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Discussion Starter · #1 ·
I see that residuals have dropped about 5% on many models. I've kept my eye on them- along with MF - for the last few years, and I've never seen them this low. That makes it MUCH more expensive to lease, which I was planning to do will be doing in about 10 months when my current lease is up (335i, or 135i, or M3, not sure which yet).

Does anyone have any insight into whether these very low residuals represent the new norm? Or is this some temporary, explainable spike?
 

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I think it's an over reaction to low used car prices on luxury cars recently. Lexus lowered their residuals much more. I believe in due time residuals will go back to normal although "once burned, twice shy" applies. While it costs a lot more to lease with low residuals it is possible the car could be worth substantially more than the residual at lease end.
 

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It's the unfortunate reality of the market. Look no further than housing prices. Do you honestly think that housing prices can go down, but car values stay the same or go up? :confused: Somehow, relatively speaking, they're connected. And it's definitely not just BMW, it's every auto manufacturer maybe with the exception of the upper crust of luxury brands that are low volume.

I pray it's temporary though. Otherwise, there will have to be other means of sales support besides inflated residuals.

One true, interesting exception is Mini. Their residuals are awesome. A Mini Cooper residual for 24/15k is 77%. A Cooper Clubman is 74%.:yikes: Hint: maybe it has something to do with fuel economy. :eeps:
 

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Discussion Starter · #4 ·
I hope you're right that they'll come back up. It really changes the cost/value equation to a degree I hadn't anticipated.

I guess the low residual does mean a lower price if you want to buy at the end, but I am self employed and much prefer leasing. And where I live, sales tax is high (8.25%), so buying at the end to resell on the open market isn't attractive, either; plus, doing so is a big hassle, and another reason I like leasing.

Are there any dealers or others with insight into what actually caused BMWFS to drop the residuals so dramatically and suddenly?
 

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Jim, BMW wrote off 370 million because of residuals on leases according to the president of BMW AG. He said it was due to "the collapse in used car prices in the U.S.". BTW I agree that even if the car is worth more than the buyout it is a hassle to take advantage of it. If I can't get an attractive lease next year I'm probably just going to buy my Z4 even if it isn't worth the residual. I like it and 0 problemos.
 

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Are there any dealers or others with insight into what actually caused BMWFS to drop the residuals so dramatically and suddenly?
I was recently told that the market prices for X3's and X5's coming off leases here in NorCal are approx. $3K-5K below the residuals, and that the new residuals will be lowered further to reflect those market realities. For the SAV's this is expected to continue and that vehicles leased in the past few months are predicted to be available on the market in 2-3 years at numbers significantly below the contracted residuals.

I have no proof one way of the other, but it sounds reasonable to me.
 

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It's the unfortunate reality of the market. Look no further than housing prices. Do you honestly think that housing prices can go down, but car values stay the same or go up? :confused: Somehow, relatively speaking, they're connected. And it's definitely not just BMW, it's every auto manufacturer maybe with the exception of the upper crust of luxury brands that are low volume.

I pray it's temporary though. Otherwise, there will have to be other means of sales support besides inflated residuals.

One true, interesting exception is Mini. Their residuals are awesome. A Mini Cooper residual for 24/15k is 77%. A Cooper Clubman is 74%.:yikes: Hint: maybe it has something to do with fuel economy. :eeps:
cut rate moneyfactors... there's not many other places for them to trim, except trunk money, but that is robbing peter to pay paul

its a rough situation, the market will only bear so much, with consumer confidence and cash flow not going up, monthly payments going up are going to put a dent in sales.

maybe beginning to build the 3'er here in the states as a hedge against the declining dollar.
 

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Predictions are silly but that doesn't keep me from making them ! I think that this decade will pretty much mirror the 70s. What happened then was we had sky high oil prices and inflation. It seemed like BMW and Mercedes were raising prices every month. Then a fellow named Paul Volker took over the Fed, cut off the money supply and after a "period of adjustment" inflation went away, oil price dropped precipitously, and we had a long period of prosperity. All the solar companies went bankrupt and anyone talking about renewable energy was met with yawns. Some people say "it's different this time". Dangerous words those. So I predict the Fed will fix this once again, oil prices will get killed along with gold prices and other commodities, the dollar will strengthen significantly against the Euro, residuals will go back up along with the stock market and housing. Talk of solar and wind power will be forgotten. After a period of adjustment of course.
 

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mclaren:
Volker reduced demand for oil by slowing down the economy. Today the demand is not coming from the US. Those measures will no longer work.
 

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Well, I'm gonna be selfish here--lower residuals might mean a buyout offer at lease-end from BMWFS of lower than my paper residual value of 73% which would equate to a very sweet deal....and I would be one happy camper if I got an aggressive buyout offer because I love my car!
 

