Shocked by declining values

[motordavid]

As expressed in previous posts, but good to remember:
other than some serious collectibles, FCars et al, a car is always a
depreciating asset and an expensive to own and operate asset at that.

The current econ has simply exacerbated the situ. Big Buck cars,
(and cars of almost any cost), have quickly evolved into "boat-like"
depreciation and running costs, (semi-facetiously said.)

It may get "better", it may or may not get back to "normal" any time soon,
but it is reality for these expensive methods of getting ourselves around...
GL,mD

[schlitzie]

Having just had a seriously expensive lesson here I am left wondering why anyone would buy brand new when you can get such ridiculous deals on just slightly used. There was always the initial depreciation hit that new buyers get, but drops like this obligate you to either lease (if leasing is even an option or financially viable), or buy used. Losing 50% of the value in a year on a new car is a fools game. I just can't see how dealerships/manufacturers will stay in business (ignoring bail-outs!) if the situation doesn't change.

[E61Silver]

Originally Posted by TwinsPoppa

I'm not familiar with leasing ins and outs but I thought leasing is mostly for people who like to have newer rides and don't want to worry about ownership.

I thought the purpose was to only pay for the depreciated part of the car during the lease - hence cars that hold their value are the best for leasing. So, if it's a 50K car and it depreciated only 10K during the 3yr lease then that's basically what you pay.

My question is:

The residual/buyout at the end of lease is based on the current market value at the end of the lease or is that agreed upon ahead of time at the time of leasing the vehicle? I always thought it was the first instance.

Can somebody school me on this, please.

EDIT: Hhmm after more thought I guess it would have to be the second scenario. Otherwise you could not figure the lease payment which is based on the depreciation, right? So would the residual value then be based on retail value or wholesale value?

At the end of the lease you give it back, my lease residual was much more than market value. I looked at buying it and they offered a reduced price.
Thanks to the lease I had many options .

[motordavid]

Originally Posted by schlitzie

Having just had a seriously expensive lesson here I am left wondering why anyone would buy brand new when you can get such ridiculous deals on just slightly used. There was always the initial depreciation hit that new buyers get, but drops like this obligate you to either lease (if leasing is even an option or financially viable), or buy used. Losing 50% of the value in a year on a new car is a fools game. I just can't see how dealerships/manufacturers will stay in business (ignoring bail-outs!) if the situation doesn't change.

I don't disagree with you, based on current conditions. But, heretofore,
buying new made some sense for long time holders of that new car,
(like me), and leasing made sense for people that could write some
of the monthly cost off, or simply choose not tie up dough combined
with wanting a new ride every few years. The dep hit has alwasy been
around on nearly all brands...it is just more dramatic now and further
impacted by a very, very soft and illiquid mkt with little credit available.

Used ain't bad, (though I haven't bought used since I was a kid/young
man back in the '60s), but good cream puff used cars, esp coming off
lease, (if not neglected), are screaming deals for those that need a new
ride and have the $20-$50gs for a new to them, car.
GL,mD

[TwinsPoppa]

Originally Posted by butundo

Right, but why isn't the payments lower on these vehicles? The way leases were designed, you are making monthly payments on the difference of the selling price, minus the residual. If a car has a high residual percentage, the car should be cheaper to lease, but with high end cars, that is not the case. ...

And THAT'S what I want to know.

Why aren't the payments lower and why is that the case. I guess the current economy is not affecting high end dealers.

[E61Silver]

Originally Posted by TwinsPoppa

And THAT'S what I want to know.

Why aren't the payments lower and why is that the case. I guess the current economy is not affecting high end dealers.

1)Generally speaking a BMW retains value and has a higher residual value.
For example a Caddy generally cost a lot to lease because the residual value is low.

2) I don't think high end foreign car makers and dealers are reducing prices like the us manufactures. The dealer can only go so low and I think they all work together. In the end if my BMW costs $1,000 more or less its not going to stop or make me buy.

[schlitzie]

Because the residual values that were set were best guesses for the future market, plus credit was very easy to get. Manufacturers got crushed on returning leases as customers could buy better/newer for alot less than they would have to pay if they decided to keep their vehicles when the lease term ended. Looks like the market is playing catch-up now for it's past sins.

Anyway, I still don't know what I will be doing with mine... I think I'll explore a private sale, or I'll just keep it and buy an extended warranty. either way I guess I have come to grips with the fact that I'll be either be losing or spending some money on it in the near future

[schlitzie]

"I don't think high end foreign car makers and dealers are reducing prices like the us manufactures. The dealer can only go so low and I think they all work together. In the end if my BMW costs $1,000 more or less its not going to stop or make me buy."

But that's just it -- If it was $1000 or so I wouldn't be complaining. I bought mine used, and I'm still talking about tens of thousands in dropped value in 15 months of ownership. And that doesn't even factor in the oh-by-the-way expenses and the state sales tax that really should be amortized in.

[E61Silver]

Originally Posted by schlitzie

"I don't think high end foreign car makers and dealers are reducing prices like the us manufactures. The dealer can only go so low and I think they all work together. In the end if my BMW costs $1,000 more or less its not going to stop or make me buy."

But that's just it -- If it was $1000 or so I wouldn't be complaining. I bought mine used, and I'm still talking about tens of thousands in dropped value in 15 months of ownership. And that doesn't even factor in the oh-by-the-way expenses and the state sales tax that really should be amortized in.

If I was in your position I would keep your car.

My comments regarding leasing relates to the next new car purchase or lease. Generally if you plan to keep a New BMW for only three years I think you should lease.

[Best4x4xFAR]

Originally Posted by nasdakboy

We just picked up our 06' X5 4.4i christmas eve. Has cold weather package with heated steering wheel, rear load sliding floor, sport package, premium package, navigation, bluetooth, adjustable air ride suspension and panoramic sunroof. Got it CPO'ed for $23,900, financed at .9% and BMW paying first 2 months payments. Car has 36k miles on it. I was surprised they had gotten hit that hard but that's what drew us to pick one up. Overall I'm very happy with the deal we got. However if I was the guy who traded that thing in, I'd be pretty upset. That's a huge hit in 2 years. Build date August 06'. Just keep it bro. I like the X6 but not over a 4.8is!

Is it just me, or is that a smoking deal, even these days? I couldn't find anything near that in my area for the last couple of months..