Why is the residual so low?

[rkdiddy]

I'm currently going between a BMW 335i and an S4. I'm looking at doing a 36 month lease and the current residual for the BMW is 61% and S4 is 54%. Selling price within a few thousand. However the monthly is over a $100 difference.

I don't understand why the residuals are so different??? Also, why is there a few point penalty on the Prestige package???

Any advice, suggestions, comments, etc?

Cheers!

[naemcivic]

^^isn't it ridiculous how BMW could hold a stronger resale value then Audi?

[zerinA4]

BMW has always heavily subsidized their leases while Audi hasn't been in that game for while. Audi still subsidizes but not as heavily. As for the Prestige package, It's almost 2-3% isn't it? The residual on my '08 TT lost 2% by adding the S-Line package. I don't get the math either but that's what it is. I guess they don't think the added features will add any value to the car on the used market.

[naemcivic]

the only thing I dislike about Audi is the resale value.

[gd10]

I'm currently going between a BMW 335i and an S4. I'm looking at doing a 36 month lease and the current residual for the BMW is 61% and S4 is 54%. Selling price within a few thousand. However the monthly is over a $100 difference.

I don't understand why the residuals are so different??? Also, why is there a few point penalty on the Prestige package???

Any advice, suggestions, comments, etc?

Cheers!

audis residual is realistic, BMWs is way to high an would never be able to be sold for 61% of its value in 3 years.

[NickS]

I'm currently going between a BMW 335i and an S4. I'm looking at doing a 36 month lease and the current residual for the BMW is 61% and S4 is 54%. Selling price within a few thousand. However the monthly is over a $100 difference.

I don't understand why the residuals are so different??? Also, why is there a few point penalty on the Prestige package???

Any advice, suggestions, comments, etc?

Cheers!

You are aware of the issues with the turbo motors and fuel pumps on the BMW's right???

[oblu]

BMW has always heavily subsidized their leases while Audi hasn't been in that game for while. Audi still subsidizes but not as heavily. As for the Prestige package, It's almost 2-3% isn't it? The residual on my '08 TT lost 2% by adding the S-Line package. I don't get the math either but that's what it is. I guess they don't think the added features will add any value to the car on the used market.

^ this ... BMW is heavy into the leasing game; they're always running subsidized financing lease and traditional. Audi, not so much except when it's time to clear left-over inventory. Unfortunately, lease residuals influence resale values, so there you go. I only pick up my Audi's pre-owned. My BMWs I've always gotten new.

[NHS4]

You are aware of the issues with the turbo motors and fuel pumps on the BMW's right???

I'm told by my BMW mechanic that this issue has been fixed for 2010 with the TwinPower motor- Still planning to get the S4 as I think it's more appealing for a number of reasons.

[rkdiddy]

Thanks for the feedback! Some great points.

I have heard about the Fuel Pump issues, they seem to mainly isolated to the N54 engine. However, that may just be the fact then N55 is still relatively new and there hasn't been time for the HPFP to fail.

Current spread between Premium and Prestige is 4 points. This equates to roughly $60/month - if price remained constant (which it obviously varies).

I've sent a request to my local Audi dealer to see what he can do on a lease. I would prefer the S4 because of the DSG, but I'm not sure if I will be able to convince the Wifey a payment North of $800/month is ok given the current financial climate. :-/

Cheers!

[CAA]

As someone above said - just because BMW subsidizes the residual to move cars , doesn't mean it will be worth 61% at the end of three years. Here are some recent auction results for 2008 335I's. I didn't explore buying a 335i but I'm guessing these prices don't reflect 61% of the MSRP......