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mclaren:
Volker reduced demand for oil by slowing down the economy. Today the demand is not coming from the US. Those measures will no longer work.
That was the part about "it's different this time". Everytime people have spoken those words they were wrong. :) Oil is quoted in dollars, a weak currency at the moment, but if the Fed raised interest rates and reduced the money supply the dollar would skyrocket vis-a-vis other currencies and oil prices would drop big along with other "stuff" quoted in dollars. Inflation would then subside. Why don't they do it ? They are scared of a deflation with the current state of the economy, banks, mortgages, and housing prices. The plan, IMO, is to clean up these credit problems and get the economy turned around and then fix the dollar.
 

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Bmw was and is inflating residuals. You can only do this so long before your stock comes back. They can lower MF and throw more incentives as luxury good sales drop that is guaranteed.

But the fact that 5 other leasing banks won't touch their residual (but can beat MF) says to me the cars just aren't worth as much as you think.

do the math. Is that 2005 330ci really worth the residual now? Would you really pay that much for it?

The best deal is the 135I 48 month. lower payments; run the warranty/service to the end; and the residuals are high for 48 month; unlike every other series.
higher MF but you can work that with MSD's. however DME 8.1 is going to cause alot of people to bail on orders i suspect.

how do the 39 42 month leases work? they are not published but do exist at the dealer. didn't know about those two options :)
 

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Discussion Starter · #13 ·
It's ironic that the sagging economy, and the resulting big fall off in demand for luxury cars, has actually made it more expensive, rather than less so, to lease one of these cars. If the collapse in used car prices is the primary cause, I do think residuals will rebound, although that might take considerable time - maybe more time than I have until my current lease is up. What we need now is for BMW NA to reduce MSRPs which, I suppose, is unlikely.
 

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do the math. Is that 2005 330ci really worth the residual now? Would you really pay that much for it?
I purchased my 2005 330ci off lease two weeks ago for several thousand less than my contracted residual. Search the board for "full circle purchase program" and you'll find a thread in the E46 forum on this. It's been around for a while and basically, any willing dealer can purchase your leased vehicle from BMWFS at the MMR value, then sell it back to you.

This is what I did and I got a smokin' deal compared to my residual. I did not want to part with this car, and I did not want to pay the residual either. Thanks to Bimmerfest, I found a great dealer (philippek @ south bay BMW) and it was easy and well worth it.
 

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It's ironic that the sagging economy, and the resulting big fall off in demand for luxury cars, has actually made it more expensive, rather than less so, to lease one of these cars.
You should also consider that much of the lower residual is offset by the trunk money that is on many models now - plus dealers are probably going to be more aggressive with lowering prices. In such a scenario, you might end up slightly better off - but be prepared to play hardball. This is just for US delivery.

As to ED - its less sweet than before.
 

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It's ironic that the sagging economy, and the resulting big fall off in demand for luxury cars, has actually made it more expensive, rather than less so, to lease one of these cars. If the collapse in used car prices is the primary cause, I do think residuals will rebound, although that might take considerable time - maybe more time than I have until my current lease is up. What we need now is for BMW NA to reduce MSRPs which, I suppose, is unlikely.
they're already bleeding on that end, and in fact are raising MSRPs on some models june 1

the only places they have to trim are interest rates (money factor) and to give trunk money. even trunk money has its downsides, if done for too long of a time, it will depress residuals even further.

volvo offered 5-10K of trunk money on the S60R for quite a while. resale value tanked.
my S60R lease had a RV of 53%. MSRP was 48K, residual was 25K. MF was an insane 0.0004. after three years the car was worth closer to 18-20K. two years of excessive trunk money clobbered the used car market for that niche car. the first year they had very low MFs, then switched to trunk money, then switched to trunk money AND heavily subsidized MFs
 

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what is MMR value? (not $$, what does it mean? wholesale?)
 

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That was the part about "it's different this time". Everytime people have spoken those words they were wrong. :) Oil is quoted in dollars, a weak currency at the moment, but if the Fed raised interest rates and reduced the money supply the dollar would skyrocket vis-a-vis other currencies and oil prices would drop big along with other "stuff" quoted in dollars. Inflation would then subside. Why don't they do it ? They are scared of a deflation with the current state of the economy, banks, mortgages, and housing prices. The plan, IMO, is to clean up these credit problems and get the economy turned around and then fix the dollar.
Mclaren, I look forward to your replies because they contain a basically simple, direct and educated response that I can actually walk away and feel like I've gained a bit more insight into the issue at hand.:thumbup: Thank you for that.:)
 

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We turned in an X5 a couple of months ago. I saw that the market price was much lower than the residual and tried to get BMWFS to negotiate a lower buyout because we really wanted the car.

BMWFS would not budge a single cent so I really don't feel sorry for them at this point.
 

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BMWFS would not budge a single cent so I really don't feel sorry for them at this point.
You also have to consider their side of things. I believe that dealers are obligated, as part of the Full Circle program participation, to accept a certain percentage of lease returns at the residual (or some fixed percentage of it).

So why should they sell it to you at a lower price than what the dealer would be paying them for it?
 
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