The Detroit automakers are trimming or eliminating their leasing programs due to plunging resale values and inflated residuals. In fact, in July leases accounted for only 19.7 percent of retail volume for the U.S. auto industry. However, leasing remains the way a lot of automakers use to put someone into an expensive car they really can't afford. And four of the most-commonly leased vehicles in the U.S. are BMWs (7 Series, Z4, 6 Series and X3). Bucking the current trend, sales and marketing VP at BMW Group Financial Services, Daniel DeChristopher, told BusinessWeek "we are still very committed to the leasing business." That's even though 70 percent of off-lease vehicles are returned to BMW Financial to be resold, usually as certified pre-owned cars. BMW is hedging its bet on leasing, though. They're also offering 0.9 percent APR loans during their "gotta unload these '08s before the '09s show up" sale. The top ten most commonly leased vehicles, and the percentage of them leased between January 1 and August 10 this year are:
BMW 7 Series – 85.3 percent
Saab 9-7x – 82.2 percent
Audi A6 – 74.1 percent
BMW Z4 – 70.7 percent
Mercedes E-class – 70 percent
Range Rover – 69.6 percent
BMW 6 Series – 68.6 percent
Audi A4/S4 – 68 percent
BMW X3 – 67.3 percent
Jaguar XJ – 65.8 percent
It all makes sense, except for the Saab 9-7x. There are good residuals on that? Did no one notice it’s a GMT360, and there are piles of them to be had for cheap on every Chevy/GMC lot in the US?
A lot of these look like company-benefit lease vehicles. I’d be willing to bet that a lot businessmen/women lease their 7-series, A6, E-class, 6-series, or XJ on the company dollar (pre-tax).
Just a thought.
The residuals on a 7-series must be horrid also, after a couple years those things are cheaper than same year 3-series – that must be an expensive lease.
I would say this list shows a lot about consumer impressions of the long term quality of Japanese cars versus European cars. People feel confident enough to actually buy an LS, G, etc.
The only car the really surprises me is the Z4. It’s not a typical business car and, as a likely third car, it’s generally the kind of thing that people hold onto for a while. The high lease rate may be the definitive proof that it is ugly.
Frank
“leasing remains the way a lot of automakers use to put someone into an expensive car they really can’t afford”
I have to questions that assertion just a bit. While certainly not for everybody, many rich people lease cars. It’s a depreciating asset. Do you want to own a depreciating asset in your driveway, or invest that capital into something returning a higher rate than your lease rate? Ask your accountant, that car parked in front of his office, it’s probably leased.
So those are what the poseurs are driving!
Though it looks inexpensive compared to the others, I’m not at all surprised at the Audi A4 being on the list. I know a few people here at work who drive them and definitely CANNOT afford them. I’m curious to know where the BMW 3 series falls in terms of percentage leased. It seems to be the poseurmobile of choice in the DC Metro area.
estaboga:
I have to questions that assertion just a bit. While certainly not for everybody, many rich people lease cars. It’s a depreciating asset. Do you want to own a depreciating asset in your driveway, or invest that capital into something returning a higher rate than your lease rate?
True, it’s a depreciating asset and if you’re the type of person who changes vehicles it makes sense to lease. However, and I have no hard statistics to back it up, I’d be willing to bet more people walk out of a dealership with a lease in hand because they could get lower payments on a more expensive vehicle that way than walk in with intent to lease because “it’s a depreciating asset.”
eastaboga : “I have to questions that assertion just a bit. While certainly not for everybody, many rich people lease cars. It’s a depreciating asset. Do you want to own a depreciating asset in your driveway, or invest that capital into something returning a higher rate than your lease rate? Ask your accountant, that car parked in front of his office, it’s probably leased”
While you are correct, remember that most people are not as finacially savvy as you describe.
The average car buyer cares about one thing: “howmuchamonth?”.
They aren’t investing the “savings” from their lower monthly payment into appreciating assets, they’re probably pissing it away on more shit they don’t need. Its the American way.
Many (most?) people driving around in a leased A6 wouldn’t be willing or able to pay the four digit monthly payment on a 36 month loan.
Here in South Florida, the stripped down no-option 3 series is the poseur lease of choice.
I think BMW is taking a bath on their leases recently, with writeoffs between $1-1.5 billion due to overstated residuals. It’s a dangerous game with the subsidized leases since so much of resuidual value is psychological–the car has high residuals because it is desirable; the car is desirable because it has high residuals–that it can be a house of cards. Actually, on the tax writeoff issue, if Congress wanted to help the domestics (or at least punish the foreigns) they should eliminate the writeoff for leased cars since so few of the domestics are now leased, it would be a good way to costlessly bump the domestics. . .
Frank,
True, I agree a lot of people are in leases who shouldn’t be, maybe these are the same folks in subprime mortgages
Keep in mind most lease arrangements restrict how many miles per year you can drive the vehicle without getting socked big bucks (10K miles seems the new lease standard limit.).
Then again, perhaps the very rich scoff at these sorts of charges?