10/07/10 RIVRSIDE Regular $25,000 20,801 Avg GRAY 6G A Yes
10/07/10 RIVRSIDE Factory $24,500 21,119 Avg JETBLACK 6G A Yes
10/07/10 RIVRSIDE Factory $22,500 32,935 Avg TITANIUM 6G A Yes
10/07/10 RIVRSIDE Factory $22,500 31,225 Avg ALPINEWH 6G A Yes
10/07/10 RIVRSIDE Regular $22,250 20,062 Avg BLUE 6G A Yes
10/07/10 RIVRSIDE Factory $21,000 43,262 Below ALPINEWH 6G A Yes
10/07/10 RIVRSIDE Lease $21,000 42,247 Below SPARKLIN 6G A Yes

[vwong]

I'm told by my BMW mechanic that this issue has been fixed for 2010 with the TwinPower motor- Still planning to get the S4 as I think it's more appealing for a number of reasons.

Check again. Someone over at e90post has reported HPFP failure in the N55 motor as well.

http://www.e90post.com/forums/showth...light=n55+hpfp

[xtrema]

I found residual is actually negotiable with BMW. If you want lower payments, BMW will do it. Especially non-hot cars like the 1 series, or anything with smaller engine than 335.

[Leor604]

A friend really wanted an A4 but cross shopped the C-class Merc. With similar purchase prices, monthly payment on the Merc was MUCH lower due to the higher residual. Seems Audis just don't hold their value as well as the other Germans. OK if you are buying used, but sucks if you buy a new one and only hang on to it for a couple or three years. By the way, he went with the C-class.

[L0U]

the car has a good value at the end of lease...the problem is you have paid for more than the value of the car over a 3 year lease.

case in point. my A3 s-line ti edition...2008 lease up in dec...buyout 21k, sells for 31k on the audi lot right now. if it was a bmw, the buyout would be 30k and it would sell for 31k....no wonder bmws leases kick audi's ass.

I am buying it out, then trading it for 4k more

[kailuaboy]

bmw also had to write down about 150 million last year in lease residual losses.....it really hurt their bottom line when the floor fell out of the used market. then again audi makes some bad choices too, my old a4 had a residual of 28k after my 36 month lease.....they couldn't fine anyone to buy it for more than 22k....opps

[riegeraudi]

I was just wondering if the reason for BMW setting the residual so high is so that they can sell more new cars. With the residuals so high the used car price will be very close to a brand new car price, this makes it easier for customers to by new than used. BMW only makes money selling new cars while dealers make money selling used cars. I think this is a great plan to keep sales volume high. While Audi by keeping the residuals low allow the dealer to make more money on used cars( this is true for Canada anyways). This also keeps the sales volume lower not sure if this is the plan since Audi makes more on sales of their cars in Asia and Europe.

[TechnoCat]

I've had two Audi leases. In both cases, when the car came off lease I was able to gain about $5K by buying it and trading it in. Pure paperwork which the dealer handled for me, just a few extra forms. So my guess is that Audi sets the residual low to minimize risk and unhappy end-of-lease situations, while BMW may be more optimistic and possibly accurate.

[xtrema]

Barring from a HPFP disaster on the S4, I'll pay the residual and keep the car for winter anyway.

[finesta101]

Audi sets the residual that way probably because it likes to sell it's cars over leasing them. And It doesn't look like the s4 drop in price that heavily, I think after the lease ends there is an opportunity to make a few bucks by buying/selling the car.

[K1speeder]

Just another thing to keep in mind. BMW looses money every time lease a car with a residual like that. For a company like BMW, loosing money on 3-series makes sense. If they can keep it as the dominant luxury sedan then its a win for them. They just take the losses out of the huge gains in other cars/sales in other countries. It's a messed up business practice but its what's going on.

[a4rings]

no it has not been fixed. there was just a member yesterday that posted about his 2011 335i with the n55 single turbo motor and it died on him at 600miles.

[stormrider]

I am friends w/ a mechanic at the local BMW dealer.
He told me not to buy a 335i..."you know how many fuel pumps i change a week??"
BTW, he just bought his wife a Q5. Nuff said.

Residuals are all projected. When the cars come off lease they will sell for what they sell for. Loss or profit.
If the banks over estimate the residual, they will take a loss.
If they under estimate the residual, then it may make sense for you to buy the car and trade/sell it.

