Why are lease residuals so high right now? Possible answer.

bonedoctor · 06-05-2010, 01:08 PM

I' m going to take a crack a "guessing" the residuals question. Let me know what you think.

The money factor rates are really going to be based on 2 things. 1 is the medium term interest rates which they cannot control. It is also based on available government backed interest rates (Example, Toyota financial services will always have better interest rates when the rest of the world has high interest rates because they always have a Bank of Japan backed 1% interest rate When U.S. fed discount rate was 5%, the Bank of Japan still gives out 1%). The second factor is the actual incentive to help sales of on cars. Thus, the base rate of an outgoing model year will be much lower than the new year.

The residual is completely statistics based and forecast based. There is NO incentive for BMWFS to give incentives in residuals since they are eating any inaccurate residuals. The residuals are like a sports betting lines, they will be as precise of a predictor as possible given all available information at the time. At the time of the April residuals, the available information was mostly historic performance of preowned models at wholesale. They only knew that E93 would do poorly compared to E92 at preowned resale.

Just before release of the May residuals, BMWFS was given new information on the timing of the F30 M3 release. Note that 48 month and 60 month residuals are pretty consistent accross the E9x line, with E92 1% higher than E90 and 3% higher than E93. That is what the statistics tell use as far as resale.

Now with the new information on the F30, they have to "guess" that in June of 2012 to June of 2013, there will be no new E92s and E93s to be bought. That puts an increased demand on preowned. They will no doubt look at the data from preowned E46 sales at the end. Looking at this data along with residual data that will come out for July, we may even be able to extrapolate release times for the F30.

As for the E93 being that much higher, they may also know that there would be a longer period where M3 convertibles will not be available, so the E93 residuals were inflated to compensate. Note that at 48 and 60 months, when F30s are available, all numbers have come down to expected statistics based levels.

They also pegged the E90 somewhere in between because they have less information to give them resale values because they were told F30 sedans were likely not to be made.

Remember, BMWFS is doing this all on forecasts and predictions. They only want the most accurate numbers they can get, otherwise they lose a tremendous amount of money. Leasing looses money when forecasts are wrong.

June numbers:

2011 BMW M3 Sedan
24 Month – Residual 59% of MSRP – .00200 Base Rate
36 Month – Residual 52% of MSRP – .00200 Base Rate
48 Month – Residual 42% of MSRP – .00230 Base Rate
60 Month – Residual 34% of MSRP – .00230 Base Rate

2011 BMW M3 Coupe
24 Month – Residual 63% of MSRP – .00200 Base Rate
36 Month – Residual 57% of MSRP – .00200 Base Rate
48 Month – Residual 43% of MSRP – .00230 Base Rate
60 Month – Residual 35% of MSRP – .00230 Base Rate

2011 BMW M3 Convertible
24 Month – Residual 70% of MSRP – .00200 Base Rate
36 Month – Residual 64% of MSRP – .00200 Base Rate
48 Month – Residual 40% of MSRP – .00230 Base Rate
60 Month – Residual 32% of MSRP – .00230 Base Rate

April numbers:

2011 BMW M3 Sedan
24 Month – Residual 57% of MSRP – .00240 Base Rate
36 Month – Residual 49% of MSRP – .00240 Base Rate
48 Month – Residual 41% of MSRP – .00240 Base Rate
60 Month – Residual 34% of MSRP – .00240 Base Rate

2011 BMW M3 Coupe
24 Month – Residual 58% of MSRP – .00240 Base Rate
36 Month – Residual 50% of MSRP – .00240 Base Rate
48 Month – Residual 42% of MSRP – .00240 Base Rate
60 Month – Residual 35% of MSRP – .00240 Base Rate

2011 BMW M3 Convertible
24 Month – Residual 55% of MSRP – .00240 Base Rate
36 Month – Residual 47% of MSRP – .00240 Base Rate
48 Month – Residual 38% of MSRP – .00240 Base Rate
60 Month – Residual 31% of MSRP – .00240 Base Rate

shakan · 06-05-2010, 03:21 PM

Good analysis

BMW got burned by high residuals a couple of years ago, let's see if they learned their lesson this time.

richardbb85 · 06-05-2010, 03:40 PM

high or not, i am not complaining since i am getting a good deal on my e92

kaykay · 06-05-2010, 04:12 PM

Good analysis bonedoctor, residuals are just like a sports betting line, very speculative with lots of historical data to help make the case.

