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BMW To Wean Customers From Leasing In Favor Of Low Interest Financing

  BMW the world's largest maker of luxury vehicles, is increasing incentives to purchase cars as a way to reduce reliance on leases that make up 60 percent of its U.S. sales.

The automaker several weeks ago began offering buyers 0.9 percent loans of as long as five years, said Jan Ehlen, a spokesman for its U.S. unit in Woodcliff Lake, New Jersey. BMW also raised its lease prices an average of 3 percent on May 1.

``We are offering a broader variety of purchasing options,'' Ehlen said today in an interview. ``One of the intentions is to have a more balanced relation between financing and leasing,'' he said, adding that Munich-based BMW doesn't have a target figure.
 

Percentage Of New Car Leases
   
BMW 60%
Mercedes Benz 55%
Audi 50%
Lexus 43%
Cadillac

General Motors
Toyota		 42%

15%
15%


 

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BMW To Wean Customers From Leasing In Favor Of Low Interest Financing



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Maverick2020Maverick2020 - 8/4/2008 11:37:29 AM
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I'm not sure how BMW is going to pull this off. Subsidized leases are integral to their strategy and they have a huge owner base who has become accustomed to that.

It is really a knee-jerk reaction to what is going on with the economy. Instead of riding out what is some pretty harsh times, it seems like BMW is over-reacting to it. That is almost always a failure and then in 2009-2010 they are going to have to over-correct and get it back into alignment.

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silver1silver1 - 8/4/2008 12:50:34 PM
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Your right, but it doesn't help that their cars don't hold their value, so when that happens and customers bring their cars back in, BMW pays all that negative equity.

Lexus and Acura on the other hand, has nothing to worry about on the Lease end, and Toyota stated and announce that they do not plan on changing their strategy.

Only solution I see is, make better BMW's with less problems and customer wouldn't be afraid to buy a used BMW, and that will make the value and residual value go up, because therefore salesman can sell them as soon as they come in.

According to KBB, the TOP 3 Cars that Hold their Value is:
1. Lexus IS 250
2. Volvo V70
3. Acura TL


BMW4me4everBMW4me4ever - 8/4/2008 2:21:42 PMView My AgentSpace
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Silver1 - who are you crappin? I just looked up the Top 10 resale value on www.kbb.com for 2007 and the BMW is above the lexus.

1. Acura TSX
2. Honda Civic
3. Mini Cooper
4. Scion TC
5. Volkswagen GTI
6. BMW 5-series
7. Lexus IS
8. Pontiac Solstice
9. Toyota Prius
10. Volkswagen Eos


Maverick2020Maverick2020 - 8/4/2008 2:26:29 PM
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The definitive source on residual values is Automotive Lease Guide (ALG). All the automakers and captive finance arms use them to set residual values.

2007 Luxury Brand Residual Value Rankings

1. Infiniti
2. Lexus
3. BMW
4. Acura
5. Porsche
6. Mercedes-Benz
7. Land Rover
8. Audi


BMW4me4everBMW4me4ever - 8/4/2008 2:32:17 PMView My AgentSpace
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how is lexus above BMW, since if you click on the individual segments for Luxury BMW has 2 of the 6 spots.

Near Luxury - Infinti G35/G37
Luxury - BMW 5-series
Luxury Sports - BMW 6-series
Luxury SUV - Lexus GX470
Luxury CUV - Range Rover .

This is for 2008


silver1silver1 - 8/4/2008 2:58:49 PM
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What I quoted is the total cost of the vehicle over the course for 5-Year Ownerscost


silver1silver1 - 8/4/2008 3:00:03 PM
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http://www.forbes.com/2007/12/10/cars-luxury-value-forbeslife-cx_bh_1210cars_slide_2.html?thisSpeed=15000


BMW4me4everBMW4me4ever - 8/4/2008 3:23:10 PMView My AgentSpace
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silver - in that list is the GMC Yukon, Buick Enclave, Lincoln MKX. huh? how are those luxury cars with the fake wood and immitation leather . lol .. nice list ... Automotive Lease Guide is much more accurate.

ALG - 2008 Infiniti
2007 Lexus
2006 BMW
2005 BMW
2004 BMW


silver1silver1 - 8/4/2008 3:42:55 PM
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And that List still puts Lexus on TOP of BMW also....


huu76huu76 - 8/4/2008 12:45:13 PM
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BMW's in for a shock when they realize their customer base can barely afford leases, let alone financing.

Will help a little though, atleast their cars won't lose their value because of a glut in returned cars, but they still won't be making any money financing.

Didn't the big 2 1/2 get trapped by making their customers accustomed to low financing?

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Agent009Agent009 - 8/4/2008 1:00:15 PMView My AgentSpace
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Chrysler expects a big drop due to the discontinuation of leases, so your theory will be put to the test.


Agent009Agent009 - 8/4/2008 2:43:17 PMView My AgentSpace
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Staar- No sure if I can say I agree with you on that.

The same analogy can be used to say Lexus owners are testosterone deficient due to the lack character of the car they buy.


enthusiastx11enthusiastx11 - 8/5/2008 11:33:53 AM
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huu.

so we can barely afford leases? please quote your sources. fyi--average income of bmw drivers is considerably higher than lexus.

i drive a bmw (as do many of my friends) and i can assure you we can afford these cars. leasing is a smart business decision for tax reasons--plus i like a new car every 2 to 3 years anyway.

so just stop talking about things you know little about.


