absolutely. But thanks for heavy discounts and grossly inflated residuals, we leased a $74k MSRP Cadillac for $605 a month (39/12k) with $900 DAS. In December when the lease is up the buyout is $46k and these cars are already going through auctions in the mid $35k range.
Not my problem however.
I might have to look at Cadillac… BMW evidently doesn’t want my business anymore.
I saw a lot of 2016 CTS going in the mid 20k with low mileage, used. Granted, that’s for the 2.0T, but still a lot of car for that money. That presents a phenomenal value for the overall cost of the vehicle and it’s definitely a better used car buy.
Leased luxury cars with inflated residuals will always be better bought used, in my opinion.
Currently luxury car MSRPs are 15-20% over true transaction prices (selling price minus all additional rebates and incentives). Luxury residuals have also been overly supported to move leases with competitive payments. I’m not sure how those OEMs and captives structure their reserves to make it all profitable.
Some lenders are hooked on the odd term drug and run with it all year which negates the entire seasonal benefit. The ones that manage it well can mitigate losses.
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I think the question is- how much does it actually cost to manufacture each vehicle.
Car stickers for 60k, sells at auction after 3 years for 28k. Lessee spent 20k during the 3 year term.
I’d imagine the manufacturer still came out way ahead.
What does build cost have to do with a used car sale years after the fact? If it has an owner, it’s already been bought and build cost shouldn’t necessarily matter unless considering long-term reliability of individual components.
Because the manufacturer is the one selling the car at auction, and the question rv guy asked is how is it possible they are leasing these cars with such wildly inflated RVs.
My point is as long as the manufacturer isn’t losing money, it doesn’t matter how much they are losing at auction compare to the residual value of the car. Basically with these luxury leases, the msrp and RV are just random numbers and have nothing to do with reality.
The bank is the one selling the car at auction. The manufacturer has washed its hands of the car a long time prior.
As Batmitestar stated, my understanding has been the financial institutions were kept separate entities from the actual manufacturers… even if it says “Lexus Financial Services,” that is still a different entity.
I ran into this issue when selling back my lease to KIA. KIA Motors Inc. had to basically assess the value of my car and determine how much I paid for it and what the total amount financed was and then cut a check to KIA Financial for that amount. Any difference was sent to me after the loan had been satisfied.
It took several months to go through this process.
99% of the time you’re leasing from a captive… they are captive to the manufacturer/parent company.
The manufacturers and captive banks are subsidiaries to a parent company, which is ultimately all that matters in terms of revenue, profit, loss etc.
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@mikem is correct. The Captives and the OEMs are almost always under the same umbrella so total profitability is what I was getting at. The OEMs that are using a 3rd party as a white label captive (Chase for JLR, Mazda, Subaru and BofA for Volvo) have a much different profitability model to justify the lease business and the RV risk involved. Their cost of funds are much higher than if they were a true captive.
At some point, if the RVs are far enough off of the actual wholesale values, the entire thing is unprofitable for the parent company. But luckily the OEMs have diverse product offerings to keep the entire ship afloat if one or 2 models are a net negative. Hence why so many car nameplates are getting ejected.
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This has turned out to be an extremely thought provoking and informative thread. Hat tip to all who have contributed.
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This is @RVguy’s livelihood. You can take what he says regarding RVs as gospel. Good stuff.
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