For new owners, now is an absolutely fantastic time to lease a 2011 M3.

J BONE · 06-05-2010, 06:45 PM

Quote:

Originally Posted by kaykay

For new owners, now is an absolutely fantastic time to lease a 2011 M3.

I just stopped by the dealer today, meet with a friend of mine and he told me the exact opposite. Told me to wait a few months and see what happens because the lease rates are not the best right now. Huh? BTW, test drove an '11 E92 and feel in love! Really starting to look now.

MSRP: $71,205. Told me for 15K miles/yr at 36 months, looking aroun $1050 give or take a few bucks. Seems high to me. Said that was $2000 above invoice

kaykay · 06-05-2010, 09:05 PM

Quote:

Originally Posted by J BONE

I just stopped by the dealer today, meet with a friend of mine and he told me the exact opposite. Told me to wait a few months and see what happens because the lease rates are not the best right now. Huh? BTW, test drove an '11 E92 and feel in love! Really starting to look now.

MSRP: $71,205. Told me for 15K miles/yr at 36 months, looking aroun $1050 give or take a few bucks. Seems high to me. Said that was $2000 above invoice

What??? Nonsense

Your friend must be smoking the good stuff

Residuals are extremely high, two months ago this car was $200-250 more per month.

I don't see how BMW can sustain a positive financial return if they increase residuals on these cars any further. That's why they didn't for June, simply lowered the MF on financing. The damn E93 has a residual of 70% !!!

$850-$1000 is the going rate for a brand new E90/E92/E93 leased in todays market. Great prices.

Some people are paying $1500 a month from Jan/Feb/March leases dude!

For people hoping the M3 will become a $750 or less / month car, this ain't gonna happen.

richardbb85 · 06-05-2010, 09:32 PM

Quote:

Originally Posted by J BONE

I just stopped by the dealer today, meet with a friend of mine and he told me the exact opposite. Told me to wait a few months and see what happens because the lease rates are not the best right now. Huh? BTW, test drove an '11 E92 and feel in love! Really starting to look now.

MSRP: $71,205. Told me for 15K miles/yr at 36 months, looking aroun $1050 give or take a few bucks. Seems high to me. Said that was $2000 above invoice

i highly doubt it will get much better, maybe a little bit but nothing to regret about later on.

J BONE · 06-05-2010, 09:53 PM

Huh? Exactly why I check this forum and have for three years! Thanks for the feedback guys. Seems like a good time to buy but he says no. It's funny because those sales guys think they know what is going on when in reality, they are clueless. I was telling him about the car more then he was telling me. He didn't even realize the changes on the 2011's. Amazing! Appreciate the feedback. Have some more homework to do

GOLFFRR · 06-05-2010, 10:20 PM

interesting. great write up. thanks for posting.

bdb · 06-05-2010, 10:55 PM

Quote:

Originally Posted by kaykay

What??? Nonsense

Your friend must be smoking the good stuff

For people hoping the M3 will become a $750 or less / month car, this ain't gonna happen.

What does ED do to the residuals, and bringing it down?

bonedoctor · 06-05-2010, 11:36 PM

Quote:

Originally Posted by bdb

What does ED do to the residuals, and bringing it down?

It does nothing. Residuals are off of US MSRP. So a ED lease is a fantastic deal.

Heck, the absolute best deal will come if you do a ED with a capitalized cost of 0-500 over ED invoice for an E93 or E92, high 36 month residual, .00200 base lease factor, current BMWFS customer (or employee even better), BMWCCA member, and living in a state other than California or New York!

Then those magical monthly payment numbers become a reality.

J BONE · 06-05-2010, 11:43 PM

So what is the best way to calculate the monthly payments? I've tried to use the lease calculator but doesn't work for me

bonedoctor · 06-05-2010, 11:53 PM

Quote:

Originally Posted by J BONE

So what is the best way to calculate the monthly payments? I've tried to use the lease calculator but doesn't work for me

Try the lease calculator on leaseguide.com.

Use your numbers this way:

For a $71575 MSRP E92 M3, and a capitalized cost of $66965 (which is invoice +$500 +$550 MACO&Training), and 36 month 15k/year residual of 57%, lease factor .00200.

I get a monthly of $942.39 + tax

On top of that, if you are a BMWFS customer, you get a discount on the lease factor. If you are a BMWCCA member, you get a $500 rebate.

