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Why the 6% spread on residuals

2K views 24 replies 8 participants last post by  jonnyz1245 
#1 ·
between X5D and X5 35i? 36 month lease on a 13 X5D has resid at 51% vs 57 for 35i. In my neck of the woods, X5 diesel sell at a premium used to the other ones and are hard to find. Doesn't make sense to me?
 
#2 ·
Even though the X5D will have much better resale values, the manufacturer (not just BMW) often plays with the residuals to move more or less product and make more profit. The game they play sucks, but it means someone who leases an X5D may never find themselves upside down in the lease.

- Mike
 
#3 ·
The X5d has a $3,500 EcoCredit which pretty much makes the offers equivalent.

$60k x 6% = $3,600
 
#4 ·
I must be missing something because I am pretty sure you can sell private party a 60K X5 for more than 30K in 36 months? At least around here you can. Hell, there is a 2011 CPO near me that is selling for 55K on a dealers lot with 43000 miles. Not fully loaded either but pretty nicely equipped. I test drove it before I ordered mine. I know it won't sell for that but at 55K it represents is a 25K delta if you take the 51% residual. On an almost 3 year old car. Its in service date was Aug 2010. There are a bunch of 2010's in the mid-high 40's.
 
#5 ·
Why not lease an X5 35d, buy at the end of the lease, and then sell it?
 
#6 · (Edited)
That is not a bad idea. I have never leased before and while I consider myself a good negotiater and have had good luck on my last sevral cars getting a good price, I would have to educate myself pretty quickly about all the leasing language.

Basic question: is the residual based on the negotiated price or the MSRP? (told ya I was a leasing nooB). In my case, with the eco credit and holidya cash, that difference is 10K+
 
#8 ·
wow, sweet. so, If the MSRP is 70.5 and I paid 60.5., I will make payments totaling 49% of 60.5 for 36 mos and then buy it out for 51% and potentially could flip it for 5-10K profit?, that is if I don't like it and/or has a ton of issues? doesn't make sense to me but I might just have to take those odds. Oh and I could put down multiple security deposits thereby reducing my % rate?
 
#11 ·
No, you will make payments on 51 percent of the MSRP, if my math is correct (residual is 49 percent of $70,500). Residual should be about $35,000 after three years.

Cars at that price are difficult to sell privately, but you should be able to trade it back in (or sell it to CARMAX) for a profit. Don't count on $5,000 - $10,000... just count on coming out ahead.

Cars are a really bad investment. Making even $1,000 on a lease return is considered good (most consumers simply turn them back in and pay the disposition fee!).

- Mike
 
#16 ·
No, you will make payments on 51 percent of the MSRP, if my math is correct (residual is 49 percent of $70,500). Residual should be about $35,000 after three years.

Cars at that price are difficult to sell privately, but you should be able to trade it back in (or sell it to CARMAX) for a profit. Don't count on $5,000 - $10,000... just count on coming out ahead.

Cars are a really bad investment. Making even $1,000 on a lease return is considered good (most consumers simply turn them back in and pay the disposition fee!).

- Mike
actually residual is 51% so i would be making payments on the 49%.

if MSRP is 70 and that is what I make payments on? and my negotiated sales cost is 60(just using round #'s) then how does the 60 play into the lease?
 
#15 ·
Leasing is best for me.

  • Reduced cash flow on monthly basis
  • Always under warranty
  • If damaged in accident, I don't own the car (no worries)
  • If a lemon, I don't own the car (no worries)
  • Can purchase at any time during the lease
  • First right of refusal on purchase at end of lease

I prefer leasing.

- Mike
 
#21 ·
The dealer can mark up the buy rate .0004. I usually can get the dealer to come down .0002. I just leased another D myself and was able to get .0015 before multiple MSDs lowered the rate to 0.00101. Consider MSDs. Great return on your money.
 
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