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#741 of 2880 Re: BMW king of the subsidizers [allargon] by markcincinnati

Mar 26, 2007 (8:24 am)

Replying to: allargon (Mar 26, 2007 12:18 am)

The car that has the least lease cost is often the car that is the least cost to own for the same reason: residual.
 
It is true that a sub-vented lease may offer artificially high or low numbers to entice a customer into buying.
 
Yet, no company is so big that it can lose money or every deal and "make it up in volume."
 
If -- and this is unknown TODAY -- a $45K car is more expensive to lease for X time, than a $50K car, it is likely the $45K car will be more expensive to buy and own, unless the car is kept until it is fully depreciated. Of course what happens is that the car with the higher residual retains its value longer than the other one.
 
The difference may prove immaterial to you but in terms of an asset on a balance sheet, it is possible (and sometimes probable) that the car with the high residual may actually cost less than the one with the lower residual.
 
Most folks will NOT pay $650 per month for a $45K car if there is a $50K car offered for the same money, especially if the latter comes complete with full, free, maintenance for 4 years or 50K miles.
 
A $45K Acura at ~$865/mo when a $48K Bimmer is ~$650 is not a compelling position for the Acura sales person to be in (when he reveals the Acura's residual is but 47% when the Bimmers is 61%.)
 
Cadillac, I am certain, will rise to this issue with the new CTS -- once the initial buzz subsides. Remember when the 300 came out? Local Chrysler dealers were charging over sticker and even had the gall to put a line item on the new sticker called "ADP." Additional Dealer Profit.
 
Now the lease programs on the 2007 300's are really attractive.
 
My assumption, and that is all that it is, is that the CTS (since the majority of the customers who drive them rent them) will be subvented either by discounts, artificially low money factors (including 0%) and/or high residuals.
 
In the past Cadillac supported low lease payments with high residuals, somewhat to their dismay, since it made the leases almost impossible to terminate early.
 
One of my co workers had a 2004 Cadillac and GM sent her a get outta jail (up to 5 months) coupon -- which she promptly applied to a 2007 CTS (on a 39 month lease/ 18K miles for a low number beginning with a $4!)
 
Sometimes, if there are any business deductions especially, a lease is not imprudent.
 
Sometimes it is.

Replies to this message:

• pearl (Mar 26, 2007 8:02 pm)
  • markcincinnati (Mar 27, 2007 5:07 am)

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#742 of 2880 Re: BMW king of the subsidizers [markcincinnati] by pearl

Mar 26, 2007 (8:02 pm)

Replying to: markcincinnati (Mar 26, 2007 8:24 am)

Replies to this message:

• markcincinnati (Mar 27, 2007 5:07 am)

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#743 of 2880 Re: BMW king of the subsidizers [pearl] by markcincinnati

Mar 27, 2007 (5:07 am)

Replying to: pearl (Mar 26, 2007 8:02 pm)