• Aug 1, 2008
The Detroit 3 aren't the only automakers feeling the hurt from lease vehicles coming back worth much less than expected. Leases account for 60 of sales in the industry as a whole. As such, BMW will begin offering incentives like never before to encourage customers to buy a vehicle instead and reduce the number of leases it has on the books. In some cases the German brand is offering loans with finance rates as low as 0.9% over five years, and of course these incentives will be aided by a commensurate raise in lease prices, as well.
Nearly all luxury makers are in the same boat as BMW, as Bloomberg reports that leases also comprise 55 at Lexus and 42% at Cadillac. While the residual value of luxury vehicles isn't falling quite as fast as SUVs and full-size trucks, the market's shift in preference to smaller, more fuel efficient vehicles means that there is less demand for vehicles that tend to conspicuously consume copious amounts of fuel. Thanks for the tip, Rich!

[Source: Bloomberg]


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  • 33 Comments
      • 6 Years Ago
      well if you would actually look past some of the current posters ignorance...you would realzie its smarter to lease a luxury car...with all of the advanced technology of the cars..they are constantly in and out of the shop..also if you own a business you are able to write it off as a business expense...i can tell by some of the negative comments pertaining to people not affording these cars because they are not purchasing with cash that you do not look at the bigger picture....Why spend 100k on a car cash when you can drop a down payment..No cash out of pocket for warranty work and none of the loss of value from depreciation..And as finicky as the automakers are with releasing new designs every 4 years...having a brand new car to drive every 4 years....leasing is very smart
        • 6 Years Ago
        Finlay someone with knowledge

        If you are the person that can afford such expensive cars,then the running around the garages ( A thing very likly to happen with Luxury Automobiles) is probebly not worth the time lost .

        A time in witch the car owner could have worked and earned more money than he lost due to the leasing price.
      • 6 Years Ago
      i dont think you should take a loan out ever for a luxury car. its a luxury!

      granted i dont make 6 figures, but i did buy my acura TSX in cash and its not even that luxury a car.

      i might trade up for a C300 in a few years or something, but i still would pay the difference in cash, i think its just stupid to go into debt to buy a luxury.

      we might as well buy iphones with loans too.
      • 6 Years Ago
      Finally! People will understand they can not afford these cars. My wife and I are in the top 10% in household income and there is no way I could afford a new BMW or Merc unless I leased it, even then it would be hard to justify a $400 a month lease. The same goes for $400K homes with $40K incomes.
        s13hybrid
        • 6 Years Ago
        I agree. What it boils down to is really just a matter of discipline. Sometimes your eyes get bigger than your wallet.
        • 6 Years Ago
        Not trying to start a debate out here, but if you really are in the top 10% of HHIs, i.e., ~$125K, your average take home has to be close to $6K per month, give or take a few hundred. If you can't afford a $700-800 payment (~12% of your net salary) for a 3-series or C-class, something's definitely wrong. My personal income is in the top 5% while my girlfriend's just getting out of school and has no job and we still manage to have enough left over as savings after spending a healthy chunk on cars, mortgage, food and partying.

        But I completely agree on saving money upfront for a sizable down payment.
        • 6 Years Ago
        That is my point as well but at what income level is dropping $50K on a car a tenable idea? $100K? $150K? In my opinion you have to make quite a bit of money to make a sufficient amount that spending such a large portion on a car makes any kind of rational sense. I see it as a % of income but it also depends on the amount saved. Depleting one's savings to buy a car is ludicrous.

        Everyone should be maxing out 401k, and have at least 3-4 months salary saved before even thinking of owning a luxury car. Why would anyone want to have less money in the bank than thay have in the garage?
        • 6 Years Ago
        Able to make he payments and "afford" are not the same thing. Yes the payment could be made with little effort but there are so many better places to put the money. I can not see spending so much on a car. I dont think the payment is the issue. Its the "whats in the bank vs whats in the garage" that matters. Garage should always be < than the bank. If that driving a used Honda even with a 6 figure income than so be it. Some day the bank account will be large enough to absorb a luxury car purchase with little effort but that is a long time off and very few have that capability.
        • 6 Years Ago
        I don't get what's so hard in saving up $20-30 grand or so as down payment and then financing the rest at 60 months. It should not be that hard if you're in the market for one of these cars, it comes with the territory, no?

        My point is if you don't have the cash, why are you buying these cars?
      • 6 Years Ago
      What I find really amusing -- and annoying -- about this story is that they're saying the depreciation is really bad because the cars aren't fuel efficient enough.

      If they'd just bring their diesel line over here, there wouldn't be any issue. There aren't a lot of vehicles that perform as well as the 123d and get such great fuel economy. The 3 and 5 series diesels are all pretty impressive, too.