J BONE · 06-05-2010, 11:56 PM

Quote:

Originally Posted by bonedoctor

Try the lease calculator on leaseguide.com.

Use your numbers this way:

For a $71575 MSRP E92 M3, and a capitalized cost of $66965 (which is invoice +$500 +$550 MACO&Training), and 36 month 15k/year residual of 57%, lease factor .00200.

I get a monthly of $942.39 + tax

On top of that, if you are a BMWFS customer, you get a discount on the lease factor. If you are a BMWCCA member, you get a $500 rebate.

Thank you! I couldn't figure out what the cap cost was. Appreciate your help on this! That is without any money down?

Edit: Do you know how much of a discount for being a BMWFS customer?

J BONE · 06-05-2010, 11:59 PM

Just built the car online and MSRP was $72,375. That was without the competition package. Is that package worth it? Going with MDC

duk · 06-06-2010, 12:18 AM

they want to move more cars that's why

bonedoctor · 06-06-2010, 12:57 AM

Quote:

Originally Posted by J BONE

Thank you! I couldn't figure out what the cap cost was. Appreciate your help on this! That is without any money down?

Edit: Do you know how much of a discount for being a BMWFS customer?

Yes, no money down. If you are a BMWFS customer, you also don't need to pay the security deposit (one month's payment, although you get it back at the end). If you don't pay the deposit, your money factor goes up by .00007.

You also have the option of giving additional security deposit, which will reduce the money factor by .00007 for each multiple of the deposit up to 7 times. This deposit is returned at the end of the lease and is also not a part of the capitalized cost ( it is separate). Because of this, even if the lease is terminated for some reason such as an accident that totals the car, the security deposit is returned fully.

See: http://www.m3post.com/forums/showthread.php?t=347321

Oh, and please don't pay $2000 above invoice. I've done that and worse in the past. Won't do it again.

KnightsCapone · 06-06-2010, 01:15 AM

How much of a discount do you get of current money factor if your a current BMWFS customer?

bonedoctor · 06-06-2010, 01:36 AM

Quote:

Originally Posted by gavinlibra1974

How much of a discount do you get of current money factor if your a current BMWFS customer?

Sorry, should have been more clear. There is not an actual discount on current money factor as a BMWFS customer.

As a customer, you don't get dinged .00007 if you decide not to pay a security deposit. You still get the option of paying up to 7x security deposits to decrease your money factor. So you are in essence kind of getting .00007 in discount.

J BONE · 06-06-2010, 07:02 AM

That is pretty interesting. When you configure your monthly payments, where on the lease calculator can you factor in your mileage? There is def a difference between 10K and 15K per year. Thanks again bonedoc for your help

chd2 · 06-06-2010, 07:47 AM

Residuals probably went up because of the troubles in Europe, and the future of our economy is unsure right now. They expect to sell less cars. This will bring the payments down some, and make it easier to move cars, with less profit though....

bonedoctor · 06-06-2010, 11:10 AM

Quote:

Originally Posted by chd2

Residuals probably went up because of the troubles in Europe, and the future of our economy is unsure right now. They expect to sell less cars. This will bring the payments down some, and make it easier to move cars, with less profit though....

My own opinion here, but I doubt the economy in Europe has anything to do with the residuals here. BMW sales have been pretty good all along in the US. And artificially higher residuals make no sense. It loses money for everyone. Only the money factor calculation changes when they want to influence sales. MF changes will change the payments.

