Quote:
Originally Posted by David70
Setting residuals artificially higher is just saying the car will be worth more at the end of the lease than you know it actually will be. At BMW they figure out a car will be worth $25k at the end of the lease (example) and decide to put on the lease with a $30k Residual? Not sure when they take the hit but it is still a hit. Guessing Audi's now look realistic and not inflated like you said BMW's are? With the lease calculation they can change any of the variables they want but all of them come with negatives.
Showing volume growth may or may not mean you are doing things well as you can always increase volume through pricing or cheap leases. GM had huge volume right before they ran out of money in 2007/8.
There is no pricing strategy a car dealer can come up with that makes everyone happy. People don't want an ok deal, they want a great deal. Selling everything at MSRP wouldn't make most happy, same with "X% off MSRP" If you want an ok deal with no hassles go through a buying service (Costco, Truecar, others), few do it because as bad as the current system is we know if we deal with it correctly we are likely to get a better deal. Then, if you have a trade, all of this falls apart as you have to figure in this variable also.
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Agreed.
On your point about residuals, Audi sets them very realistically so the lease payments are higher but they don’t get stuck with upside down turn ins that they have to offload for a loss.
BMW artificially inflates their residuals so the lease payments are less realistic (aka lower) and it actually encourages leasing a new vehicle at lease end since the value will almost always be upside down.
Trust me, the price of the car has revenue built in for those end of lease ‘losses’. That’s what I meant when I said everyone pays for that, even if they are financing or paying cash.
It’s all a shell game - you just have to be aware of which shells have which costs and how they fit into your goals.