horrible 2012 residual?

Was at a dealer today who told me the residual on the 2012 535i xdrive was going to be 52% for the month of september, compared to 56% for the outgoing 2011. His explanation was that there were a lot of 2011's left over. Seemed a bit wide of a gap to me. Has anyone heard different numbers yet? Also, money factor was going from .00195 to .00200.

I hope that the info is inaccurate for obvious reasons. I did call my dealer who is also the GM and he had not received any rate info as of yet.

Sounds suspicious; was the dealer by chance trying to get you to drive a 2011 model home today?

(For what it's worth, my dealer's prediction, last time I asked, was that the residual would most likely remain the same for the 2012 MY but that the MF might be slightly higher.)

Originally Posted by acetner

Was at a dealer today who told me the residual on the 2012 535i xdrive was going to be 52% for the month of september, compared to 56% for the outgoing 2011. His explanation was that there were a lot of 2011's left over. Seemed a bit wide of a gap to me. Has anyone heard different numbers yet? Also, money factor was going from .00195 to .00200.

That can't be right even at 15,000 miles/yr. I would believe 62% at 10k/yr before 52% with 15k/yr

I was just told the same by a well-known forum sponsor (although money factor was same as Aug). No way I'm pulling the trigger on my car now.

Too many 2011 left over? Why are they not moving?

Out here in Houston Texas -there are 5 dealers and every one of them have about 15-20 535i on the lot, i think BMW will give out some aggressive offers to move them

Originally Posted by 535Stu

Too many 2011 left over? Why are they not moving?

I heard or read that the default rate on auto loans is extremely low at the moment (eg. 2.4% even for subprime credit). However, despite the strong fundamentals of the auto loan portfolios banks are not meeting the demand for loans. It is being left to the manufacturers to secure and lend the capital required to lease or finance their cars. Each addtional dollar, euro etc of capital they need to sell additional cars comes at a higher cost of capital (they are increasing debt, hence risk).

The readership here is well aware of such things, but I think that might explain some of the surprise at 2012 residuals as well as remaining 2011 stock. The BMW residuals are highly debated as inflated and such a mismatch has to be offset in the financing company as the lease structures would not reflect the risks. If you don't believe the residuals are inflated, and who knows if they are, then the explanation is that the financing company is passing on its higher cost of capital by reducing residual values instead of the money factor where one would expect to see it. However, people are psychologically sensitive to interest rates and I think it is probably an intelligent move to cover the risk with residual values. So, you have to be good at negotiating the sales price at the moment.

If you can't afford to purchase a BMW with cash, you likely need to drive a Ford. All flash and no cash! There are too many people that lease BMWs...it drives down the resale value of the brand.

Originally Posted by Hoosier1

If you can't afford to purchase a BMW with cash, you likely need to drive a Ford. All flash and no cash! There are too many people that lease BMWs...its drives down the resale value of the brand.

I don't know where to start with this... But no.

Tax benefits of leasing
Leasing is roughly 20% of sales (normal)
Resale value far more sensitive to the Ford business model which is $5000-$10000 cash back on models plus dealer cash etc than writing a lease

I think it's great that you paid cash and it does reflect discipline and resources. But many people don't because of tax write-offs or the preference to finance a car at 3.9 and leave cash in their business instead of borrowing at a higher rate there.

I stand corrected. Yes, it does make sense to lease if you're a business owner or want to take advantage of the low BMW finance rates.

Don't want to go too far off topic, but there are plenty of valid reasons for leasing that don't involve lack of money. For me, I'm not willing to bet on BMW reliability and maintenance costs beyond the initial warranty.

Originally Posted by Hoosier1

If you can't afford to purchase a BMW with cash, you likely need to drive a Ford. All flash and no cash! There are too many people that lease BMWs...it drives down the resale value of the brand.

What a massively ignorant statement. Clearly you don't understand leasing and you don't understand why people in different circumstances may choose to lease or buy.

For me, although I could have paid cash, I chose to lease. The money factor on the lease was very low, such that the finance cost is likely significantly less than I could earn on the cash I would have outlaid to purchase.

The big factor in my decision though was that the lease was based on an excellent residual value. I'll be shocked if the car is worth anything close to that amount by the time the lease is up. If I want to keep the car, I'll likely be able to purchase it for less than the residual, in which case I'll have saved a chunk of money that I would have lost in depreciation if I'd purchased it. If the market surprises me and the car is actually worth more than the residual, I could buy it for the residual value and have lost nothing vs a purchase.

For me, leasing in these circumstances was a no brainer, but I understand why others prefer to buy.

Hoosier1- i see you drive a 528i and you are talking big things like if you don't have cash don't buy a BMW- that is most arrogant statement i have ever heard.
If people don't buy a car with financing or leasing you will be driving a Ford because the price of your 528i will be so high, you can only dream of a 535i or 550i

It's always sad when I see people say things like, 'it's only a 528' or 'only a 3 series.' They're still BMWs; the least expensive models are made with the same attention to detail and just as artfully styled as the most expensive car in the lineup. It's kinda like the, "my dad makes more than your dad" statement kids make. Can't we all just get along?

