usage.

louiswei

I believe it was right on target from his one day usage.

I took a picture at the end of the day too, here you go (apologize for the quality, I used my camera phone to take it):

tagman

According to the EPA website, the ML-Class diesel achieves 20% BETTER than EPA ratings in real life. This is not accomplished by the RX hybrid... and referencing the Highlander hybrid as well indicates that it performs 10% worse than the EPA rating.

At the end of the day, the hybrids will achieve closer to the latest 2008 EPA ratings, but the diesels will continue to achieve significantly better than those ratings, as is consistently reported in auto rags as well.

I believe there is enough evidence to support the FACT that diesel vehicles achieve significantly better fuel efficiency in real life than the EPA ratings, while hybrids tend to achieve closer to the ratings, or slightly worse.

That is not to say that there aren't other advantages to the hybrids. I have no agenda against hybrids or in favor of diesels. I am just making some objective observations and statements regarding their differences.

I intend to purchase a hybrid myself in the very near future. I am more inclined to get a hybrid than a diesel at this point.

But credit should go where credit is due.

TM

circlew

It's nice to compare hybrids to diesels to gas versions but in every case that I have researched, the tradeoff in price is not returned by the efficiency over the gas version.

When price parity is met and a value emerges, let me know. Until then, I will wait on the sidelines and go with gas! I will do all my efficiency gains off less weight going forward, however.

Hint, hint BMW, Merc, Audi, Lexus, et al.

Regards,
OW

2001gs430

I think it depends on what time frame you do your calculations for the trade off. Here are the most recent studies for two provinces in Canada. They did the calculation for a five years period. Factored in all considerations, the results are in favor of seven Hybrids out of thirteen models:
Honda Civic Hybrid, Toyota Highlander Hybrid, Saturn Vue Hybrid, Toyota Camry Hybrid, Lexus RX 400h, Ford Escape Hybrid and Chevrolet Malibu Hybrid.


Read more here link title
They did mentioned that the government grants are significant sources of the hybrids cost advantage.
I suspect that with the current gas price, a US study would arrive at similiar conclusion.

2001gs430

I am more inclined to get a hybrid than a diesel at this point.


I am very curious to know your reasoning for the above statement, given that you have been very vocal in supporting clean diesel.

circlew

Well, in the states, it's curtains for the tax incentive. That renders a nil advantage. Factor in the depreciation and costs to replace battery after 5 years and there is a real negative return.

link title

Regards,
OW

lexusguy

I believe there is enough evidence to support the FACT that diesel vehicles achieve significantly better fuel efficiency in real life than the EPA ratings, while hybrids tend to achieve closer to the ratings, or slightly worse.

The EPA certainly wouldn't rate the A8 4.2 TDI at 40mpg highway, but it can do that. Initially I was more interested in diesels than hybrids, but how much will it cost to fill up a Q5 3.0TDi when it finally arrives?

Also, I think that hybrids will see much greater fuel economy gains in the future than diesel engines. While technically the hybrid automobile is some 90 years old, and the electric motor more than that, it's the battery where the advances will be made, and diesel doesn't have something comparable to that in its future.

Until (if) hydrogen power becomes economically realistic, the best idea may be a Volt style system of electric drive and gas generator, powered either by diesel or a gas turbine. Toyota did exactly that with the turbine powered Century hybrid back in 1971.

louiswei

Also, I think that hybrids will see much greater fuel economy gains in the future than diesel engines. While technically the hybrid automobile is some 90 years old, and the electric motor more than that, it's the battery where the advances will be made, and diesel doesn't have something comparable to that in its future.

Geez, I have been saying that since the day one of the legendary hybrid vs. diesel discussion...

2001gs430

How much is the state side incentive worth?
In Canada, I believe it ranges some $500-2000. The gas price increase at the current rate will quickly negate the loss of government grant over the five years. Also, I think Toyota batteries are proven to last much longer than five years, so one should adjust for that.

briteone

"Welcome (back) Briteone.
I have not seen such quality postings since Brightness04 stopped writing."

Thank you so much for your kind words. I'm quite touched.

