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I posted the following in another thread :
"Also, one advantage of leasing is that you have an option to buy or not buy the car for a known amount. Consider that the value of a car at the end of say, three years, is not known. The car could be worth far less or far more than the residual value. For example, media reports that a car is unsafe, like what happened to Audi a few years ago, could decimate the resale value. Or, as happened in the late 1970s, a strong dollar inflation could make the car worth much more than the residual. And so, when you lease, you have a free option which really does have a value as anyone familiar with stock options knows."
If you leased a 2006 Z4 coupe and I offered you $100 for the right, but not obligation, to buy your car in 3 years for the residual ( 50% ) would you do it ? Some might say yes as they have no plans to buy the car and $100 is $100. Others might say no, and still others might say make it $300. The point is this option has value, albeit a different value to different people. Now what about me, if I pay $100 for this right is it a good deal ? If I believe the Z4 coupe could easily be worth more than the residual definitely yes. But who knows how to price this option ? The answer is there should be a market with bids and offers and market makers ( dealers ) for the option to buy various cars at the end of leases. The trouble, of course, is cars are not fungible. Everything depends on condition and miles. But there are standards used now for acceptable wear and tear, the maximum mileage is known, and I don't have to buy the car.
Because I believe there will be inflation in the U.S. in the next several years I think buying these options would prove to be profitable on selected cars. I also believe that a very good living could be made by someone who started a market in these. What do you dealers think about this ?:thumbup:
"Also, one advantage of leasing is that you have an option to buy or not buy the car for a known amount. Consider that the value of a car at the end of say, three years, is not known. The car could be worth far less or far more than the residual value. For example, media reports that a car is unsafe, like what happened to Audi a few years ago, could decimate the resale value. Or, as happened in the late 1970s, a strong dollar inflation could make the car worth much more than the residual. And so, when you lease, you have a free option which really does have a value as anyone familiar with stock options knows."
If you leased a 2006 Z4 coupe and I offered you $100 for the right, but not obligation, to buy your car in 3 years for the residual ( 50% ) would you do it ? Some might say yes as they have no plans to buy the car and $100 is $100. Others might say no, and still others might say make it $300. The point is this option has value, albeit a different value to different people. Now what about me, if I pay $100 for this right is it a good deal ? If I believe the Z4 coupe could easily be worth more than the residual definitely yes. But who knows how to price this option ? The answer is there should be a market with bids and offers and market makers ( dealers ) for the option to buy various cars at the end of leases. The trouble, of course, is cars are not fungible. Everything depends on condition and miles. But there are standards used now for acceptable wear and tear, the maximum mileage is known, and I don't have to buy the car.
Because I believe there will be inflation in the U.S. in the next several years I think buying these options would prove to be profitable on selected cars. I also believe that a very good living could be made by someone who started a market in these. What do you dealers think about this ?:thumbup: