View Single Post
      03-04-2008, 06:55 PM   #16
linus
Lieutenant
linus's Avatar
Canada
40
Rep
525
Posts

Drives: 07 E90 335xi, 08 E92 335i
Join Date: Jun 2006
Location: Toronto

iTrader: (0)

Quote:
Originally Posted by Nixon View Post
I was trying more to imply better-than-lease numbers depreciation instead of appreciation, but your points are all well taken.

It is definitely not a sure thing. Buying upon expected future value is gambling. Just like in poker, sometimes you win, sometimes you lose. That is one of the benefits of leasing. There is no risk to the buyer, because the house (dealership) assumes the risk up front. When the lease is over, you don't have to care what the resale value is. You can just ignore all of that and hand them the keys and walk away. Of course the house isn't stupid, and it stacks the cards in it's favor.
The one thing to consider in Canada is the impact of the currency. Notwithstanding a horrendous lease rate such as we have for the 1er, leasing makes a huge amount of common sense in the current environment even if you want to own your vehicle.

With the Canadian dollar over par against the US, it is quite possible that BMW Canada will feel enough of a pinch over the next few years that it will have to actually lower MSRP. This will hurt resids and will provide those with a lease the ability to walk away from their vehicle and let BMW Financial Services take the hit on the difference between the resid and the actual market value of the vehicle.

In this context, I feel that I have, at a 3.9% lease rate for my E92 335i, a very inexpensive put option for my car that is likely 'in the money'. At the end of my lease, it is conceivable that BMW Financial Services will offer to allow me to buy out my vehicle at below the resid. Or, I can walk away and purchase/lease the same vehicle for $$$ less. Either way, I win.

Accordingly, I think there is very little likelihood that the 1er in Canada will beat the lease depreciation schedule compared to if it is bought outright. As much demand as there might be, consider that the US looks like it will be in a fairly deep recession for some time and Canada may follow, although not to the same extent. In this type of an environment, used vehicle prices will hit the $hitter, especially premium vehicles such as BMW.

So, buying is good if you're a cash buyer and want to drive the vehicle into the ground. Not leasing in this environment is dangerous... Dilemma for 1er buyers is between the horrid 7.75% lease rate but protection of value through fixed resids vs. undue downward pressure on used prices but benefit of self-funding. Tough spot BMW has put us in. If the rate were even 5.0%, I'd say it's a no brainer lease. To add insult to injury, the Bank of Canada just reduced its target overnight rate to 3.5% from 4.0% today and the prime lending rate at Canadian chartered banks has fallen to 5.25% from 5.75%. Prime will almost inevitably fall to 5.0% in April - the Bank of Canada has alluded to this in its statement today. Think about the spread BMW Canada is making on the 1er lease rate.
Appreciate 0