Topic: Is this a good lease takeover?

[2JDM]

A great lease deal if you want to lease only.

Have you considered a 2021 Crosstrek? You'll be able to get it with the 2.5L for more power. High resale value, practical, class leading AWD, easy to use infotainment, android auto /apple car play, eyesight safety features. Also a Subaru could be "cool" without being pretentious (if that matters). A great first car for your daughter IMO.

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[OliverD]

Isn’t the residual a fairly arbitrary number that BMW is free to make up?

If they want to juice sales, just up the residual to lower the monthly payments. Maybe that’s what BMW did back in 2018.

Maybe they got burned having to take back too many vehicles with inflated residuals, so aren’t playing the same game today?

The whole residual game is interesting. Back in the 2000s it bit people in the ass. Volvo would set a high residual to keep payments low. Ford credit actually went out and bought residual insurance in the case that the residuals were over estimated. This residual insurance was packaged up and sold to retail mom & pop investors as some sort of income instrument. Very similar to the CDO debacle that brought down wall street (temporarily lol) in 2008.

Anyhow I leased my Volvo with a balloon payment lease. When the lease period was up the residual was 7-8k too high. However I was not allowed to buy it at a lower residual. It had to be traded in and appraised by Ford Credit. It was then sold to the dealer who sold it back to me as a CPO. I never took my plates off  . The difference between the estimated residual and the actual trade in value was then claimed on insurance. My residual on paper was something like $37k. I bought it back for $29 IIRC.

Interesting, I didn't know there was that much negotiating room on the residual at turn in time.
Railton

There isn't. That was an outlier and ~20 years ago.

I believe that these days some leasing companies don't even allow you to purchase a vehicle after you turn it in, to avoid exactly this scenario.

The step in between is the dealer negotiated buying the vehicle from the lease company as opposed to shipping the car to a centralized wholesale auction. I believe this still happens to this day if the residuals are out to lunch.

So ownership went: Lease Company (me leasing) > Dealer > Me.

This is what some leasing companies specifically forbid now.

[ktm525]

Isn’t the residual a fairly arbitrary number that BMW is free to make up?

If they want to juice sales, just up the residual to lower the monthly payments. Maybe that’s what BMW did back in 2018.

Maybe they got burned having to take back too many vehicles with inflated residuals, so aren’t playing the same game today?

The whole residual game is interesting. Back in the 2000s it bit people in the ass. Volvo would set a high residual to keep payments low. Ford credit actually went out and bought residual insurance in the case that the residuals were over estimated. This residual insurance was packaged up and sold to retail mom & pop investors as some sort of income instrument. Very similar to the CDO debacle that brought down wall street (temporarily lol) in 2008.

Anyhow I leased my Volvo with a balloon payment lease. When the lease period was up the residual was 7-8k too high. However I was not allowed to buy it at a lower residual. It had to be traded in and appraised by Ford Credit. It was then sold to the dealer who sold it back to me as a CPO. I never took my plates off  . The difference between the estimated residual and the actual trade in value was then claimed on insurance. My residual on paper was something like $37k. I bought it back for $29 IIRC.

Interesting, I didn't know there was that much negotiating room on the residual at turn in time.
Railton

There isn't. That was an outlier and ~20 years ago.

I believe that these days some leasing companies don't even allow you to purchase a vehicle after you turn it in, to avoid exactly this scenario.

The step in between is the dealer negotiated buying the vehicle from the lease company as opposed to shipping the car to a centralized wholesale auction. I believe this still happens to this day if the residuals are out to lunch.

So ownership went: Lease Company (me leasing) > Dealer > Me.

This is what some leasing companies specifically forbid now.

So leasing company would rather ship car to car to auction and ship to the new buyer? Seems wasteful but yeah I could see a sharp dealer being able to pry some good deals out of the old system. I guess it died out after the 2008 crash. Leasing is slowly coming back again though.

[OliverD]

Isn’t the residual a fairly arbitrary number that BMW is free to make up?

If they want to juice sales, just up the residual to lower the monthly payments. Maybe that’s what BMW did back in 2018.

Maybe they got burned having to take back too many vehicles with inflated residuals, so aren’t playing the same game today?

The whole residual game is interesting. Back in the 2000s it bit people in the ass. Volvo would set a high residual to keep payments low. Ford credit actually went out and bought residual insurance in the case that the residuals were over estimated. This residual insurance was packaged up and sold to retail mom & pop investors as some sort of income instrument. Very similar to the CDO debacle that brought down wall street (temporarily lol) in 2008.

Anyhow I leased my Volvo with a balloon payment lease. When the lease period was up the residual was 7-8k too high. However I was not allowed to buy it at a lower residual. It had to be traded in and appraised by Ford Credit. It was then sold to the dealer who sold it back to me as a CPO. I never took my plates off  . The difference between the estimated residual and the actual trade in value was then claimed on insurance. My residual on paper was something like $37k. I bought it back for $29 IIRC.

Interesting, I didn't know there was that much negotiating room on the residual at turn in time.
Railton

There isn't. That was an outlier and ~20 years ago.