Yes, TM shares have taken a beating too, but it's still up almost 20% over the past five years, to date. When a company's market share is as big as TM (or GM for that matter), the company is the market . . . it's hard not to go down with the market. That's the primary reason why I wouldn't buy TM shares at this juncture either . . . because both the car market and the stock market in Japan and in US are going to be a drag. As well run a company as Toyota, it's hard for stocks to swim against the tide . . . because in addition to company performance, share prices are also heavily influenced by money supply, which is entirely out of a carmaker's control. With further deterioration in the worldwide markets, protectionism may well rear its ugly head . . . that is not good for any company engaged in worldwide trade. Like I mentioned to Tag, picking a lone ranger in a bear market is not a winning strategy. . . after all, life is a game of odds . . . TM may well outperform other carmaker stocks, but that's small consolation for losing money :-) Of course, if you like to trade them in balanced pairs, then short some other carmakers and long an equal dollar amount of TM might be a viable trade.

Infiniti might introduce turbo, especially an infiniti version of its turbo-charged Nissan halo sportscar . . . where durability and ease of maintenance in the long run is not as important as boasting maximum bhp . . . and the production volume wouldn't justify yet another dedicated engine block. Otherwise, having a new block would make more sense. Installing a turbo is actually quite costly in the production process due to the parts count and plumbing involved. It would not surprise me if Audi's turbo 4's actually cost more money to produce (per unit variable cost) than the V6's despite the marketing differentiation the other way; Audi sells a lot of non-turbo 4's in the rest of the world, so that helps defray foundry cost and engine/parts distribution network worldwide. In the general case, if there is volume, and the company can afford to pay up the one-time cost of a new engine block, it usually doesn't make financial sense to pay every time installing a turbo only to buy a bad reliability rep later.

As for Lexus, I think the rapid progress of hybrid is making turbo quite unnecessary for that company.

BTW, I don't think the turbo-charging saving gas theory works in real life. Most of the time running at steady state highway speed, the turbo is shunted through the bypass valve . . . the result is a normally aspirited engine running at relatively low compression ratio . . . that doesn't sound like a formula for fuel efficiency.

All are my humble opinions of course.

louiswei

As for Lexus, I think the rapid progress of hybrid is making turbo quite unnecessary for that company.

Agreed.

I'll take an IS450h (2GR-FSE + LI batteries) at around 350hp over a TT IS350 any day of the week.

tagman

I'll elaborate more later, cause I'm on my mobile (new 3G iPhone, guys!), but let me just say that I haven't seen any very high MPG diesel vehicles that look cool enough for me to want any of them in my garage. On the other hand, the hybrid and electric vehicles look much sportier and some even look futuristic...most of the diesels all look conservative.

I think if I consider the extra premium for diesel and also consider the difference in diesel availability, as well as fuel economy, and then factor in the selection of vehicles, I am more likely to go hybrid. Now... if a good-looking fuel efficient diesel-powered vehicle comes along that I like... then fine, I'll consider it.

I still like diesels. And I'm not needing to squeeze every nickel's worth of mpg's out of my cars. But it's time for a change towards fuel efficiency and a great diesel OR hybrid is something I look forward to... but I'm now more inclined to think "hybrid" for the reasons I explained.

See?... The good TagMan is more open-minded than you thought!... LOL.

TM

circlew

TM, what kind of mileage are you seeing from the 135'er?

I would guess around 24 mpg all around. That is good enough for me!

Regards,
OW

tagman

TM, what kind of mileage are you seeing from the 135'er?

Well, I noticed that it depends so much upon how I drive. When I was taking it easy, I was getting lower 20's. But when I started having a lot of "spirited" fun, it dropped down into the upper teens.

With a balanced mix of fun and conservative driving, I'm expecting to average around 20 mpg in the long run. I know it could be better, but I'm being realistic for my kind of driving.

edit: my Porsche mileage sucks lately, and I'm going to have to figure out why. Might need a service. It should do better than 13 mpg, IMO. :surprise:

TM

anthonyp

No question about the Porsche.....I am a little surprised about the bmw getting that average...Do you drive alot of shortish trips? Tony ps My wife`s bmw stationwagon gets around thirty on the big I, around seventy five mph, which is the un supercharged streight six light weight engine...and it is a sweet driving car.

circlew

You are rated at 18/28. You should average around 22 unless you drive only short trips with many blasts up and down the rev range!

