Quote:
Originally Posted by Maitre_Absolut
What it means is that the market views a 50k BMW as being a better value than a 50k audi in 3/4 years. Its not a "manufacturer choice". Audi would love to be in that situation. BMW residuals arent artificially inflated vs audi, they just reflect expected market value. You cant get around it by inflating your orignal msrp, that makes your problem worse.
Look at Porsche, their cars hold great value so they are able to charge high interest % and still make it "attractive" though their residuals are still lower than market values come lease return time. But they dont want to flood the market with great leases which in turn then push the market values down.
My point is its not a zero sum game. A manufacturer wins when the market perceives their cars as retaining good value.
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I hear what you’re saying but the residual value is completely set by the manufacturer. The market will dictate what an actual value will be but statistics can tell what a true expected value is likely to be. If a manufacturer (like Audi) chooses to set their residual value close to that expected market value then there is a higher chance that they will minimize losses from having to fund the difference between the actual market value and the predicted value (aka residual value).
BMW subsidizes/incentivizes the residual value knowing that it will make the turn in differential expectedly worse but they factor that into the MSRP on the cars to help offset that expected expense.
I agree that the market will determine the true value, but the manufacturers set a residual value based on what they expect will happen and then any incentives to balance that with lower monthly payments to help move cars.
Either way, I think we’re saying the same thing. I feel like we hijacked this thread enough
Cheers!