Accuracy of Payment Estimator on Audi Site
03-14-2018, 01:16 PM
#21
AudiWorld Super User
I don't think I am doing that at all. I also don't consider it an asset, as whichever way you go, it isn't appreciating. To me, it's a liability, but that becomes more of a philosophical debate 
Other than that, yes, we are saying the same thing. The method by which you acquire the car is a very user specific determination.
And yes, and I think I accounted for the differing type of vehicle requiring different maintenance costs. RS anything's do not lease particularly well, as they are subject to high rates, due to the types of cars. I've yet to lease an RS anything to anyone, they have all been purchases. RS's are also not, generally, that client's primary car. So things are on a different curve when it's a toy.
I understand full well the depreciation curve. I also know that with most of these cars, even an Audi, they are being kinder, 9 times out of 10, on their projected depreciation, than what the marketplace will dictate, assuming I keep to the contracted mileage. I have had a lot of Audi's, and alot of just about everything at this point. After I have sat down to do my math for my transactions, I favored the net result of a lease. Others can differ, and that's cool. It is, as you say, and I said too at some point, never a one size fits all approach. Different vehicles for acquiring the same....ermm...vehicle.
Other than that, yes, we are saying the same thing. The method by which you acquire the car is a very user specific determination.
And yes, and I think I accounted for the differing type of vehicle requiring different maintenance costs. RS anything's do not lease particularly well, as they are subject to high rates, due to the types of cars. I've yet to lease an RS anything to anyone, they have all been purchases. RS's are also not, generally, that client's primary car. So things are on a different curve when it's a toy.
I understand full well the depreciation curve. I also know that with most of these cars, even an Audi, they are being kinder, 9 times out of 10, on their projected depreciation, than what the marketplace will dictate, assuming I keep to the contracted mileage. I have had a lot of Audi's, and alot of just about everything at this point. After I have sat down to do my math for my transactions, I favored the net result of a lease. Others can differ, and that's cool. It is, as you say, and I said too at some point, never a one size fits all approach. Different vehicles for acquiring the same....ermm...vehicle.
.Generally speaking, buying or leasing a depreciating asset is all-together a bad idea w/o offsetting the loss of value with an equal or higher gain generated by the asset. However, if we lived by that, none of us would be owing or leasing a car in the first place. So, one's personal situation drives much of this. To some the freedom of personal mobility that a car provides is enough to accept the loss. Others drive for Uber or Lyft to make some money or the YouTubers who buy exotic cars to make money with their videos, and then there are the car collectors who buy cars that actually appreciate, but they just have them sitting around in a decked out garage and drive them rarely if at all. All very personal.
Last edited by superswiss; 03-14-2018 at 01:38 PM.
03-14-2018, 01:28 PM
#22
AudiWorld Senior Member
Depreciation is not a linear curve. It is steep during the first 2-3 years and then flattens out, which means the longer you keep a car the less dollar you lose every year. By getting into a new car every 3 years you constantly spend your time in the steepest part of the depreciation curve.
This also applies to used cars. Buy the part under the depreciation curve from 5 years to 10 and you will be paying a LOT less than the person who bought the first 5 years. Of course that person would also be driving around in a 5 to 10 year old car with old tech and higher maintenance costs, but those are trade off that some find worth it. For me, a 5 year old car is the cutoff point where the trade off is no longer acceptable and the value I place on a new car agrees with the cost that it will incur. For others its 2 or 3 years and they are willing to pay more for that. But that decision is totally independent on if you should buy vs lease. They shouldn't be conflated.
I actually tend to view my "ownership" of the car this way. Even though my monthly payment is the same, I view my ownership costs during the first year as being much higher than that of the 5th year just based on how much resale value the car loses every month and mile I put on it. So I'm always in a position to judge if I'd prefer to pay the lower cost of owning a 5 year old car vs the higher cost of owning a 1 year old car.