Heck, I average 22 tank to tank in my xi!!

What's up?

Regards,
OW

reality2

LOL! That's hilarious, but so true.

reality2

Thank you for the insight briteone. Although, I am not as well versed in these matters as you, my understanding is that the goal of a well performing premium luxury brand should be based off the concept of profitable growth rather than simply chasing volume. In this regard doesn't the financial markers of "Net profit per unit" or in general "Investment return per unit" represent a more realistic view of how profitable a luxury carmaker is. If so, I have been watching over the last several years how BMW's markers (Investment per unit and net profit per unit) have not only slipped but have begun to lag considerably behind arch rivals Mercedes-Benz and Audi. Lexus is not a separate company, so it is impossible to know if they are truely profitable globally (I have serious doubts they are considering their low volume overall worldwide). Both markers are growing steadily for Mercedes-Benz and Audi relative to BMW. So, even though they [BMW] may be selling higher volume, the return per each unit sold is declining or flat. I would assume this would be of greater concern than simply increasing volume. This is where I assume they would have to diversify or go into partnerships with other companies. I cannnot see Mercedes-Benz acquiring or wanting to acquire BMW. This would seriously dilute the MB brand negatively. Audi on the other hand would rather see BMW drop dead. BMW will likely enter into some form of partnership type agreements to sustain growth and maintain independence. By then the Quandts will likely sell their stake and get out while they still can reap profits from their investment. Cutting its volume in the US actually would be beneficial to them at this time and a desired effect. I never understood BMW's policy of wanting to be so ubiquitous.

tagman

Yes... a LOT of short little trips. Otherwise I'd be getting at least 22-24. Oh well.

TM

lexusguy

(new 3G iPhone, guys!)

Weee! I actually just got a new phone myself, replaced my Nokia E62 with an E90. It's a bit bulky, but that huge screen and nice roomy keyboard are worth the size penalty. With the latest QuickOffice, it's basically a mini-laptop. The one negative is that it only supports the EU 3G bands, but there's only Edge in my town anyway, and I figure if I'm in one of the few cities that does have AT&T 3G service, well there's gotta be WiFi around as well. It's not a "zazz" product like the iPhone, it has uncrippled Bluetooth, UMS support, swappable battery, etc. instead

It would be interesting to see somebody do a Prius style specialized diesel designed for maximum mileage, rather than just a variant of the Jetta or Passat.

bmlexus

Weee! I actually just got a new phone myself, replaced my Nokia E62 with an E90. It's a bit bulky, but that huge screen and nice roomy keyboard are worth the size penalty. With the latest QuickOffice, it's basically a mini-laptop

But still very bulky, I would might get the new E66 or E71 or maybe the N96 but I like E series better.

BTW saw my first nissan GTR in black 2 days back.Also seen a red R8 the same day hard to choose between them.

In the same house there is also 2 SLR 1 black 1 silver many 911s, 1rolls royce phantom couple of suvs a and a plymouth

tagman

Only 1 issue I have with the latest iPhone. IMO, it has been stupid to leave out the support for Flash. Absolutely stupid. :confuse:

Otherwise, there is nothing like it... absolutely incredible. Does everything so well. especially the internet. I have a device called mophie that I use for extended power when I am wanting to watch a few back-to-back movies on a long airplane trip. Otherwise battery is more than enough to get through the day before recharging. Bluetooth and Wi-Fi are seemless. And... it will support literally hundreds and hundreds of applications.

BTW, videos and movies on the iPhone are beyond incredible.

It would be interesting to see somebody do a Prius style specialized diesel designed for maximum mileage, rather than just a variant of the Jetta or Passat.


I agree... but I wonder if we would ever see such an animal. I find it soooooo frustrating when we don't have many vehicles that obviously we should have available to the public.