06-05-2010, 01:08 PM	#1
bonedoctor Dreamer 2 Rep 77 Posts Drives: 2011 E90 M3 SG Join Date: Mar 2010 Location: Yorba Linda, California iTrader: (0)	Why are lease residuals so high right now? Possible answer. I' m going to take a crack a "guessing" the residuals question. Let me know what you think. The money factor rates are really going to be based on 2 things. 1 is the medium term interest rates which they cannot control. It is also based on available government backed interest rates (Example, Toyota financial services will always have better interest rates when the rest of the world has high interest rates because they always have a Bank of Japan backed 1% interest rate When U.S. fed discount rate was 5%, the Bank of Japan still gives out 1%). The second factor is the actual incentive to help sales of on cars. Thus, the base rate of an outgoing model year will be much lower than the new year. The residual is completely statistics based and forecast based. There is NO incentive for BMWFS to give incentives in residuals since they are eating any inaccurate residuals. The residuals are like a sports betting lines, they will be as precise of a predictor as possible given all available information at the time. At the time of the April residuals, the available information was mostly historic performance of preowned models at wholesale. They only knew that E93 would do poorly compared to E92 at preowned resale. Just before release of the May residuals, BMWFS was given new information on the timing of the F30 M3 release. Note that 48 month and 60 month residuals are pretty consistent accross the E9x line, with E92 1% higher than E90 and 3% higher than E93. That is what the statistics tell use as far as resale. Now with the new information on the F30, they have to "guess" that in June of 2012 to June of 2013, there will be no new E92s and E93s to be bought. That puts an increased demand on preowned. They will no doubt look at the data from preowned E46 sales at the end. Looking at this data along with residual data that will come out for July, we may even be able to extrapolate release times for the F30. As for the E93 being that much higher, they may also know that there would be a longer period where M3 convertibles will not be available, so the E93 residuals were inflated to compensate. Note that at 48 and 60 months, when F30s are available, all numbers have come down to expected statistics based levels. They also pegged the E90 somewhere in between because they have less information to give them resale values because they were told F30 sedans were likely not to be made. Remember, BMWFS is doing this all on forecasts and predictions. They only want the most accurate numbers they can get, otherwise they lose a tremendous amount of money. Leasing looses money when forecasts are wrong. June numbers: 2011 BMW M3 Sedan 24 Month – Residual 59% of MSRP – .00200 Base Rate 36 Month – Residual 52% of MSRP – .00200 Base Rate 48 Month – Residual 42% of MSRP – .00230 Base Rate 60 Month – Residual 34% of MSRP – .00230 Base Rate 2011 BMW M3 Coupe 24 Month – Residual 63% of MSRP – .00200 Base Rate 36 Month – Residual 57% of MSRP – .00200 Base Rate 48 Month – Residual 43% of MSRP – .00230 Base Rate 60 Month – Residual 35% of MSRP – .00230 Base Rate 2011 BMW M3 Convertible 24 Month – Residual 70% of MSRP – .00200 Base Rate 36 Month – Residual 64% of MSRP – .00200 Base Rate 48 Month – Residual 40% of MSRP – .00230 Base Rate 60 Month – Residual 32% of MSRP – .00230 Base Rate April numbers: 2011 BMW M3 Sedan 24 Month – Residual 57% of MSRP – .00240 Base Rate 36 Month – Residual 49% of MSRP – .00240 Base Rate 48 Month – Residual 41% of MSRP – .00240 Base Rate 60 Month – Residual 34% of MSRP – .00240 Base Rate 2011 BMW M3 Coupe 24 Month – Residual 58% of MSRP – .00240 Base Rate 36 Month – Residual 50% of MSRP – .00240 Base Rate 48 Month – Residual 42% of MSRP – .00240 Base Rate 60 Month – Residual 35% of MSRP – .00240 Base Rate 2011 BMW M3 Convertible 24 Month – Residual 55% of MSRP – .00240 Base Rate 36 Month – Residual 47% of MSRP – .00240 Base Rate 48 Month – Residual 38% of MSRP – .00240 Base Rate 60 Month – Residual 31% of MSRP – .00240 Base Rate
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06-05-2010, 03:21 PM	#2
shakan Private First Class 1 Rep 116 Posts Drives: 335 Join Date: Oct 2008 Location: SC iTrader: (0)	Good analysis BMW got burned by high residuals a couple of years ago, let's see if they learned their lesson this time.
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06-05-2010, 03:40 PM	#3