03-14-2018, 01:42 PM
#23
AudiWorld Senior Member
I'm not an economist, but I believe on might say that utility has value. So the utility that the car provides would in fact offset that loss. And that utility can come in many different forms, such as the ability to commute to a job or as a personal expression of taste and comfort. And that utility value is determined solely by the person who made that economic decision based on their own needs, wants, desires and means. Which is why some people will drive a Toyota Corolla and other will drive a Bentley. It all depends on your individual determination of utility.
03-14-2018, 01:55 PM
#24
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As someone else mentioned there are four key drives in what your monthly lease payments are: Price, interest rate (the Money Factor), the residual (the % of the value left-over after you lease it, the inverse of which is the % of which you're financing) and money down
The price is basically the MSRP minus whatever discounts or incentives you can get. This depends on what promos Audi may or may not be running at the time, as well as what the dealer may be able to do. The dealer is less incentivized to move off MSRP if the models are hot and he knows the next guy who comes through the door will pay MSRP
The money factor may be somewhat negotiable but there will be a floor that is set by Audi - the question is if the dealer is marking it up
If you put any money down, that will lower your lease payments because you're narrowing the amount financed
The residual is usually the biggest driver of lease payments. It is typically set by the manufacturer. Audis tend to have pretty "bad" residuals compared to BMW which is why it is often cheaper to lease a BMW than an Audi. Basically they assume the car is worth less on a % of MSRP basis when you return the lease compared to BMW, so you're financing a greater portion of the car. I'm not really sure why they do this. But consider this: the residual on my BMW is actually higher than what it's worth on the market, so even if I wanted to buy my car at the end of the lease, it wouldn't make financial sense. With the Audi, it is possible that the car is worth more at the end of the lease than the residual, which means you could turn around and sell it for more than you bought it for.
For me, I'm leasing because I know in 3 years I'll probably be forced to get an SUV due to kids.
Leasing is generally more expensive than buying and then selling to a private 3rd party, but you need to do more leg work in that case. It's about the same as buying it and "trading it in" for something else a few years down the line. Obviously there are exceptions, but that's my general rule of thumb. Also....it's a first year (kind of) model car - it's nice to have the option to move on or re-up to something else should it prove to be a hassle.
The price is basically the MSRP minus whatever discounts or incentives you can get. This depends on what promos Audi may or may not be running at the time, as well as what the dealer may be able to do. The dealer is less incentivized to move off MSRP if the models are hot and he knows the next guy who comes through the door will pay MSRP
The money factor may be somewhat negotiable but there will be a floor that is set by Audi - the question is if the dealer is marking it up
If you put any money down, that will lower your lease payments because you're narrowing the amount financed
The residual is usually the biggest driver of lease payments. It is typically set by the manufacturer. Audis tend to have pretty "bad" residuals compared to BMW which is why it is often cheaper to lease a BMW than an Audi. Basically they assume the car is worth less on a % of MSRP basis when you return the lease compared to BMW, so you're financing a greater portion of the car. I'm not really sure why they do this. But consider this: the residual on my BMW is actually higher than what it's worth on the market, so even if I wanted to buy my car at the end of the lease, it wouldn't make financial sense. With the Audi, it is possible that the car is worth more at the end of the lease than the residual, which means you could turn around and sell it for more than you bought it for.
For me, I'm leasing because I know in 3 years I'll probably be forced to get an SUV due to kids.
Leasing is generally more expensive than buying and then selling to a private 3rd party, but you need to do more leg work in that case. It's about the same as buying it and "trading it in" for something else a few years down the line. Obviously there are exceptions, but that's my general rule of thumb. Also....it's a first year (kind of) model car - it's nice to have the option to move on or re-up to something else should it prove to be a hassle.
Last edited by MrBlahBlah; 03-14-2018 at 02:42 PM.
03-14-2018, 01:57 PM
#25
This is great if the only thing you're comparing is the person who keeps their car this long, vs one who doesn't. The majority of people do not...they change their car out, often before their car is paid off (because they often buy the wrong car to begin with). Cars, like most things, are rarely zero sum. Always a ton of variables.