The way i just specced out an S4 vs 335i, there was about $80-$100 difference per month.

[jmikeh]

got a quote today on an 2011 S4 with the lease thru U.S. Bank instead of Audi. the residual there is 62%. so, sounds like if you go with someone other than Audi, you get a better deal.

[zerinA4]

Any fees? What terms?

got a quote today on an 2011 S4 with the lease thru U.S. Bank instead of Audi. the residual there is 62%. so, sounds like if you go with someone other than Audi, you get a better deal.

[jmikeh]

Any fees? What terms?

No residual buydown. The only fees you pay up front are 1st month, security, title, tax, etc. The upfronts are @1700. 12k per year for 39 months.

[rkdiddy]

No residual buydown. The only fees you pay up front are 1st month, security, title, tax, etc. The upfronts are @1700. 12k per year for 39 months.

That is a fantastic deal. Almost too good to be true, since Audi's residual is < 50%. What MF are they quoting you?

I entertaining the idea of adding on the options I want to the Prem-Plus package. Getting that package over the Prestige saves 4 points.

[AofC_RR]

bmw also had to write down about 150 million last year in lease residual losses.....it really hurt their bottom line when the floor fell out of the used market. then again audi makes some bad choices too, my old a4 had a residual of 28k after my 36 month lease.....they couldn't fine anyone to buy it for more than 22k....opps

Actually it was a TAD more than 150 million. More like over 500 million.....they're in some financial hot water as a result. Audi unlike BMW has shyed away from inflated residuals. BMW continues to lose money leasing. Audi is not interested. You're pretty much stuck in a BMW lease till it ends.

[Drizz]

audis residual is realistic, BMWs is way to high an would never be able to be sold for 61% of its value in 3 years.

Audi dealers love to tell people that too...that Audi is "realistic". No. What's realistic to a customer is what they're actually paying. I could care less how much Audi is subsidizing versus BMW, or vice versa...what I care about it how much it's going to cost ME. I don't get it. How can a dealer tell a potential buyer that the two cars have the same MSRP but that they're going to charge you more for the Audi because of the "realistic" residual?! Realistically, they're going to lose some business because of this. Now I know Audi is riding high right now cause they're currently experiencing tremendous sales volume, but eventually that's going to die down and they're going to be forced to do something to get their lease prices in line with the competition.

Don't get me wrong here...I love my Audi and it's not the first one I've leased. I've also leased multiple BMWs and really loved those cars too. I'm not trying to take any sides here it just frustrates me when I hear that the higher priced leases are more realistic. Let's see how realistic they are once their sales start slowing down...

Oh and to gd10...sorry this wasn't an attack at you at all. I was just reminded of my annoyance with dealers saying that = )

[stormrider]

There is no realistic residual since it is just a guestimate.
For the past few years leases have sucked because alot of dealers got stuck w/ used cars that they were upsidedown on, because of high residuals at lease signing.
Now they are just covering their azz.

When i leased my cooperS in 2005 the residual was great at 63%, but the MF was all out stupid.
Why did they charge such a high interest rate? Cause they could.

[stormrider]

got a quote today on an 2011 S4 with the lease thru U.S. Bank instead of Audi. the residual there is 62%. so, sounds like if you go with someone other than Audi, you get a better deal.

Was this quoted by an Audi dealer?
Do you know if it was state specific?
And yes, i would like to know the MF you got too...

4 weeks ago i was quoted 56%res w/ 0.00188MF for 12K 39mo.

[zerinA4]

Wow, those MFs are high. I'd rather have a lower Residual with a lower MF than a high residual with high MF. I got the equivalent of 1.8% in June.

[gd10]

[QUOTE=Drizz;5837980]Let's see how realistic they are once their sales start slowing down...

QUOTE]

Audis sales are only going to keep increasing as the new A6/A7/A8 start filling up inventory next year. Then once the "new style" of the a6/a7/a8 fades then the new A4/A5/q5/q7 will be here to pick audi back up, so I do not see any downfall of sales in the next 5 years for Audi.

