[s-cars] Leasing

[JC]

Scott -  Thanks for the further deets - you obv have dug further into this
than my anecdotal and observational experience but confirms everything I
have surmised and fairly confidently hypothesized about leasing economics
and the failed long-term logic/economics for the OEM's (I definitely read
your posts as confirming my discussions of subsidizing, gaming of short-term
metrics, and what can only result in long-term failed economics).   I didn't
know about ARV insurance but dope slapped myself - duh, of course they try
to insure that risk.  I bet they have 2 or 3 ways to hedge the risk
including insurance (I'd still like to know if any of them have created
derivatives - CDO's or whatever - out of lease bundles). 
 
I would bet that at some point or another, some Harvard MBA McKinsey /
Boston Consulting types pitched to some automaker or another (usually they
pitch to all the competitors in and industry when they come up with a
'brilliant' idea,  meaning by hiring them gets you no advantage whatsoever)
the idea that "well by SETTING extremely high residual values in your leases
you'll be DRIVING expectations in the market and pushing prices up!  Then
you'll ensure high residual values for used cars, benefitting both your CPO
sales and ensuring good price and sales support for future new models!".
Nice theory until the market / consumer fails to cooperate and buy cars at
those prices down the line.
 
J



  _____  

From: qshipq at aol.com [mailto:qshipq at aol.com] 
Sent: Saturday, March 20, 2010 2:53 PM
To: jc at j2c3.com; joe.pizzimenti at gmail.com; cody at 5000tq.com
Cc: s-car-list at audifans.com
Subject: Re: Leasing




Good read!  I did a Econ paper college about Audo Leasing, how it works, and
how it doesn't.  Juxtaposed to VW and BMW good residuals in 2008, is the
rest of the world.  Years ago, when Honda was to first take Ford Taurus in
sales, Ford dumped 10's of thousands of units to the Rental Car Lease
market, to make the "sales" numbers hit the marque, and the Taurus took the
crown.  Fine short term strategy, but 2-5 years down the line, you live with
'off-lease' sales competing with your new *and* used car sales.  Ford got
hit hard for that move.