0to600to60 - 8/4/2008 12:55:47 PM
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This paints somewhat of a picture of who really purchases Luxury cars because they can actually afford it and who the posers are. Also may suggest who plan to keep their cars for the long run allowing some theories to be published as to why. Additionally, interesting that Lexus did have high sales numbers yet the majority of their cars were purchases. And their rates sucked in the past yet they still turned over high volumes in the US. Interesting.

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Agent009Agent009 - 8/4/2008 12:57:58 PMView My AgentSpace
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The better picture probably which models are being leased. I know many a poser is driving a BMW 3 series.

But I suspect it is similar across the board.


0to600to60 - 8/4/2008 3:27:01 PM
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009, that would be interesting facts for you to research, lol as if I sign your paycheck


Agent009Agent009 - 8/4/2008 4:28:36 PMView My AgentSpace
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0-60- I take cash...


enthusiastx11enthusiastx11 - 8/5/2008 11:35:59 AM
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i'd rather be called a poseur (i.e. bmw driver by your definition) than have one foot in the grave (a 70year old lexus driver).


DeutschlandDeutschland - 8/4/2008 1:01:52 PM
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Lexus fans will never learn, BMW and Mercedes are the top two companies overall in terms of holding their value...Looking at data for an individual model is meaningless. F

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_43LE_43LE - 8/4/2008 2:19:49 PM
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And where did you get you data from?


sectorsector - 8/4/2008 1:22:30 PM
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BMW is doomed! who wants to keep a BMW past 3-4yrs! you better have your wallet open, get ready to pay $40 for windshield wipers and $200 for oil changes :)

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silver1silver1 - 8/4/2008 1:56:51 PM
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LOL


bimmerbimmer - 8/4/2008 2:07:34 PMView My AgentSpace
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@auto001

You don't even know what are you talking about... You're just writing stuff as long as it is something to put German manufacturers to a corner. Why ?!!

And just so you know from now on (at least for a 5 series BMW, in Canada) the windshield wipers are $115.00 changed at each inspection I and II and an oil change is around $100.00


BigShow50BigShow50 - 8/4/2008 1:57:26 PM
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Deutschland....time to pull your head out of your ass...we are talking real market numbers in North America, not your artificial opinions. The high residual BMW has set was not based on truth, simply they based it on affordability....and they have taken a gamble that is now biting them in the ass big time! For every BMW they sell, they actually loose money depending on its' model, at least $500-$600 and up per model! With the high euro dollar and high cost of materials, etc. They have real no viable solution in making a cost effective production process. So the offset on residuals they set are simply "not real" in hopes that a poor economy does not hit the North American shores(too late for that) and give away these maintanence free programs(which they are loosing about $700-$850 millions a year and now are planning to kick that program to the curb in the next year or so) just to win the hearts of our happy Americans and whoever on this planet.(free maintenance = compounding BMW's problems) Don't get me wrong I love the BMWS' too and have been a happy owner of a few model that I have learn to appreciate. And I agree they are one the best driving machines. But on the actual business aspect of things, down the pipeline they cannot find a solution to their problems with the business practice they create and face day in and day out, and announcing the other day of a 44% percent drop in profit?!?!?!...wow!!!...all I can say....The "BIGGER" they are the harder the "FALL or FAIL" for the matter.

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bimmerbimmer - 8/4/2008 2:14:53 PMView My AgentSpace
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You are kidding...right !?? After reading your post, one would understand that BMW is an huge money pit.

If you are so well informed, can you tell us if BMW ever had a profit and which were the time periods ?

I have to ask you since you seam to know even how much BMW looses per car ("depending on its' model")...


BMW4me4everBMW4me4ever - 8/4/2008 2:27:36 PMView My AgentSpace
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Same can be said of Toyota. Toyota is down about 18% year to date, equating to just over 1 billion in losses.




Agent009Agent009 - 8/4/2008 3:06:38 PMView My AgentSpace
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1 billion in lost sales...not lost profit though



nybimmernybimmer - 8/4/2008 5:16:37 PM
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IMHO -
BMW has been basically propping up their lease residuals sicne the late 1990's - with the CPO program, "free" (yeah right) maintenance, offering huge warranties on cars with issues (6 yrs 100K miles on early 7-series, etc)and it is now payback time.

BMW resale holds up until the magic 27 to 36 month lease turnaround but then it falls off the cliff. There are loads of 5-7 yr old V-8 and V-12 Bimmers you can buy for about $8,000. The quality does not hold up much past the lease.

When a company must loan customers money to buy their products, a certain number of those will boomerang back to them - just like sub-prime borrowers lost their houses. This is a sorry state indeed.

I own a BMW and I like BMW's, but it saddens me that they will be running their business into the ground over the next few years because their customers can't really afford to buy their products and have been propped up for so long.

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Bighead255Bighead255 - 8/5/2008 2:00:48 PM
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3% increase on a BMW cmon seriously thats a extra $30 on a $1000 a month lease if you cant afford that maybe its time to get back on the grind. Humble yourself drive a nissan for a couple more years and get finances and residual income to the point where you want it to be

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BMW995BMW995 - 8/6/2008 11:56:19 AM
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"i'd rather be called a poseur (i.e. bmw driver by your definition) than have one foot in the grave (a 70year old lexus driver)."

The above comment by Enthusiastx11 is one of the greatest putdowns in the history of AutoSpies.




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MBZFANMBZFAN - 8/8/2008 8:04:01 PM
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Obviously BMW wants to get the Bimmers off THEIR "books" and put on the buyer's "books", but even at 0.0% it doesn't make sense. The tax advantage/savings for most business people far outweighs even free financing. Does BMW fail to realize that automobile acquisitions are "capped" unlike leases (as expenses) are not?

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