[tomtom11]

I really do not understand this. I would think that a lease price per month would be determined by the MSRP of the car. I went to a Honda dealer and looked at an Accord and it was over $400 a month. I checked online and this is an accurate price. I then went to BMW and the price per month is significantly less than the Honda even though the car itself costs more money. I don't get it.

[majin ssj eric]

You're just paying for depreciation with a lease. The sticker may be $60k on a BMW but subtract the residual (which is usually 50-60% of MSRP) and you get the amount you are actually financing with a lease. Say the residual for the $60k car is 60% after 36 months, you would take 60% of $60k ($36000) and subtract it from negotiated sales price (let's say you got the dealer down to $57000) leaving $21000 which you would then divide by 36 making the payment $583 per month plus financing (which is simply the price of the car plus the residual then multiplied my the Money Factor which is just your interest rate divided by 2400). Sounds complex but it all works out in the end....

[tomtom11]

so is the 335i depreciating worse than the 135i? on BMW's website it says for a 335i 36 month well equipped is 369/month. and the 135i is 399/month even though the MSRP is 39,000 for the 135i and 45,000 for the 335i

[CedarZ4]

That conclusion would only hold true if both lease terms had the same down and money factor.

[tomtom11]

Originally Posted by CedarZ4

That conclusion would only hold true if both lease terms had the same down and money factor.

both 36 months 135i is 2,500 down 335i is 3,000 down. not that big a difference it seems

[majin ssj eric]

You can't look at those special lease offers and make any comparisons because you don't know the lease terms of each deal. BMW, like every other manufacturer, offers different terms for its different models. Some have high residuals which are usually that way because they want to get rid of them while others (hot sellers) may have low residuals and high MF's. They also offer rebates and other offers that get rolled into those advertised lease deals but the customer never sees those individual numbers.

[CedarZ4]

Based on what you said (which is all true) you can never determine if a car depreciates more or less based purely on lease terms. However, I like to argue differently. While there may be incentives rolled in and a lot of other factors, they're rolled in for a reason (which ultimately boils down to residual anyway). It's a pretty good way too get a rough comparison on which car depreciates more.

OP, what is the money factor for each? $500 may seem like it's not a big deal, but let's do some quick calculations. $500/36 months = $13.888, which is around $14 per month. $369 + $14 = $383, compared to the $399. Add in the interest for those $500 since you paid upfront, you are really closing the gap. I know that's not how it's technically done, but a good way to give you some quick numbers.

Also, another note. It would make sense the 335 depreciates more than the 135. Despite being a 35i, it's still your run of the mill 3 series. There are plenty of those. 135s are significantly more rare, which would increase it's residual... So, if we use the lease numbers alone, then yes 335 does depreciate more than the 135 (and it makes sense) but not actually by that much...

[tomtom11]

ok thank you guys very much.

[pootytang]

Originally Posted by CedarZ4

Also, another note. It would make sense the 335 depreciates more than the 135. Despite being a 35i, it's still your run of the mill 3 series. There are plenty of those. 135s are significantly more rare, which would increase it's residual... So, if we use the lease numbers alone, then yes 335 does depreciate more than the 135 (and it makes sense) but not actually by that much...

Isn't residual value dictated by BMWFS rather than the open market? So while your analysis based on sales volume holds some water, it's still probably a complex mathematical formula that takes into account how additional sales offset losses incurred by inflated residuals. I know for instance that other makes sometimes deflate the residual to the point where it is financially advantageous to buy out the lease and turn around to sell it, even with paying the sales tax.

I don't know the details, but I've read that aggressive leasing was a major player in financial collapse of the big 3 and now you can probably lease a 3 series for less than a Ford focus.

[CedarZ4]

Originally Posted by drob23

Isn't residual value dictated by BMWFS rather than the open market? So while your analysis based on sales volume holds some water, it's still probably a complex mathematical formula that takes into account how additional sales offset losses incurred by inflated residuals. I know for instance that other makes sometimes deflate the residual to the point where it is financially advantageous to buy out the lease and turn around to sell it, even with paying the sales tax.

I don't know the details, but I've read that aggressive leasing was a major player in financial collapse of the big 3 and now you can probably lease a 3 series for less than a Ford focus.

Yes, the residual value is set by BMWFS. However, they don't just say "we like the 1 series more and since we make less of it, we will give it a higher residual." From my understanding, it is based on previous model sales and recent consumer purchases. So ultimately, it does boil back down to the open market, since these cars will be dumped back into the same market at lease end.

I do agree that there are numerous number of complicated mathematical formulas used to determine residual, monthly payments, money factor, etc. so that BMW comes back with a profit. My way of explaining is grossly inaccurate, however, I think is a very layman's way that most (including myself) understand leasing as. And while it is not technically how it's all done, in terms of just understanding the basics of leasing, I think it serves its purpose well.

More importantly, I don't have any training finance and my explanations are just the ways I understand it as, so please do correct me if I'm wrong so I'm not going around giving away false information.