Leasing a car is not a good financial move; at best it’s a slightly lesser evil than buying outright every 2-3 years. Changing cars this often is a bad idea regardless of how you’re financing it. If someone says they’re leasing to save money, they’re either lying or deluding themselves.
kurtamaxxguy
You can lease a vehicle for almost any mileage you want (I would guess 12,00 is more common now). If you go over on the mileage, you’ve over-depreciated the asset and will have the compensate the bank accordingly.
redrum
at best it’s a slightly lesser evil than buying outright every 2-3 years
Agreed (damn I’m agreeing too much), but if you do buy every 2-3 years, take good care of the vehicle, predict your mileage accurately, etc. then you have 50 large sitting someplace bearing interest while you make a $600 a month payment. Not for everybody certainly, but not inherently evil. I’m not advocating it for most people, but an informed buyer should be astute enough to make that decision themselves. The fact that many people do not do their homework is why all the tall buildings downtown have bank names on them.
“redrum :
Leasing a car is not a good financial move; at best it’s a slightly lesser evil than buying outright every 2-3 years. Changing cars this often is a bad idea regardless of how you’re financing it. If someone says they’re leasing to save money, they’re either lying or deluding themselves.”
Turning in a car every two or three years (or even more often) is only a bad financial move if you can’t afford it or if it doesn’t provide the requisite level of happiness. If driving something new and shiny floats your boat better than a trip to Europe or a spousal trade-in (talk about bad financial moves), more power to you.
That said, leasing can save money (compared to frequent purchases and resales), particularly if you’re in a position to write off the payments, as I suspect are a substantial portion of the lessees of the top ten.
But the real savings are in the massive subsidies companies like BMW, Audi and Lexus provide to their lease customers. Right now BMW is offering 7 series leases to existing customers at a .00115 money factor (that’s 2.76%) and with 54% residuals after 36 mos. For 15000 miles/year.
If you compare that to market interest rates (6% and up) and residuals (32-37%) on leasecompare.com, we’re talking about a more than $20K discount off MSRP.
Obviously, those kinds of Dodge Ram scale discounts aren’t offered on every model, but with rare exceptions (1 series, M3), very substantial discounts are available to lessees across the board.
Subsidized (or subvented if you prefer the industry euphemism) leases have so far worked very well as a way of putting serious cash on the hood without denting brand equity (aka the Schlitz factor). But as the D3 have discovered,
silly monthly payments based on fantasy residuals are just another form of bubble based on the assumption of ever increasing demand. When the bubble bursts, the “slightly lesser evil” is for the evil lessor.
That may explain why new model BMWs pop up around LA like weeds every time a new one comes out.
kurtamaxxguy: They’re not rich, they just have a good credit score.
Eastaboga,
Sorry, but the math doesn’t work.
The idea that you should lease a car becuase you “don’t want to own a depreciating asset” is a line a lot of BMW dealers use, but anyone who thinks it through will realize it is bogus.
If you own a car for 3 years or lease it for 3 years, the depreciation is the same. It might even be higher on a leased car, because potential buyers may fear you’ve treated it like a ‘rental’.
The only way a leaser comes out ahead is if the seller has underestimated the car’s depreciation, the problem that has led the domestics to stop or severely curtail leasing.
The buyer comes out ahead because after 3 years, they can elect to keep the vehicle, thereby having lower depreciation than someone gettting back on the 3 year leasing treadmill.
As is repeatedly pointed out, lines like “you don’t want to own a depreciating asset” are used as an excuse by people to get more car than they can afford. If you want to be financially responsible, and you can’t afford the payments on a 5-year purchase, you probably need to look for a used car.
There are worse indignities in life.
blautens : In regards to the Saab 9-7x it’s percentage is so high because of the 10 that were actually purchased 8 were leased.
GM is seriously giving money away on those anyway. I was just looking at a 9-3 convertible and happened to notice that you get employee pricing plus an $8000 rebate right now on the 9-7x.
Seriously, leasing is a bad financial move. If you can’t afford the payment to own it, then don’t buy it. Two of the people I work with are always leasing, even though they swear they love this one and when the lease is up they will buy it. Problem is they never save any money for a down payment so they lease again.
I know a few years ago the stat in Canada was that 90% of BMWs were leased. Without leasing BMW Canada could turn off the lights and go home.
Looking at people driving new BMWs it seems to me that it doesn’t make financial sense for many of them. But that’s not the same as saying they can’t afford it. Obviously they can since they must be making the payments if they are driving these cars. So who am I to judge somebody else’s choices in life?
Then there are situations where leasing makes perfect sense. In Canada it makes no sense to buy cars for businesses only lease them.
BMWs are perfect lease vehicles. the maintenance is free for the lease period and BMW typically has very aggressive money factors and good residuals on the 3s and 5s. as a business owner i have the business lease the car, so as mentioned above, the lease is paid using pretax dollars and represents a business expense. i don’t think leasing is a good choice if you have to use after tax dollars that are not deductible.
At first glance I thought I saw “Ranger” as in Ford Ranger!!!
Oh! Range Rover…
Makes better sense…
I’m wondering how corporate leases work into that list. My brother drives a company car that is leased by his employer through a 3rd party that does bulk purchases through the manufacturers. While he currently drives a Caravan his next promotion will put him into a Cadillac or Lincoln. Higher executives get choices of Lexus, Mercedes, etc. My hunch is the 7 series is a big time corporate lease vehicle where teh Z4 is more leased by private individuals.
The United States Government wants me to lease my vehicles.
They allow me to write off my lease payments as depreciation (business expense, I’m a lawyer, I use my car to see clients) – and thus deduct my lease payment from my income tax.
It gets better.
I put 0% on my leases, meaning I finance the sales tax.
Meaning when I write off my payments, I get to write off my sales tax – from my income tax.
USA
USA
USA!