[s-cars] Leasing

[Taka Mizutani]

I missed it because I don't see any press release or article that you
referenced anywhere in your original post. I can't read something that's not
there. I understand what you're saying below and have no problem with it.

I think part of the problem that Audi has in terms of resale value on the
used market is the consistently poor customer service that the dealerships
give- when you're not paying for maintenance, you can deal with a lot of BS
because the service is free, but once you start paying for it, no one wants
to deal with all of the shenanigans that the typical Audi dealer performs in
their routine course of business. That's typically why MBZ does well
compared to both BMW and Audi- their customer service is impeccable.

Now that may not be the case in other parts of the country, but from '99-06
in the NY metro and Philadelphia markets, I have seen consistently poor
service from both VW and Audi dealers- to a degree that it is appalling.

It also doesn't help that VW as a company generally makes cars obsolete
after what, seven years? Then it becomes impossible to get parts. I would
have an UrS6 as a daily driver right now if I thought that the company that
built the car would continue to make parts for the car. Once you start
deleting part numbers from the parts catalog, it's over.

I agree with you that BMW is rapidly taking over Audi's market with AWD
everything, but the cars are soooo ugly! As I said before, I would probably
take the risk of dealing with fuel pump/injector issues with the N54 to
drive a 535xi manual wagon, but that's about it- the manual transmission is
worth more to me than the cheap-looking interior and the ugly styling, which
isn't as bad as a wagon as it is as a sedan. The driving dynamics are
definitely better and nothing compares until you move up to a Cayenne GTS
with a manual, which I can't get for $27k used (that's what I'm seeing, even
retail, for a '07 with normal miles). And yes, I'd lease a 328xi if I were
to lease a car, probably before I got an A4 2.0T, but that's a hard one- the
new B8s are very nice cars to be in.

Taka



On Sat, Mar 20, 2010 at 6:20 PM, <qshipq at aol.com> wrote:

>       I have addressed subsidizing, I may suggest you mis/(t)/(s)/ed it?
> If Audi pre-sells high residuals, and there are no ARV's yet, that means
> Audi is giving notice that they will be heavily subsidizing leasing to
> artificially inflate residuals.  Coming in a press release from the
> President of AoA himself, that's quite an all-in position to take IMO.
> Overly optimistic, more likely.
>
> Take a look at the Kelly Resale values for 2006 and 2008 in the article I
> referenced.  BMW in fact slipped from the number 1 spot to number 2, Audi
> moved slightly up (at least in the top 10), but not comfortably as noted in
> the article I referenced: "Audi benefited from the gains (2006 to 2008) in
> the S6, Q7 and A3, somewhat offset by a drop in the A8."  That's more likely
> a new body demand, that will  get corrected back when the  2010 numbers come
> out.
>
> Actual Residual Value is what it is, it's the same as used car Actual Cash
> Value.  The difference between the two is that Residual Value is a predicted
> result 24-60 months ago, and ARV and ACV is the benchmark (post predicted
> reality) to that prediction.
>
> It's a good thing to sit in the top spots for ARV/ACV, because that
> reflects the value of the real world open market economy.  You can hide
> behind/prop up artificial residuals only for the actual length of the
> lease.  Historically, Audi just hasn't done well post-lease, period.  And
> BMW has, period.  I suggest that's because BMW consistently produces cars
> with long term value, and Audi doesn't.  That's part of a Corporate Mission
> Statement/Philosophy that may need addressing on Audis part, now that BMW is
> taking the AWD route thru the line-up.
>
> S 's' J
>
>
>
>
>
>
>
>  -----Original Message-----
> From: Taka Mizutani <t44tqtro at gmail.com>
> To: qshipq at aol.com
> Cc: jc at j2c3.com; joe.pizzimenti at gmail.com; cody at 5000tq.com;
> s-car-list at audifans.com
> Sent: Sat, Mar 20, 2010 4:03 pm
> Subject: Re: [s-cars] Leasing
>
>  You haven't addressed the fact that companies often subsidize leasing to
> artificially inflate residuals to have an artificially low payment. Then you
> take an example of a car that has terrible lease terms (135i) and compare it
> to a heavily leased and subsidized car like the A4 or the 3 series. If you
> look at actual wholesale prices of A4s and 3 series prior to the credit
> crunch putting a big crunch on leasing versus the very first cars to come
> off lease since the crunch, you'll see that real wholesale prices of the A4
> and 3 series have slightly improved in terms of residual value due to the
> reduction in leasing and subsidized residuals that have killed values on the
> used market for quite a few years now.
>
> When you're talking about the upper end of the model line, flagship cars
> tend to have poor resale value on the used market because the target market
> does not buy these cars used and the secondary used market is unwilling to
> pay a high price for a car that tends to be very costly in maintenance past
> the warranty terms. That mentality even carries on to relatively reliable
> used cars like the Lexus LS, due to the way this tier of the market is
> bought and sold.
>
> I guess you'll still call me ungentlemanly and an asshole for disagreeing,
> but once again, you're not really correct.
>
> Taka
>
>
>
>
> On Sat, Mar 20, 2010 at 2:57 PM, <qshipq at aol.com> wrote:
>
>>
>>
>>  Goodread!  I did a Econ paper college about Audo Leasing, how it works,
>> andhow it doesn't.  Juxtaposed to VW and BMW good residuals in 2008, isthe
>> rest of the world.  Years ago, when Honda was to first take FordTaurus in
>> sales, Ford dumped 10's of thousands of units to the RentalCar Lease market,
>> to make the "sales" numbers hit the marque, and theTaurus took the crown.
>>  Fine short term strategy, but 2-5 years downthe line, you live with
>> 'off-lease' sales competing with your new *and*used car sales.  Ford got hit
>> hard for that move.
>>
>> Looking at BMW and Audi now, the reason Audi sells their comparablecars at
>> such a premium price, partially reflects that poor 'Actual'Residual Value
>> (ARV) Audis never seem to hit.  Contrast that with BMW,which historically
>> hit their residuals well, the win-win is forcorporate and the consumer.  I
>> find it quite interesting that Audi is'selling' high residuals (incl a press
>> release from AoA President?!),as Leasing finance companies face the
>> realities that Audi doesn't. Leasing companies look at historical residuals
>> to predict futureresiduals.  Unfortunately for Audi, the transmission and
>> maintenanceissues of Flagship transmissions and bread and butter turbos of
>> thelast 10 years, massively reflects residual values 2 years from now.
>>
>> But it's not all bad news for the used car market.  When you go
>> fromlooking at a new car now, to a used car 2-5 years from now, the
>> Audisstarts to look attractive again.  High ARV, means that a 135i is
>> gonnasell at a higher price used, than a comparable Audi 3 series.
>>  Specificto many on this list, without mentioning any names (JNR), the ARV
>> ofthe S8 and S6 makes them very affordable performance cars for thedollar
>> spent.  But, it's also best to know 'what' caused that residualfailure.
>>  That is to say, a savvy used car buyer will make sure the S8Trans has been
>> done, or the S4 turbos have been replaced....
>>
>> Backing up to the war then, the company that will survive is the onethat
>> makes the 'up' front money on the Lease with a High ARV history,because you
>> tend to have a better list price vs the competition,because you don't have
>> to cover a Low ARV in the price.  Then longerterm, the High ARV helps your
>> Corporate and Certified Used Car Sales onthe back end.  Part of the lease
>> price, is the Residual Value Insurancethat is built into the price.  That's
>> paid for up front, and I suspectAudi historically pays a whole bunch more
>> than BMW for that insurance.
>>
>> I hope for the day when Audi shows high ARV's, but when a Flagship RS6can
>> be had for less than 30k right now, I'm not holding my breath. Alas, the
>> smartest move then, what the (re-)marriage of Audi and VW. VW has some
>> pretty good high ARV's, but that also creates anotherproblem.  I suspect the
>> reason ARV are high on VW and low on Audi, isbecause the platform and
>> drivelines are interchanged between the two,making the VW a better Audi
>> value for the money.  Will be interestingto see in 2012 if the marriage was
>> successful in ARV to Audi.
>>
>> Scott J
>>
>