AudiFanFL

Reaching half-time (18 months) on my lease, I thought I'd check kbb for the current trade-in numbers today. The result was a shocker. My 2017 with an MSRP of $88K and 5K miles came back at $53K!

Mind you that this is exactly the price I'd have to pay at the end of the lease for the purchase option - another 18 months of depreciation from now. Considering that kbb's numbers are often inflated, my plan of having equity at the end of the lease and buying my vehicle probably vanished into thin air.

Now, if these numbers are indeed accurate, what does this mean for Audi (Financial)? When I return my vehicle to them in 18 months, it could be $15K under water ALTHOUGH I only put on 10K miles instead of the 30K I was entitled to.

All I can say is....WOW..

farmerjones

I think this is going to become super-common. In an effort to continue to increase sales (and after the diesel debacle they need to generate cash for VW) inflated residuals on leases helped sell more cars. For those of us that wanted to buy our cars off-lease, we are screwed. We can go to the dealer and buy an identical car with LESS miles for a huge savings over our residual value. And I'm told Audi won't negotiate an off-lease purchase price less than the residual value. DUMB. I can currently buy an identical used Audi to what I have now one year before my lease is up with HALF the miles on my current car.....for LESS than the residual value on my lease. WHAT!?!? It's going to be pretty ugly for someone when a glut of leased cars come back and hit the used market. There is no financial way I can buy my car off lease....I'll lose over $5,000 without even trying.

AudiFanFL

I think this is going to be bad for Audi in particular. Basically, they used a residual of 60% for 3 years @ 10K miles/year. This number is indeed a few points higher than average but the potential gap on my vehicle could very well be $15K. I think there is more behind that than just the inflated value. I have the feeling that the brand in general might have taken a hit.

The MF on the Q7 was already bad to begin with.

Honestly, the Q7 is a great vehicle but looking at potentially $15K in negative equity after I already paid $50K over three years on a vehicle I only put 10K miles on will make the decision easy to look elsewhere. Such a drop in value is something I've never seen before and I doubt I would have avoided this situation by financing. No way I would have broken even after 36 of 72 months while financing. The rule of thumb has always been that you break even after half of the financing period. On the Q7, I have my doubts. It's probably closer to 4 years - the time you have to invest additional money in tires and an extended warranty..

AudiFanFL

Oh, and another thing I don't understand is this:

Inflating residuals is indeed used by manufacturers who want to push sales through leases - BMW would be the best example. BMW, however, uses competitive MFs.
Audi does NOT seem to be marketing leases by using an inflated MF which actually pushes more sales to be financed and in the end, reducing new car sales.

I'm not quite sure what their agenda is...LOL

jetsfan101

on the Q7, Audi financial makes up some of their money with high interest rates. We're talking around $6500 and up in interest collected over 3 years on tier 1 credit (assuming .00200 MF on average). So if they lose some on the residual, they will make it up with interest. All the same.

As far as the OP comment, expensive cars depreciate A LOT simply because the % depreciation of a high msrp, is a high depreciation number. I think in terms of %, the Q7 depreciates less than most vehicles, but the high price tag will result in big depreciation.

Tiburblium

My other car (our Q7 is primarily driven by my wife) is a 2014 BMW 550i that had an MSRP of $80,000, I bought it late last year with 42k miles for $28,000. This was through a dealer with a CPO warranty extension, new tires, etc. The car was delivered in August 2014 to the original owner, who leased it, and a little over 3 years later it's value had dropped 65%. Quite a few cars to choose from too, all off lease. Ones sold from non BMW dealers that couldn't be marketed as CPO went for a few thousand less, or around 70% off. I'd expect steep depreciation the first 3-4 years in any luxury car at this price point with the value mostly leveling out (declining much slower) after 5-6 years, I have a feeling this current generation of Q7 will fare slightly better than the luxo barge sedans but not by a huge margin

JT4

As we all know a luxury vehicle will depreciate faster than a non luxury vehicle with maybe Lexus being the exception. But this is why I leased my Q7 last year trough US Bank instead of AFS..

I'm away right now so I can't look at the paperwork, but if I remember correctly the residual from AFS at the time was nowhere near 60%, and the money factor was much higher than US Bank, again this was last year and things change.

But again, at the time on a comparable (apples to apples ) lease vs. AFS, with the same money due at inception, same term, 10K miles per year their lease payment was $100 +/- per month less than AFS..

I've mentioned it on the forum several times, IMO if AFS supported their leases as lets say BMW does there would be more Audi's on the road.

SYMAWD

You also have an $88k Q7. Most of the options above $70k don't add much to the resale.

BigKutta

No surprise that these cars are depreciating, all luxury cars depreciate fast. If you want little depreciation, go buy a civic and watch your $ work hard for you. Luxury cars are always about pissing money away. Just a year and a half ago, getting 5-6% off a new Q7 was an amazing deal. Now, all you see is 10-13% off without even negotiating much. So yeah, if one is thinking of resale and equity, etc., I've got bad news for ya.

If you dont want to **** money away, do what TiburBlium did, and buy a 3 year old luxury car once its at 40% of its original value. Probably best bang for the buck.

BigKutta

^^^^This exactly. There is no end to the options, but they just dont make sense after a certain point.