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· Polemicist
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So in 3 years the 7 will cost the same as a new 325 w/ options...interesting

FINANCE & INSURANCE: Residual guide rips BMW 7 series
Firm says redesigned car is overpriced

By Jim Henry
Automotive News / April 22, 2002

Add Automotive Lease Guide to the list of critics of the redesigned BMW 7 series. The influential guide to residual values says the new BMW flagship is too pricey.

The redesigned car went on sale in the United States in January at $72,495, including $645 freight, for the 745Li model.

In its March-April report, the company gives the 7 series a residual value only 1 percentage or 2 percentage points higher than the outgoing generation, depending on the model and lease length. For example, the residual on the 745Li is 48 percent of sticker price on a 36-month lease, compared with 47 percent for the model it replaced.

That means that Automotive Lease Guide believes the 745Li will be worth only $34,798 after three years.

In contrast, when archrival Mercedes introduced the latest-generation S class in 2000, the company raised the residuals as much as 9 percentage points over the outgoing generation. The S430, for example, was given a residual of 63 percent of MSRP on a 36-month lease, compared with 54 percent for the S420.

Over the entire S-class range, the increase was 5 percentage points.

Automotive Lease Guide's residuals on the 7 series remain significantly lower than those of the S class, and lower in some cases than the Lexus LS 430, another rival (see table).

Automotive Lease Guide, of Santa Barbara, Calif., is a widely used benchmark for predicting residual values on leases. A lower residual means higher monthly payments for the lessee because the customer, in effect, borrows the difference between the transaction price and the predicted residual value.

But lenders are free to set their own residual values. For instance, BMW Financial Services has set a 61 percent residual on the 745 for a 36-month lease, indicating it expects the car to fetch at least $44,223 after three years.

That means that a 745 lease based on Automotive Lease Guide's residuals would cost the customer an additional $9,424.
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