      They have the technology, they're just being lazy for some unfathomable reason.
      • 6 Years Ago
      Why would I want to buy a $60K vehicle that depreciates over 30% in 3 years, when I can buy lease. Also, while it's depreciating, it's also falling apart (in the case of BMW and MB).
        • 6 Years Ago
        I just heard an advert on the radio for CPO BMWs going with a 100k mile warranty. Can't beat that!
        • 6 Years Ago
        Don't worry, the lease rates will soon be adjusted accordingly so that you can't afford either option.
        • 6 Years Ago
        That's why you buy CPO! The cars come back from leases are in great shape, you take no hit on new value, factory warranty still left and they add an extended warranty on top of it.
        • 6 Years Ago
        'Why would I want to buy a $60K vehicle that depreciates over 30% in 3 years, when I can buy lease. Also, while it's depreciating, it's also falling apart (in the case of BMW and MB).'

        That's why I bought a used bimmer. I don't worry about depreciation or the hassle of leasing a car I can't afford to buy (or don't want to buy new).

        And it's far from falling apart. No one who gets in my 330Ci believes me when I tell them it was built in nowember 2000. If I get it detailed it would look showroom new. Starts everytime, runs like a champ and handles like it just came off the factory line. Most worry free used car I've ever bought.
        That said, suckers lease. $800 a month to rent a car? No thanks.
        • 6 Years Ago
        Liqor: Careful with those numbers. Remember that when you lease, you generally pay an up-front amount at lease inception. In the case of a 3-series Touring from BMW, it looks like their current offer is a 36-month lease with a $489/month lease payment (that's 5868/year, by the way, not 4500) with a $3k cash payment due at signing IN ADDITION to that first month's lease payment.

        You should also keep in mind that when you buy a car, though you do indeed suffer depreciation, you have some value left in the car when you're ready to get rid of it. When you lease one, you just give it back to them and start from scratch. So, to drive a 3-series Touring on a lease for 6 years, you'll have to have a NEW lease inception fee. Assuming it'll be the same in 2011 as it is today, that 6 years in the leased BMWs would cost you $41,208 and you'd own nothing at the end.

        TANSTAAFL.
      • 6 Years Ago
      I never realised how ridiculous/pathetic the credit situation was in the US, 40% leases!?! Everyone i know who drives a BMW, owns a BMW, same with every other premium brand. There needs to be a serious attitude change for these consumers, rather than everybody relying on inflated valuations to drive a brand of car that maybe they haven't earned yet.
        • 6 Years Ago
        i meant 60%, even worse!
      mike
      • 6 Years Ago
      I was at BMW yesterday to take a shot at the .9% financing for the 2008 535i almost fully loaded and they were asking 60k drive out. I told them Mercedez is giving 5k rebate off the E500 bigger engine for less price than the 535i. They kept me for 2 hours trying to negoiate down to 56k drive out and they still wouldnt budge. Amazing. Anyone have any advice. Should I just wait a couple of months to see? Will the .9% financing go away any time soon?
        mike
        • 6 Years Ago
        @mike
        Wow thanks. How did you find out it was extended through Sept? Man they are so hard to bargain with. I might as well just wait for a 2009 if i was going to spend 60k on a 5 series. You think they will give huge rebates like 5k off by Sept end of third quarter?
        mike
        • 6 Years Ago
        @mike
        oh by the way im from Texas another bmw salesman wanted to give me 700 over invoice. How did you get 200 below invoice? how did you bargain with them?
        • 6 Years Ago
        @mike
        The 0.9% expired yesterday, they might continue it through August as well though. I don't know where you are located, but I was able to get a 328i at Capital BMW in Tallahassee, FL, for $200 under invoice. Hope that helps a bit.
      • 6 Years Ago
      Well, they can't really expect people to BUY a $100K 7 series, can they? Most people who shop in this segment feel the need to keep up with their peers/social circle anyway.

      Besides, the statement about luxury cars depreciating by a lot less than their SUV counterparts isn't exactly true. I was looking around for a beater TL the other day and it was fascinating to see how many 04/05s are available for $15K-ish, which represents a depreciation of over 20K in just 4 years. Need more proof? I've seen CLK55 AMGs for a shade above 30K, when a new one costs close to $70K.
      • 6 Years Ago
      Audi isn't in that boat, they don't subvene leases by artificially raising the residual like BMW does.
      • 6 Years Ago
      lol good luck with that BMW/Merc. Everyone I know with a BMW leases it and if they had to buy it they wouldn't be driving a BMW right now.
      • 6 Years Ago
      • 6 Years Ago
      Serves these idiots right....now perhaps people will buy what they can afford...

      Hopefully the number of douche bags running around in overpowered deathtraps will be reduced.
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