[s-cars] Truth vs. Joy

Sat Mar 20 02:30:31 PDT 2010

Testify to Joe & Scott on the Ultimate Leasing Machine & leasing economics. 

Another thing I submit Audi is/was copying from BMW... 

It's been years since I couldn't plunk down full cash to buy the car I
choose (not that my choices can include Veyron's or R8s etc., but within my
modest world at least...) But when we got the B7 Avant few years back we
went in ready to buy outright but I reluctantly just had to take the lease
option just because of the numbers. At the time, bustin' out my mad Herbert
Kornfeld MBA number crunchin' skillz, I peeped that it was just retahded to
do anything but take the special lease deals based on the crazy high
residual number they were using. It was very very hard to see how the
depreciation was going to be less than the sum of our lease payments over
the period.  And in fact when turned in, DUH, the 'buy it' price was WAY
more than market. Either they were hallucinating on residuals at the time or
I'm guessing some exec who's bonus was based on total-leasing numbers but
was headed for retirement just gamed the system to move new metal, hit his
targets, and screw the long-term consequences (sounds like banking crisis
and real estate values).  Probably the leases were packed up into CDO's and
sold by Goldman to Icelandic banks or some shit. 

Anyway same was true even moreso for the Beemers which were under
consideration at the time.  I could have bought even 'more' car from BMW on
the lease than Audi in the sense of 'for same payment would have had a car
with a higher street price' but the models/optioning/availability didn't
work out for me/us. 

We loved that car and might easily have bought it but in the
corporate-bureaucracy-idiocy-can't-make-it-up, they "couldn't" sell it to us
for the reality based price that we all knew it would ultimately sell for.
The leasing/receiving dealer had no incentive to sell it below the
pre-programmed residual and in fact the guy told me they would be lashed for
undercutting the contract buy-out price. They get some nominal feel for
processing the car and wouldn't wear any of the eventual pain of
depreciation, so they were completely incented to spend Audi's money to
inspect, clean-up, collect their fee, ship it to the Audi central
scrutinizer where it would go on the internal dealer lease-bid program, and
some other dealer would end up getting it shipped to him and finally sold at
a sensible price.  All that shipping and cost being wasted vs. just selling
me the car but that's how the system works... 

I heard that the OEM's took some haircuts on their lease portfolios in the
crisis so they might have improved their process such that when they have a
'reality check' mechanism, but would be interested if anybody has some
knowledge of current system.  But on the other hand it would be very OEM
like to do a calculation that "since 20% of Jane-Doe-soccer-moms who decide
to keep the leased car will just pay the contract price without checking
market value, we make more money fleecing those people than the wasted
shipping turnover for the other cars costs us, so we keep the system"... if
you can follow that. 

  _____  

From: qshipq at aol.com [mailto:qshipq at aol.com] 
Sent: Friday, March 19, 2010 10:26 PM
To: joe.pizzimenti at gmail.com; cody at 5000tq.com
Cc: s-car-list at audifans.com; jc at j2c3.com
Subject: Re: [s-cars] Truth vs. Joy

Leasing?  That's a side benefit of moving sheet metal when there is a high
Residual Value - those numbers usually lag 24 months behind, the latest data
from 08 then:
http://www.prnewswire.com/news-releases/kelley-blue-books-kbbcomr-releases-2
008-residual-value-analysis-59846467.html

Interesting to note, that Audi is marketing (preselling leases?) hard the
'prospect' that the A5/S5 will have a really high residual Value.  That's a
lease argument, er, that tends to buck a very long and arduous journey of
exactly the opposite in reality.  And in the truth department, BMW Residuals
don't seem to be a big secret:
http://www.bmwblog.com/2008/02/27/bmw-128i-135i-m3-and-x6-lease-residual-val
ues/

Just sayin....

SJ

-----Original Message-----
From: Joe Pizzimenti <joe.pizzimenti at gmail.com>
To: Cody Forbes <cody at 5000tq.com>
Cc: s-car-list at audifans.com <s-car-list at audifans.com>; jc at j2c3.com
<jc at j2c3.com>
Sent: Fri, Mar 19, 2010 7:24 pm
Subject: Re: [s-cars] Truth vs. Joy

No one buys new BMW's.  They're the ultimate leasing machines.

You can get a 750i for 1500 a month.  Or an X6M.  Or an M6.

On Mar 19, 2010 8:21 PM, "Cody Forbes" <cody at 5000tq.com> wrote:

BMW in my book is a bit funny. I can't think of one I'd buy given any

particular price range, but I can think of dozens that I love to work

on because of the test drive. Given the money to buy a newer 3 or 5er

I'd rather buy a Renault R5 Turbo2 or a 914 with a 3.6l engine swap.

Given the money to buy a newer ///M of any type and I'd much much

rather buy a 996tt.

If I HAD to have a BMW it would be an e30 M3 with an M54 swap or

anything with the 3.5ltt power plant. But then to me any car that's

supposed to be fun basically should be pre-OBDII for ease of

modifying. A DD for the female part of the family doesn't need to be

anything other than BIG (our A8 seems cramped sometimes) and

prefarably AWD.

-Cody (mobile)

On Mar 19, 2010, at 6:01 PM, Taka Mizutani <t44tqtro at gmail.com> wrote:

> I would rather buy a Pors...

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