As an example, I have a ton of clients who buy their cars, cash...keep them for 5-6 years, and then trade them in for new cars. Routinely. They don't drive a lot, and they are regularly changing car to car. This works for their lifestyle. For others, they buy cars for cash but put them on their own personal credit lines, and that is how they manage their expenses. I have others still who lease, and always want out prior to the lease term. There is a path for each of these to do what works best for them. There is no magic formula
As an example, I have a ton of clients who buy their cars, cash...keep them for 5-6 years, and then trade them in for new cars. Routinely. They don't drive a lot, and they are regularly changing car to car. This works for their lifestyle. For others, they buy cars for cash but put them on their own personal credit lines, and that is how they manage their expenses. I have others still who lease, and always want out prior to the lease term. There is a path for each of these to do what works best for them. There is no magic formula
As you said, everyone's situation is different so pick what works best for you and your long term goals. For me, buying and not leasing seems to fits me the best.
03-14-2018, 01:57 PM
#26
AudiWorld Super User
I'm not an economist, but I believe on might say that utility has value. So the utility that the car provides would in fact offset that loss. And that utility can come in many different forms, such as the ability to commute to a job or as a personal expression of taste and comfort. And that utility value is determined solely by the person who made that economic decision based on their own needs, wants, desires and means. Which is why some people will drive a Toyota Corolla and other will drive a Bentley. It all depends on your individual determination of utility.
03-14-2018, 02:03 PM
#27
AudiWorld Super User
And that goes directly to OP's original question. Audi sets the residual and the buy rate MF. That's what the online calculator is based on. The dealer can't fudge with the residual, but they are free to mark up the MF to make some additioanl profit. So the payment the dealer offers is most likely higher than what the calculator says assuming you factor in the same trade-in and discount values that the dealer will give you. You have room to negotiate the MF down to the dealer's buy rate. They won't go lower, though, otherwise the lease is gonna cost them money.
03-14-2018, 03:51 PM
#28
AudiWorld Super User
I'll agree that there is no one option that fits everyone. From my point of view the only real benefit of leasing to me is if you like driving a new car every 3 or so years and are not doing it because you think you're going to save money in the long run. Please don't take my post as if I'm saying you're wrong. I can see the allure to having a new car to drive every few years. I just see a lot of people talking about and leasing cars and was just trying to figure out if I'm missing something. I personally tend to drive my cars into the ground because I don't like having a car payment and financially you save more money long term which I'm all for. I also think buying and eventually owning a car outright does provide you more flexibility when life throws a curve ball at you assuming you get the ownership part first
As you said, everyone's situation is different so pick what works best for you and your long term goals. For me, buying and not leasing seems to fits me the best.
As you said, everyone's situation is different so pick what works best for you and your long term goals. For me, buying and not leasing seems to fits me the best.
Last edited by SCarGuy; 03-14-2018 at 03:58 PM.
03-14-2018, 03:56 PM
#29
AudiWorld Super User
As someone else mentioned there are four key drives in what your monthly lease payments are: Price, interest rate (the Money Factor), the residual (the % of the value left-over after you lease it, the inverse of which is the % of which you're financing) and money down
The price is basically the MSRP minus whatever discounts or incentives you can get. This depends on what promos Audi may or may not be running at the time, as well as what the dealer may be able to do. The dealer is less incentivized to move off MSRP if the models are hot and he knows the next guy who comes through the door will pay MSRP
The money factor may be somewhat negotiable but there will be a floor that is set by Audi - the question is if the dealer is marking it up
If you put any money down, that will lower your lease payments because you're narrowing the amount financed
The residual is usually the biggest driver of lease payments. It is typically set by the manufacturer. Audis tend to have pretty "bad" residuals compared to BMW which is why it is often cheaper to lease a BMW than an Audi. Basically they assume the car is worth less on a % of MSRP basis when you return the lease compared to BMW, so you're financing a greater portion of the car. I'm not really sure why they do this. But consider this: the residual on my BMW is actually higher than what it's worth on the market, so even if I wanted to buy my car at the end of the lease, it wouldn't make financial sense. With the Audi, it is possible that the car is worth more at the end of the lease than the residual, which means you could turn around and sell it for more than you bought it for.
