Quote:
Originally Posted by hockey21
https://g80.bimmerpost.com/forums/sh...7#post26950207
read this post. it is what it is, but to reiterate my point ( i admit i did a half assed job of explaining). the first year of " use" on a lease is going to cost more than the final 2... Yes, i know the payments are not actually more, but you will be upside down on 95% of luxury car leases after the first year.
Perhaps the M5 holds better being more of an enthusiast car and holds well, but nobody in their right mind should take over a lease over without an incentive, if the residual + the payments is more than the car is worth unless somebody is dying for a term use of the car, but to take over for 2+ years, in my opinion you should get an incentive
also this one:
https://f90.bimmerpost.com/forums/sh....php?t=1779341
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OP: you're doing a terrible job of explaining it, but you're 100% correct. Bottom line is this, assuming the original lease holder did not put any money down, then the lease price, while fixed for the duration of the lease period, is paying a fixed amount for a car that is continually depreciating (and the depreciation rate is non-linear, but more on that later.) In the first month you get a brand new car for $1000, in the second month you get a 1 month old car for 1000, in the third month you're getting a 2 month old car for 1000... in the 36th month you're getting a 3 year old used car for 1000 a month. If a $1000 is a fair payment, and by that I mean a payment that anyone who negotiated well can obtain (as opposed to a price that is based on a special incentive that is no longer available) then anyone can go in and get a brand new car for the same price. Explain why anyone would want to swap the lease and pay 1000 a month for a 2 year old used car when they can get the same payment for a new car???
Now back to depreciation. It's non-linear. Forget the interest in a lease for a moment. You pay 1000 a month and $36k over 3 years based on the assumption that the cars value will depreciate by 36k, but it doesn't depreciate by $1k a month. It might depreciate $14k in the first year, $12k in the second year and $10k in the third year. Obviously leases aren't structured with decreasing payments so you pay $1k a month, but the depreciation in year 2 and 3 in my example is $22k and should warrant a $916 a month payment. The difference should be shouldered by the original leaseholder through an incentive.
Bottom line is if no incentive is offered on a car that was purchased without a significant down payment and without an incentive that is no longer available, no one is going to want to pay a new car price for a used car.