So while doing the usual search for Guilias out of boredom was pretty surprised to see how insanely cheap the low mile loaded 2017 Guilias are. A $46-48k msrp with 8k miles going for $28k on a dealers lot with a clean title.
Given that it can be assumed it was traded in or bought at auction for like $24-25k could argue the residual was like 50% for one year. Given that the guilias and stelvios right now have lease rates of near zero interest, and residual of 60% for 24 months, will Alfa keep up that residual and stuff or will it be like Ford where they are just like fuck it, 50% residual for 24 months and 40% for 36?
On one hand… These might end up being the used car bargain of the century, on the other hand, succckkkkssss to anyone who financed these things
I was talking to one if the finance guys at volvo dealership about inflated RV. He said that the captive is fine with “losing” the money because they will deduct that loss on their taxes and get the benefits of the write off. Seems like it isn’t as big of an issues as it sounds.
Selling cars at way below market residual is not an effective strategy to be profitable, it’s a way to gain market share. Being able to write off loses to limit tax obligations helps subsidize ease the pain but only partially. Most companies don’t pay more than 20% on corporate taxes, many even less, so you are only writing off 20% of the cost.
The flip side is captives can often recover some money at lease end. Mileage overages and excess wear and tear are both profit centers. Also people can make irrational decisions to buy cars at lease end rather than pay the mileage overages even when it doesn’t make sense to do so by the numbers.
I have a 2018 Volvo S90 and the market price after 8 months is less than the 2yr (62%) residual on my lease. Makes me think my next vehicle will be a CPO purchase instead of another lease as I tend to want to change vehicles before the leases terminate.
Speaking of Alfa’s, I wonder what a 1yr old Quadrifolio will be going for?
This is one of those explanations from a dealer that doesn’t make much sense. It’s a cost of doing business for sure, as it allows them to advertise low payments, get people in the door and hopefully move some metal. But the tax benefit of it isn’t that great. He sounds like Kramer from Seinfeld talking about “just write it off”
The real thing to look for is what the 3-5 year prices are. That way can figure out if the cost of a 2 year lease from new is still going to be greater or less than the cost of a cheap CPO and then the depreciation from there.
For example: This is a 3-4 year old BMW 328i (now 330i) with hardly any miles on them. Imagine that the trade in price is another $3-4k lower.
So if you had bought a CPO BMW 3-series 2 year prior for like $30-35k, with an original MSRP of $45-50k, that depreciation cost is an additional $20-25k over 2 years, pretty insane. That’s why leasing a new BMW is often a great deal. Getting a loaner deal is absolutely the best way to enjoy a German car. My total cost of ownership on my 330i is going to be roughly $6k for 2 years after taxes and all that jazz.
Hence I am veryyyy interested how much these Alfa’s are going to be in like 2-3 years, if it follows BMW’s trend then it’ll be THE used car to get.
I’m going to be in the market for a new sedan around the end of the year. Will be interesting to see what CPOed S90s are going for. Figure a good number should be coming off 24 month leases in Q3 and Q4 of 2018.
Alfa and Volvo are in the market share game so I am sure they have budgeted plenty of money to eat these losses. Hopefully that means 70% off CPO Quads by next year
