Bada Bing

This is not meant to be a rant at all. I am trying to understand how people who choose to lease their A4/S4 cars justify paying significantly more in monthly payment comapared to competing models from BMW, Infiniti, MB and others. I fully appreciate that Audi cars have superior design and craftsmanship and if I were in the market to finance a car, it would be a no-brainer to go with the better car (not necessarily the best performer as far as the A4 goes though), but Audi is in the luxury car business and a significant percentage of luxury car sales are from leasing.

I hear radio Audi commercials from time to time where they cite ALG lease residuals from centrian models (Q5 or Q7, I forget) as the highest in their class. Yet when you look at captive lease residuals, Audi has by far the lowest residuals across the board and the higher you up in trim levels, the worse things get. I realize that BMW inflates their lease residuals to move cars, but they don't penalize lessees for getting cars the way they want in termsl of trim lines and options. As a case in point, my older brother leased a 6MT 2013 328i Sport Line back in July with MSRP of $46K for $460/mo including tax with zero drive-off on a 3 yr/12K mile per year lease. I know that when they set a 64% lease residual on this car, the car will not be worth that much in 3 years with 36K miles on the odometer, but as a lessee my brother could care less if BMW loses money on the back end. I think at the time he leased his car, I ran some numbers on a comparable A4 Premium Plus 6MT quatro for him and it was not even close. The A4 lease residual was 10 or 11 points lower and the payments would have been some $100-150/mo higher.

Now I have followed some threads on this forum and the B8 S4 forum where people say that when you lease an Audi, you build up positive equity and should sell the car at the end of the lease to recover the extra money you have paid monthly. Doesn't this defeat one of the main advantages of leasing which is having the convenience of turning the car in and having the option to walk away? I'd like to know more about exactly how people do this, like do you sell the car to the Audi dealer for something higher than the residual or do do you have to line up a private party buyer; how do you avoid paying sales tax if you want to buy the car at lease end and turn around to sell it at higher value to recover your equity, etc.

I'm looking down the line at leasing a B9 A4 (I wanted to lease a 2013 A4 2.0T Premium quattro this summer, but decided to stay with a lower payment and go with another VW CC R-line for now and go for a B9 A4 in 2016). Please educate me on how I can make a lease work on an Audi. As I said, I am sold on the brand's cars as being superior to BMW and MB, but I'm not willing to just pay $150/mo more to drive an Audi just because AFS likes to set conservative lease residuals. I feel like they should set their lease residuals to reflect market value.

I guess my bottom line question is this: How do you make leasing an Audi viable financially without the hassle of having to buy the car at the end or finding a buyer?

Sorry about the long ramble. This whole thing with Audi leases baffles me. They continue to grow their sales in the luxury market year after year , and I know that leasing is large component of luxury car sales. I cannot believe that every consumer who leases an Audi is unaware of what competing brands offer in lease terms or chooses to pay significantly more because they love the car that much more.

Moviela

Realize that Audi is a boutique for VW. BMW is the main brand with Mini the boutique.

BMW wants to move vehicles to keep the factories humming. They do it by (f)leasing a lot of people who cannot afford to buy the car. The high residual is to keep the monthly nut low for the lease. It is also to insure they don't buy the unit at the lease termination. They want that person in a new unit with a lease payment. That customer has proven once he was stupid enough to fall for a lease, so why not continue to jack up his trousers and rotate his wallet? The margin for dealers is razor thin on new units at the BMW store, so most of the capitalized cost winds up in BMW pockets. The dealer makes his killing on the lease return. The markup on used cars is way, way more for used units. The reason BMW still pays for maintenance is so the dealers have "more to sell" to the next guy.

So why doesn't Audi do this? Warranty costs. Believe me, when Audi replaces an engine they don't eat the cost. You pay them for it, every dollar. Audi spends a lot of time at the VW parts counter, and mass produced economy car parts have a lot of failures. The residual is low so the lease pays more per month. That cash funds the warranty program. You did not think Audi has a different margin per unit than BMW or MB did you?

Audi advertising plays up meaningless comparisons, like more people are leaving BMW and MB than ever before. Of course they are, Audi about wrecked the brand by blaming owners for the sudden acceleration of the Audi 5000. When you start from low sales numbers, it is not hard to increase numbers of conquests.

Audi is much more popular in Europe because they have turned in a pretty good car over the past decade. Americans are slowly rediscovering Audi, and it is not hard to build sales. The US marketing arm plays games with options and equipment they would not dare to play in Europe. Europeans do not buy cars from well stocked dealers. They place an order for a car equipped the way they want. It is ingrained in the culture. Here you are expected to drop in, have a sales Bob dance you around the inventory and tell you that you cannot do better anywhere else, or any other day.

uberwgn

Bada, you aren't likely to unless Audi alters their (low) residual value strategy. Low residual value* = high monthly pmt

In general, lease deals just aren't what they used to be.


*low residual value = safety factor for lease company

Bada Bing

In my original post I gave an example of a recent BMW 328i lease my brother got where the monthly payment (including use tax) is 1% of the car's MSRP with zero drive-off on a 3yr/12K per year lease. He did not have any loyalty or conquest money either. That's a heck of a deal, so it's not true that lease deals just aren't what they used to be. When I leased my 2007 335i, the residual was 63%; it had gone up to 64% on my brother's lease and his money factor was lower than my old lease too.

What puzzles me is how Audi can continue to grow sales in the luxury market where leasing accounts for a sizable portion of new car transactions when their lease terms are so much worse than the competition. I can't believe that everybody is purchasing their $45K A4, $55K S4 or $85K A8. A good percentage of these people are leasing their cars. I'd like to know how they rationalize paying significantly more. Is everyone buying their car at lease end and turning around and selling it privately to recoup some of that extra cash paid each month? Do they buy it at residual and sell it to the Audi dealer for a higher trade-in value? Or do they make these higher payments and simply turn the car in at lease maturity and walk away?

If leasing turns out not to be a viable option for me in a couple of years, I will just finance my B9 A4 purchase. I just hope they don't drop the manual transmission option like they've done with the new A3 sedan. That's my line in the sand. I will readily switch to another make if I can't get my car in stick shift.

uberwgn

There you go !!

NJRoadFan

BMW's subsidized leasing is mainly to keep their CPO vehicle pipeline moving. They more than make back that residual value in reselling marked up used cars.

Whats weird is when I traded in my 2009 A4, I likely came out ahead by buying that car instead of leasing, more so because I bought the car used with 3000 miles on the clock. Dealers make more money on used cars, and without the steady stream of CPO eligible off-lease cars (particularly during the 2009-2010 time period) some of them were willing to offer more on trade-ins to get inventory.