TM

lexusguy

But still very bulky, I would might get the new E66 or E71 or maybe the N96 but I like E series better.

I do a lot of mobile emailing and messaging, so phones like the E51, E66, and the N-series phones are out, I need a real keyboard. I was hoping that the E71 was going to be an E61i with US 3G support running S60 3.2. I'd buy that in a second. The actual E71 though is a disappointment. In their effort to make it more "pocket friendly" they shrunk the nearly perfect E61i into a Samsung Blackjack sized phone with a screen too dinky to do anything useful with, and a too small keyboard. What I want to see is a Blackberry Bold sized E-series with a high res screen and S60 3.2. Until something like that shows, the E90 is a great compromise.

and a plymouth

An old muscle car, or just some random Plymouth?

bmlexus

This is the one.

Btw saw another GTR in the same house. They got 2 in 2 days. black and white

tagman

I never liked the Plymouth Prowler. I always envisioned Herman Munster at the wheel... for some reason, especially the purple ones.



Here's Herman Munster at the wheel of his coffin dragster...



TM

laurasdada

I actually always thought that the Prowler was very cool in appearance. If not in performance...

circlew

Here it is. The recent drive which is much more raw than the awd GT-R.

link title

Regards,
OW

anthonyp

Whew-----thanks

dewey

Do I sense an Island Cult here?

I know there is a 3 initialed acronym that has a credit crisis and that acronym is not BMW but the USA.

There seems to be two lone individuals who have a credit crisis view of BMW.

Robinson Crusoe from Rhode Island and his Good Man Friday from Block island appear to be the only two voices that talk about a so-called BMW Enron Ponzi scheme. :confuse:

This Islander belief is very interesting indeed especially when the argument is based on financials that I myself had used to point out over a year ago that there is no financial crisis at BMW. And apparently there is no financial crisis at BMW this year too at least not based on those "Net Asset Figures" that were so kindly pointed out by Crusoe himself who instead likes to be called Brite or Brightness..

A writedown of about 370 million $ is the size of mosquito’s wart for a firm like BMW.

For anybody who really gives a damned and I know there are very few out there who care but for the few who do care I suggest that they check the debt or liability ratios of BMW compared to other automakers. And I dare anybody here to find a publicly listed car company with a stronger balance sheet than BMW's.(certainly stronger than Toyota’s).

Regarding BMW’s low share prices?

BMW about five years ago was the most overpriced car company in the world . Today to a lesser degree it is still among the most over priced auto companies in the world despite their low share prices. Looking at stock prices alone is something only a financial amateur would do. If you look at earnings or various other valuation ratios you will notice BMW is still one of the highest valued auto companies in the business.

Anyways this is my last post regarding this matter since all those Islander arguments are just a rehash of the very same arguments of last year. Kenneth Lay from Enron, bankrupt lending firms and the dismal record of business magazines in terms of picking either a“CEO or Business of the Year” has nothing to do whatsoever with BMW.

BMW faces far too many headwinds like all other automakers. And some of those headwinds are unique to BMW as an independent luxury premium auto company. BUT a Ponzi scheme this ain't.

Enough is enough (though I think I said these words to many times before) :surprise:

dewey

I never understood BMW's policy of wanting to be so ubiquitous.

I do and so should you.

Certainly exclusive Italian sport marques would dread BMW's success.

But Audi , MB , Lexus and every single other major luxury auto marque has tried so hard to imitate the global ubiquitousness of BMW with far less success.

reality2

Maybe so, but there is a fine line where ubiquity becomes dilution for a premium brand. There are so many BMW 3-Series roaches crawling all over Los Angeles that their presence passes without any hint of interest from anyone but their owners.

cdnpinhead

". . .without any hint of interest from anyone but their owners."

Generally yes, but don't forget the wannabes -- those who figure that if they possess X, they are then Y. Much of the U.S. economy is built on the concept.

They can have it.

This is the year I would have bought a BMW, if I were going to. I didn't. I'm confident they couldn't care less. There's more at the door -- or are there? The residuals on leases are down and the money factors are up, and rumour has it that most lease BMWs. Time will tell. The long-term Edmunds crowd enjoys driving and is quite different from the majority of people who walk into a car dealership, IMNHO.