[L0U]

the lease does bite...you have to buy it out end of lease...or you are walking away from a large amount of positive equity.

I am guessing no one buys out a bmw lease...since its buyout is higher than the audis.

[kailuaboy]

Actually it was a TAD more than 150 million. More like over 500 million.....they're in some financial hot water as a result. Audi unlike BMW has shyed away from inflated residuals. BMW continues to lose money leasing. Audi is not interested. You're pretty much stuck in a BMW lease till it ends.

sorry i was quoting a quarterly number but yes they are in a world of hurt with 335's sitting everywhere that are 2-3 years old that are 3-5k less than a new one. the dealer here cant sell a used 335 for love nor money right now because they are no more than 5k off a new one with 10000km and a year to 1.5 years old....its kinda funny when there is still a 6 month wait for an s4 in the same city

[CBRmatt600]

Audi dealers love to tell people that too...that Audi is "realistic". No. What's realistic to a customer is what they're actually paying. I could care less how much Audi is subsidizing versus BMW, or vice versa...what I care about it how much it's going to cost ME. I don't get it. How can a dealer tell a potential buyer that the two cars have the same MSRP but that they're going to charge you more for the Audi because of the "realistic" residual?! Realistically, they're going to lose some business because of this. Now I know Audi is riding high right now cause they're currently experiencing tremendous sales volume, but eventually that's going to die down and they're going to be forced to do something to get their lease prices in line with the competition.

Don't get me wrong here...I love my Audi and it's not the first one I've leased. I've also leased multiple BMWs and really loved those cars too. I'm not trying to take any sides here it just frustrates me when I hear that the higher priced leases are more realistic. Let's see how realistic they are once their sales start slowing down...

Oh and to gd10...sorry this wasn't an attack at you at all. I was just reminded of my annoyance with dealers saying that = )

I think it would serve you well to learn a bit about finance, and the traps that automakers have gotten themselves into by over incentivizing new vehicle purchases in order to keep demand falsely elevated (cough cough, GM). It makes little sense in the long run to falsely elevate residual values just so that you can have a low car payment. The company takes a huge loss in the end, and is merely trading financial losses in the future for quick profits right now. It also heavily influences used values. Audi realizes that playing tit for tat price games with BMW results in a classic prisoners dilemma, and gains them nothing in the end.

Plus I've always looked at it like this- if you can't swallow an $800/mo car payment, you probably shouldn't be shopping for a $50k car in the first place.

[kailuaboy]

extra credit for working prisoners dilemma into your post takes me back to my university days......stupid econ degree i have yet to use

[Kandiru]

Just like one above poster residual value and resale value have little in common
unless the manufacturer is doing poorly.

I you lease to abuse and forget and will return the car, then suckering out the
highest possible residual value is your best goal.

Look at BMW's website, they have some insanely attractive lease deals on the
new 5 series.

VAG VW and Audi alike are very poor companies when it comes to manufacturer
leasing, BMW pretty much leads. I have had good luck with a Volvo too.

[LeadToRome]

this weekend I saw an Audi commercial a few times that claims that Audi retains value better than any other German car. Just to make things even more confusing, apparently.

[Runge]

I think it would serve you well to learn a bit about finance, and the traps that automakers have gotten themselves into by over incentivizing new vehicle purchases in order to keep demand falsely elevated (cough cough, GM). It makes little sense in the long run to falsely elevate residual values just so that you can have a low car payment. The company takes a huge loss in the end, and is merely trading financial losses in the future for quick profits right now. It also heavily influences used values. Audi realizes that playing tit for tat price games with BMW results in a classic prisoners dilemma, and gains them nothing in the end.

Plus I've always looked at it like this- if you can't swallow an $800/mo car payment, you probably shouldn't be shopping for a $50k car in the first place.

reminds me of all the newest advertising for financing.. 0% for 84 or 96 months!. but by the time you pay off the car in 8 years, it won't be worth much!

[kailuaboy]

upside down till the bitter end on that one