In the conventional way of thinking about a lease, it is true that the residual value should be higher at the start of a new model year. Like when buying a car, less depreciation over the previous model year. However, BMWFS subsidizes these rates and residuals in order to move product. There is no way that the Z4 residuals that people were getting not too long ago represented reality. And in all likelihood, the 61% residual like I'm getting on my 2011 550 is nearly impossible that the car will be worth that much after three years. These lease rates allow BMW to move product without having to resort to huge discounts off of MSRP. It keeps their selling prices higher, even if it results in a lower monthly payment for the renter. With 2011s still in the pipeline and cash/financing buyers holding off purchases for 2012s, BMWFS has no incentive to move leases on 2012s right now.

Back on topic, have any of the long time BMW followers seen this kind of movement in the residual before? I assume it is merely to move the remaining 2011s and things will adjust upward in Oct/Nov. Trying to decide whether to roll the dice on an ED in hopes of things improving in Oct...

Originally Posted by 12VMan

Back on topic, have any of the long time BMW followers seen this kind of movement in the residual before? I assume it is merely to move the remaining 2011s and things will adjust upward in Oct/Nov. Trying to decide whether to roll the dice on an ED in hopes of things improving in Oct...

This doesn't make sense as a strategy for moving 2011s. 2012 buyers, you are more likely p*ssed off right now waiting it out than citing the merits of settling for that 2011 you sort of liked before proceeding to research and configure your 2012.

1) If it were 52% and buyers believe they will increase it, people won't buy now expecting a better deal (with higher RV) in a few months.

2) I give BMW enormous credit, but not enough to start at 52% and climb to 59% and ease back down after new year. It doesn't make sense to start this low.

I don't believe these numbers. No way.

52% residual? Sounds like a page out of Audi Financial's book.

I lease for the business benefits mentioned above. Owning a depreciating asset doesn't impress me.

I narrowed down my decision between a 535 and S4. The S4 lease would have been high $900s to low $1,000s. My 535...a paltry $770.

I'm also getting older now, so the 535 was more fitting.

Originally Posted by Hoosier1

If you can't afford to purchase a BMW with cash, you likely need to drive a Ford. All flash and no cash! There are too many people that lease BMWs...it drives down the resale value of the brand.

Not really, no... What an ignorant statement.

Huge number of people lease BMWs, but that doesn't necessarily drive down the resale value.

You should look the values on E90s, X5s, etc. Even with the cheap lease deals, they have near the top resale value.

Frankly, I'm shocked at how strong some of these BMWs hold their value. My BMW dealer has a used '11 E70d with 32k miles on it. Less options than mine and it was listed for $52k. I paid $54k for my significantly more optioned model. I asked my salesmen and he said that the guy that traded that X5 in only lost 5,000 in the year he drove it. 32k miles and only $5k?! That is unheard of.

Look at this. Book value on my X5 right now. It's worth more than I paid for it... (The local MB and Lexus sometimes offer 110% of KBB value, so it's even better)




I've been researching residual trends over the few years. BMW and VW/Audis are holding their value like no other. Same can't be said for MB.

Originally Posted by Hoosier1

If you can't afford to purchase a BMW with cash, you likely need to drive a Ford. All flash and no cash! There are too many people that lease BMWs...it drives down the resale value of the brand.

If you have all that cash to dump stupidly into something that depreciates 20% the next day (always lease new, buy CPO), then why did you buy that lowly under-powered 528? All that cash, I would have at least been in a 535xi.

Not buying you one bit, that you paid cash for the car that is.

Originally Posted by FastMarkA

52% residual? Sounds like a page out of Audi Financial's book.

I'm also getting older now, so the 535 was more fitting.

Exactly. This is probably even reaching into Volvo land.
535 over S4 is a good call. That S4 is an expensive lease. You could get into a 7 for that payment.

Originally Posted by 12VMan

Back on topic, have any of the long time BMW followers seen this kind of movement in the residual before? I assume it is merely to move the remaining 2011s and things will adjust upward in Oct/Nov. Trying to decide whether to roll the dice on an ED in hopes of things improving in Oct...

Historically, BMW has cleared out inventory with a combination of "sales support" strategies. These have included option credits (e.g. free nav), owner loyalty, below market APR's and money factors, and "trunk money". Historically, the residual for new model years is HIGHER than the outgoing model year.

Can they change strategies? Of course. If you can find a 2011 locally that is "exactly" what you want, you will probably get an awesome deal.

If the 2011 you want has to be trucked in from outside the region, the $500 to $750 of trucking costs make it a much less attractive deal, particularly if you are leasing.

And if you can't find the car you want in dealer stock, you are probably better off building a 2012 to spec.

Sent from my HTC Inspire using BimmerApp

Originally Posted by cynerjist

Exactly. This is probably even reaching into Volvo land.
535 over S4 is a good call. That S4 is an expensive lease. You could get into a 7 for that payment.

This is because Audi doesn't subsidize leases like BMW, but that's another whole argument

I think the 535 took the big hit due to inventory. All of the F10 resdiduals went down, but the 535 is by far the worst (54% for 528, 52% for 535, 55% for 550). At the dealers I've visited over the past couple of months, nearly all of their 2011 F10 inventory were 535s... Having said that, there is no doubt the residuals are worse for all F10s.

I'd never really given much thought to a 550, but because of this change in residual and the reconfiguration of options for the 2012s, I just realized I can move up to a 550 with the exact same options (plus add'l others) for <$15/month.