For me, I'm leasing because I know in 3 years I'll probably be forced to get an SUV due to kids.
Leasing is generally more expensive than buying and then selling to a private 3rd party, but you need to do more leg work in that case. It's about the same as buying it and "trading it in" for something else a few years down the line. Obviously there are exceptions, but that's my general rule of thumb. Also....it's a first year (kind of) model car - it's nice to have the option to move on or re-up to something else should it prove to be a hassle.
The price is basically the MSRP minus whatever discounts or incentives you can get. This depends on what promos Audi may or may not be running at the time, as well as what the dealer may be able to do. The dealer is less incentivized to move off MSRP if the models are hot and he knows the next guy who comes through the door will pay MSRP
The money factor may be somewhat negotiable but there will be a floor that is set by Audi - the question is if the dealer is marking it up
If you put any money down, that will lower your lease payments because you're narrowing the amount financed
The residual is usually the biggest driver of lease payments. It is typically set by the manufacturer. Audis tend to have pretty "bad" residuals compared to BMW which is why it is often cheaper to lease a BMW than an Audi. Basically they assume the car is worth less on a % of MSRP basis when you return the lease compared to BMW, so you're financing a greater portion of the car. I'm not really sure why they do this. But consider this: the residual on my BMW is actually higher than what it's worth on the market, so even if I wanted to buy my car at the end of the lease, it wouldn't make financial sense. With the Audi, it is possible that the car is worth more at the end of the lease than the residual, which means you could turn around and sell it for more than you bought it for.
For me, I'm leasing because I know in 3 years I'll probably be forced to get an SUV due to kids.
Leasing is generally more expensive than buying and then selling to a private 3rd party, but you need to do more leg work in that case. It's about the same as buying it and "trading it in" for something else a few years down the line. Obviously there are exceptions, but that's my general rule of thumb. Also....it's a first year (kind of) model car - it's nice to have the option to move on or re-up to something else should it prove to be a hassle.
Residuals are not set by the manufacturer, but rather, a 3rd party. What's more, residuals can be insured against by the bank that is offering the lease option. Leases are often done through the manufacturer serving as the bank, but not always so.
Last edited by SCarGuy; 03-14-2018 at 03:59 PM.
03-14-2018, 04:09 PM
#30
AudiWorld Super User
Fair enough, but a car is an asset. It's property that has a value that is available to meet debts, commitments or legacies, whether the value is appreciating or depreciating. The definition of an asset is what it is. A loan or a lease is a liability on the other hand. An asset adds to your net worth, whereas a liability subtracts from it. Nothing to do with philosophy .
Generally speaking, buying or leasing a depreciating asset is all-together a bad idea w/o offsetting the loss of value with an equal or higher gain generated by the asset. However, if we lived by that, none of us would be owing or leasing a car in the first place. So, one's personal situation drives much of this. To some the freedom of personal mobility that a car provides is enough to accept the loss. Others drive for Uber or Lyft to make some money or the YouTubers who buy exotic cars to make money with their videos, and then there are the car collectors who buy cars that actually appreciate, but they just have them sitting around in a decked out garage and drive them rarely if at all. All very personal.
.Generally speaking, buying or leasing a depreciating asset is all-together a bad idea w/o offsetting the loss of value with an equal or higher gain generated by the asset. However, if we lived by that, none of us would be owing or leasing a car in the first place. So, one's personal situation drives much of this. To some the freedom of personal mobility that a car provides is enough to accept the loss. Others drive for Uber or Lyft to make some money or the YouTubers who buy exotic cars to make money with their videos, and then there are the car collectors who buy cars that actually appreciate, but they just have them sitting around in a decked out garage and drive them rarely if at all. All very personal.