richardbb85 Lieutenant Colonel 104 Rep 1,653 Posts Drives: e92 m3 Join Date: Apr 2010 Location: annandale, va iTrader: (0)	high or not, i am not complaining since i am getting a good deal on my e92 __________________ 2011 E92 Space Grey/black + Tech + Premi + Heated Seats
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06-05-2010, 04:12 PM	#4
kaykay Lieutenant Colonel 90 Rep 1,769 Posts Drives: 2011 E92 M3 ZCP Join Date: Apr 2010 Location: SoCal iTrader: (0) Garage List 2011 E93 328i Conve ... [9.50] 2011 E92 M3 ZCP [8.66] 2008 550i Sport [10.00]	Good analysis bonedoctor, residuals are just like a sports betting line, very speculative with lots of historical data to help make the case. For new owners, now is an absolutely fantastic time to lease a 2011 M3. __________________ '12 CLS550 Palladium Silver - loaded '11 E92 M3 ZCP - SG/B-EXT/CF, M-DCT, loaded '11 E93 328i, BSM over Saddle Brown, sport, loaded '08 550i M-Sport, Carbon Black (Gone but not forgotten), '06 W211 E55 AMG (Gone, miss this animal),'01 E39 540i Sport
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06-05-2010, 09:53 PM	#8
J BONE The Boss 110 Rep 4,948 Posts Drives: %E2%80%9816 F15 X6 Join Date: Nov 2007 Location: Illinois iTrader: (12) Garage List 2008 E92 335xi [9.00]	Huh? Exactly why I check this forum and have for three years! Thanks for the feedback guys. Seems like a good time to buy but he says no. It's funny because those sales guys think they know what is going on when in reality, they are clueless. I was telling him about the car more then he was telling me. He didn't even realize the changes on the 2011's. Amazing! Appreciate the feedback. Have some more homework to do __________________ 2016 F16 X6 2015 F15 X5- Retired 2013 F10 535xi- Retired 2011 E92 M3- Retired 2011 E90 335- Retired 2008 E92 335- Retired
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06-05-2010, 10:20 PM	#9
GOLFFRR 10869 Rep 27,640 Posts Drives: GOLFFRR cart Join Date: Mar 2009 Location: we sell BMWs to "ALL" US states iTrader: (4)	interesting. great write up. thanks for posting.
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06-05-2010, 11:43 PM	#12
J BONE The Boss 110 Rep 4,948 Posts Drives: %E2%80%9816 F15 X6 Join Date: Nov 2007 Location: Illinois iTrader: (12) Garage List 2008 E92 335xi [9.00]	So what is the best way to calculate the monthly payments? I've tried to use the lease calculator but doesn't work for me __________________ 2016 F16 X6 2015 F15 X5- Retired 2013 F10 535xi- Retired 2011 E92 M3- Retired 2011 E90 335- Retired 2008 E92 335- Retired
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06-05-2010, 11:59 PM	#15
J BONE The Boss 110 Rep 4,948 Posts Drives: %E2%80%9816 F15 X6 Join Date: Nov 2007 Location: Illinois iTrader: (12) Garage List 2008 E92 335xi [9.00]	Just built the car online and MSRP was $72,375. That was without the competition package. Is that package worth it? Going with MDC __________________ 2016 F16 X6 2015 F15 X5- Retired 2013 F10 535xi- Retired 2011 E92 M3- Retired 2011 E90 335- Retired 2008 E92 335- Retired
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06-06-2010, 12:18 AM	#16
duk ///M 158 Rep 3,195 Posts Drives: 2011 AW/FR 6MT E92 Join Date: Jun 2007 Location: Irvine, CA iTrader: (0)	they want to move more cars that's why __________________ 2011.5 AW/FR E92 M3 6MT
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06-06-2010, 01:15 AM	#18
KnightsCapone A pure fighting machine with only one desire - Win 23 Rep 280 Posts Drives: 2014 F10 M5 & 2015 F15 X5 5.0L Join Date: Dec 2008 Location: SLC, Utah iTrader: (3)	How much of a discount do you get of current money factor if your a current BMWFS customer?
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06-06-2010, 07:02 AM	#20
J BONE The Boss 110 Rep 4,948 Posts Drives: %E2%80%9816 F15 X6 Join Date: Nov 2007 Location: Illinois iTrader: (12) Garage List 2008 E92 335xi [9.00]	That is pretty interesting. When you configure your monthly payments, where on the lease calculator can you factor in your mileage? There is def a difference between 10K and 15K per year. Thanks again bonedoc for your help __________________ 2016 F16 X6 2015 F15 X5- Retired 2013 F10 535xi- Retired 2011 E92 M3- Retired 2011 E90 335- Retired 2008 E92 335- Retired
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06-06-2010, 07:47 AM	#21
chd2 Driver 3 Rep 119 Posts Drives: 09 E92 M3 DCT Join Date: Jul 2009 Location: Seabrook, TX iTrader: (0)	Residuals probably went up because of the troubles in Europe, and the future of our economy is unsure right now. They expect to sell less cars. This will bring the payments down some, and make it easier to move cars, with less profit though....
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