Reading Roundel every month is interesting, in that it makes it crystal clear, over and over again, that the cars that BMW sells today are of little or no interest to the subscribers. They want cars that can be worked on and that have things like real tires, dipsticks and that were maintained with a schedule based on keeping the vehicle viable, as opposed to minimizing "free" maintenance.

Go figure.

You can add me to the two people who think that there's a house of cards at work here, FWIW.

briteone

"Do I sense an Island Cult here? "

"Robinson Crusoe from Rhode Island and his Good Man Friday from Block island appear to be the only two voices that . . ."

" . . . that were so kindly pointed out by Crusoe himself who instead likes to be called Brite or Brightness.."

Pat and Karen, I'd very much like to know what's the forum policy on such gratuitous personal attacks . . . would like to know the permissibility before replying in kind.

"I know there is a 3 initialed acronym that has a credit crisis and that acronym is not BMW but the USA. "

Unfortuantely, US-style financial engineering has long spread to the other side of the pond; hence the credit crisis is not at all limited to the US only. DeutchBank, UBS and HSBC all had huge write-downs. UK's NorthernRock Bank actually failed before any major US bank failed. Credit crisis has gotten so bad in Europe this past week, the Spanish government just shelved their planned short-term borrowing.

"Robinson Crusoe from Rhode Island and his Good Man Friday from Block island appear to be the only two voices that talk about a so-called BMW Enron Ponzi scheme"

Here is what Dresdner (a major German bank based in Frankfurt) had to say in March 2007 when talking about BMW's lease programs in the US: "BMW's discounting practices in the US leaves us speechless. . ."

"This Islander belief is very interesting indeed especially when the argument is based on financials that I myself had used to point out over a year ago that there is no financial crisis at BMW."

Nobody said BMW was in financial crisis back over a year and a half ago. The debate was on whether BMW's lease residuals were subsidized and hence BMW's financial numbers were inflated. Brightness04's position was that residuals were inflated (so was in Dresdner Bank's opinion apparently), but Dewey, a self-claimed CPA out of Canada (where shouldn't the title be "CA" intead?), asserted that the residuals were not inflated and would be able to fetch on the open market at lease end. The $370 million dollar writedown in 2008Q1 answered that debate.

"A writedown of about 370 million $ is the size of mosquito’s wart for a firm like BMW. "

That's the writedown in one quarter. Most of it as result of US lease returns. How many BMW's were "sold" in the US in one quarter back two or three years ago when those leases were written? About 75k vehicles per quarter. What per centage was leased? Let's say 70%, or 52,500 vehicles were leased, and assuming they all got returned at lease end. When you divide $370,000,000 into 52,500, you get $7000 per vehicle! That's how much the lease residual was inflated by . . . that's also the amount by which any cash buyer was over paying on average, at the least . . . because the writedown is on the back end at lease return, wereas cars are worth more when new hence potentiallly containing even bigger element of "mark up."

"Looking at stock prices alone is something only a financial amateur would do. If you look at earnings or various other valuation ratios you will notice BMW is still one of the highest valued auto companies in the business."

Long term stock performance, such as over 5 years, speak volumes much louder than any report that can be rewritten/revised/write-down at any moment . . . BTW, I agree with you that BMW stocks may still be overvalued. . . but that's not a point I care to pursue.

"And I dare anybody here to find a publicly listed car company with a stronger balance sheet than BMW's.(certainly stronger than Toyota’s). "

Since you asked, here you are:

http://www.reuters.com/finance/stocks/balanceSheet?symbol=BMWG.DE&WTmodLOC=R4-Fi- - - - - - - - - nancials-2-Balance

http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&symbol=7203.T- - - - - - - - -

As you can see, as of December 31, 2007 (last available set of data for BMW, second last for Toyota), the total Equity-to-liability ratio at Toyota was 12.5:22.0 or better than 1:2, whereas that of BMW was 21.7:67.2 or worse than 1:3. Since then, BMW stocks have gone down to breaching 5yr lows, whereas Toyota stocks are still trading at about 20% above 5yrs ago. I have a habit of believing that stock prices lead reports, especially on the way down.

