tgdA4

$34k

jperryrocks

It's pretty simple.

BMW has always jacked up residuals. You have more inventory to move. So you gotta sell cars and get them off the lot. And they've been programming their customers for years to expect cheap and subsidized leases.

A5s seem to be in very short supply and it can be hard to even find the right car you want w/o ordering one.

Audi is very hot as a car company. Sexy designs, the new and fresh face of luxury for more and more buyers.

Audi doesn't have to bribe customers to buy it's cars with subsidized leases. There simply isn't enough cars go around at times. So there no "deal" on the car. The deal is that you get the car you want.

A5 and S5s can be very expensive used. There are many times worth much more than the residual set by the bank. But Audi needs a fair profit on the cars and can't just send expensive cars out on cheap lease payments.

ryanjm

I'm not following with the 'subsidized leases' thing... The guy with the S5 above is paying $39,000 over the course of roughly 3 years, with a residual of $34,000. That means they're valuing his car at $73,000 minus a few thousand in interest payments that he would have had to pay if he just bought the car outright instead. Depending on the options, his car's sticker should have been around $60-65k...so to me that's a pretty inflated price to pay.

Now let's compare the BMW 335xi. By just about any review mag, these cars are faster and better than an A5, while performance-wise are on-par with an S5. Here is just a basic example per BMW's site:

$3000 down
$459.00 for 36 months based on MSRP of $49,525.00 ($16,524.00 total payments + 3000 down = $19,524)
$31,696.00 residual

To me, that's way way closer to what a reasonable fee would be for a lease since they are still getting roughly $51,000 for $49.5k car, which really could probably be negotiated down to $47-48k at least. I don't see how this is any kind of discount or anything...they're still making good money, just not bending you over a barrel like Audi seems to want to do.

I'm not trying to hate on Audi...I'm more just thinking out loud since I'm buying a car next month and it was really down to the A5 or the BMW 328 or 335. I like the looks of the A5 better, but then the BMW can be had in the nice blue shade that only the RS5 can get. Anyway, I guess if the price difference on a lease is that great, I don't see the value for the Audi for a slight cosmetic improvement over a 328/335.

JD15

Ignore the monthly payments for a second and compare the residuals on the two cars. Assuming the MSRP of the S5 is between $60k and $65k (split the difference and say $62.5k), the residual value of the S5 is 54%. Adjusting for the difference in time between the 36 and 39 month leases, it can be estimated that the residual of the S5 is around 57% after 36 months. The BMW, on the other hand, has a residual value of 64% after 36 months.

The low calculated depreciation of the BMW keeps the lease payments low, but makes the end buyout unattractive; the price differential between a 39 month S5 and a 36 month old 335xi is going to far more than $2,300. This is what is meant when people say that BMW inflates residuals.

tgdA4

Here are my actual numbers:

Gross Capitalized Cost: 69,510
Capitalized Reduction: 4,504
Adjusted Capitalized Cost: 65,005
Residual Value: 34,017
Depreciation: 30,987
Rent Charge: 10,349
Gross Monthly Payments: 41,337
Lease Term: 39 months
Monthy Payment: 1,059

Note that the capitalized reduction was not a down payment, but instead me paying the difference of my A4 lease they bought out. The adjusted cost is the selling price plus tax, audi care, and tire protection.

tgdA4

This math is a little off. Your downpayment reduces the capitalized cost of the car. This cap cost is then used to determine your monthly payment, based on the residual value of the car after 36 months (based on MSRP), and the money factor (interest). So to apply your downpayment to the total lease payments is incorrect.

The residual value is not the MSRP - the sum of your monthly payments + down payment. The residual is soley a percentage of the MSRP that the bank estimates the car will be worth in 3 years. So putting down money on a lease never makes sense, because you are never getting your $3k back in full. Some of that equity stays in the car when you return it. You are better off taking the $3k and applying it to your monthly payments evenly on your own.

One last thing, how do you get $459 for a $50k car? I just went to the BMW payment estimator and for a 335i coupe priced at $49,100 and $3k down it comes to $581 a month. The site calculator doesnt factor in tax title and fees either. You are looking at $600+ in the end.

tubi

What's the rationale behind the inflated residual/subsidized lease strategy? Didn't it hurt MB a few years back?

ryanjm

^^Thanks, I think my terminology is a little off. I also just learned about the "dont pay a down payment on a lease" thing a few days ago.

The numbers I quoted are straight from BMW's site when you look at "current lease offers." A 335i would be even cheaper per month, I quoted the 335xi to add in all-wheel drive.

tgdA4

OK, I see now. That is indeed a very attractive lease offer.