I believe that these days some leasing companies don't even allow you to purchase a vehicle after you turn it in, to avoid exactly this scenario.

The step in between is the dealer negotiated buying the vehicle from the lease company as opposed to shipping the car to a centralized wholesale auction. I believe this still happens to this day if the residuals are out to lunch.

So ownership went: Lease Company (me leasing) > Dealer > Me.

This is what some leasing companies specifically forbid now.

So leasing company would rather ship car to car to auction and ship to the new buyer? Seems wasteful but yeah I could see a sharp dealer being able to pry some good deals out of the old system. I guess it died out after the 2008 crash. Leasing is slowly coming back again though.

I think the dealer can still buy the car from the leasing company, they just can't sell it back to the original leasee.

[ktm525]

Isn’t the residual a fairly arbitrary number that BMW is free to make up?

If they want to juice sales, just up the residual to lower the monthly payments. Maybe that’s what BMW did back in 2018.

Maybe they got burned having to take back too many vehicles with inflated residuals, so aren’t playing the same game today?

The whole residual game is interesting. Back in the 2000s it bit people in the ass. Volvo would set a high residual to keep payments low. Ford credit actually went out and bought residual insurance in the case that the residuals were over estimated. This residual insurance was packaged up and sold to retail mom & pop investors as some sort of income instrument. Very similar to the CDO debacle that brought down wall street (temporarily lol) in 2008.

Anyhow I leased my Volvo with a balloon payment lease. When the lease period was up the residual was 7-8k too high. However I was not allowed to buy it at a lower residual. It had to be traded in and appraised by Ford Credit. It was then sold to the dealer who sold it back to me as a CPO. I never took my plates off  . The difference between the estimated residual and the actual trade in value was then claimed on insurance. My residual on paper was something like $37k. I bought it back for $29 IIRC.

Interesting, I didn't know there was that much negotiating room on the residual at turn in time.
Railton

There isn't. That was an outlier and ~20 years ago.

I believe that these days some leasing companies don't even allow you to purchase a vehicle after you turn it in, to avoid exactly this scenario.

The step in between is the dealer negotiated buying the vehicle from the lease company as opposed to shipping the car to a centralized wholesale auction. I believe this still happens to this day if the residuals are out to lunch.

So ownership went: Lease Company (me leasing) > Dealer > Me.

This is what some leasing companies specifically forbid now.

So leasing company would rather ship car to car to auction and ship to the new buyer? Seems wasteful but yeah I could see a sharp dealer being able to pry some good deals out of the old system. I guess it died out after the 2008 crash. Leasing is slowly coming back again though.

I think the dealer can still buy the car from the leasing company, they just can't sell it back to the original leasee.

So they have to sell to my fence who then sells it to me. 

[OliverD]

Isn’t the residual a fairly arbitrary number that BMW is free to make up?

If they want to juice sales, just up the residual to lower the monthly payments. Maybe that’s what BMW did back in 2018.

Maybe they got burned having to take back too many vehicles with inflated residuals, so aren’t playing the same game today?

The whole residual game is interesting. Back in the 2000s it bit people in the ass. Volvo would set a high residual to keep payments low. Ford credit actually went out and bought residual insurance in the case that the residuals were over estimated. This residual insurance was packaged up and sold to retail mom & pop investors as some sort of income instrument. Very similar to the CDO debacle that brought down wall street (temporarily lol) in 2008.

Anyhow I leased my Volvo with a balloon payment lease. When the lease period was up the residual was 7-8k too high. However I was not allowed to buy it at a lower residual. It had to be traded in and appraised by Ford Credit. It was then sold to the dealer who sold it back to me as a CPO. I never took my plates off  . The difference between the estimated residual and the actual trade in value was then claimed on insurance. My residual on paper was something like $37k. I bought it back for $29 IIRC.

Interesting, I didn't know there was that much negotiating room on the residual at turn in time.
Railton

There isn't. That was an outlier and ~20 years ago.

I believe that these days some leasing companies don't even allow you to purchase a vehicle after you turn it in, to avoid exactly this scenario.

The step in between is the dealer negotiated buying the vehicle from the lease company as opposed to shipping the car to a centralized wholesale auction. I believe this still happens to this day if the residuals are out to lunch.

So ownership went: Lease Company (me leasing) > Dealer > Me.

This is what some leasing companies specifically forbid now.

So leasing company would rather ship car to car to auction and ship to the new buyer? Seems wasteful but yeah I could see a sharp dealer being able to pry some good deals out of the old system. I guess it died out after the 2008 crash. Leasing is slowly coming back again though.

I think the dealer can still buy the car from the leasing company, they just can't sell it back to the original leasee.

So they have to sell to my fence who then sells it to me. 

Pretty much. I wonder what the tax implications of that are though.

[ktm525]

No taxes on private sales in AB...For now.

[OliverD]

No taxes on private sales in AB...For now.

Right, that makes it easy! I think in NB if you buy a car privately and then sell it within 10-14 days you get the sales tax back.