Perhaps you are qualified to write pump pieces for your boss when targetting sheeples who would take your brow-beating lying down without bothering to actually read financial statements and verify what you write, but I certainly would not trust you picking stocks for me.

"Enough is enough"

I have no idea why then you launched into such a spat of gratuitous personal attacks. I had been holding back on replying to Reality2, to whom I very much agree yet I had been trying to come up with a response that's diplomatic enough to other denizens of the forum who happen to be BMW fans.

briteone

Very good point on the deteriorating per unit profit margin. That's also one of the points that the Dresdnr report mentioned, along with the "speechless" lease discounting that BMW was offering the North America market.

It's important to keep in mind that the interest of the management is not always aligned with that of the shareholders . . . nor is shareholders planning to sell always alingned with that of the long-term health of a company. When products with inflated residuals are being returned enmasse at lease end, the management woud have no choice but to increase new "sales" at the front end in order to cover the cash flow burn when a returned product is sold less than the "residual." Just to use some conrete round numbers to illustrate the point:

1. If we have a widget that would have sold for $30k, depreciated to $15k in 3 yrs in a normal market

2. A financial engineer can increase front-end price to $40k, raise back end "residual to $25k . . . with the consumer still paying only $15k depreciation especially if lease interest is also subsidized. So the monthly payment hasn't changed, and the consumer will take it. The vendor books $40k sales instead of $30k sales, increase profit in the books by $10k! The financial engineer gets bonus commesurate with that additional profit.

3. At lease end, the consumer sees the $10k difference between residual and real market value, the obvious choice is exercising the put option putting the widget back to the vendor at $25k.

4. The vendor now has a widget that had been marked in the books for $25k, but really can only fetch $15k! That's a $10k loss if the book is updated honestly . . .

5. If at the same time, another $30k widget can be leased for $40k with $25k residual, the $10k fake profit coming in the front door can cover the $10k loss at the back end from (4) . . . if the lease sale volume increases at 10% a year, a three-year lease-return cycle would have $13k fake profit coming in the front door for every $10k payout leaving at the back door at the same time. The hamster thinks the wheel can spin faster and faster every year with no end in sight. Not only no need to writedown, but can book more profits than would have been the case without lease program at all.

6. It all implodes when lease "sale" volume drops. If volume drops by 10% compared to three years ago, for every $10k "loss" on returned widget, there's only $9k coming in the front door. That's when losses would have to be recognized as a separate item, and pretended to be a one-time item, so the on-going number in the books can exclude that loss :-)

That's why practically all vendors that engaged in that sort of financial engineering typically pushed hard for volume growth before eventual implosion.

lexusguy

I never liked the Plymouth Prowler. I always envisioned Herman Munster at the wheel... for some reason, especially the purple ones.

Same here. It's one of those Detroit oddities (like the Chevy SSR) that should've remained a concept. I have to wonder why somebody with millions of dollars worth of exotic cars would have something as mediocre as a Prowler (a poorly executed imitation '30s Ford coupe with a rental box interior and a woeful engine) when they could easily afford to buy a real '30s Ford coupe.

briteone

More power and better reliablity (don't laugh, I know it's a Chrysler :-)

Much of the retro craze was catering to the lazy crowd that would never have the time or fortitude to keep a 60yr old car running. The low volume helped too . . . however, for me, it's still hard to believe that a Prowler would fetch more than double its original price at introduction. Oh well, I suppose, beauty is in the eyes of the beholder . . . and only skin thin. LOL

BTW, saw a SSR yesterday on the road . . . always wondered about whether that roof would hold up in a roll-over accident.

lexusguy

however, for me, it's still hard to believe that a Prowler would fetch more than double its original price a decade later.

Since when? The Prowler hasn't depreciated too badly (especially for a Chrysler) but it most definitely has not appreciated in any way, shape or form. The base price was $38-42K during its production run, and even very low mileage examples are only worth some $30K now.