This is pretty normal for Luxury cars - I recall my wife getting pitched on a Range Rover and when she asked about gas mileage the salesman response was if you are worried about the gas cost this is not the car for you. But also the idea that you would keep a luxury car for more the length of the lease is generally understood(I thought) to be crazy you always trade in for the new and shiny...
It’s not that simple. Sometimes the lease is a better deal if you fall into the correct mileage band or if a manufacturer over estimates residual value. This happens a lot for fast depreciation luxury cars that aren’t a as popular or low end economy cars that manufacturers are dumping.
Generally what you pay for when leasing a new car is the depreciation. This is why luxury sedans like a BMW often have better lease deals than cheaper or less desirable cars--you're only paying for the depreciation, not the base cost of the car, and these cars depreciate much slower.
That said, just because that's how it works for new cars doesn't mean there isn't a market for leasing used cars. In fact, I could see myself leasing high mileage luxury cars--cars I wouldn't normally buy due to the mileage but wouldn't mind renting for a few years, so long as the price was notably less than leasing a brand new car of the same kind.
Many luxury car shoppers are not that concerned with reliability since they plan on only owning the car for a few years. 3 year leases are common and even those who buy a vehicle outright may trade in long before reliability becomes a real concern.
What I wonder is why people are turning in their leases/selling their cars so soon?
What are the ratios of, gets a new car every couple years, more car than they could realistically afford, wasn't meeting their needs (range, passenger, luggage, person capacity), etc. etc.
To me this seems to reflect a lifestyle where certain people always want a shiny BMW or Mercedes and have to trade up every 2-3 years to maintain it. Seems like leasing would be a better approach though.
There's two groups of people I can think of that do this:
- People who like to frequently change cars, not so frequent as to lease but still prefers to let it go between 50-100KMi. (Contrast folks who sell past 100k or drive cars into the ground, they care more about long term repair cost.)
- People who are using resale value as a proxy for reliability.
I suppose 'lease-e' may fall into this category, also by proxy (as high resale value means lower depreciation, lower lease cost.)
I wonder how much this is affected by the prevalence of leasing. Something like 1/3 of new cars in the UK start off as leases. At the end of the lease period most/all of them hit the second hand market. In this case I think even the seller doesn't know if it's a lemon or not and, in any case, they will always want to liquidate the car as soon as possible, even if it's a peach. So they would factor the market price into the lease deal and sell all cars at market price regardless.
I agree that the entire enterprise might be a bad deal for buyers, BUT:
- for those who returned the car after months, this is an option that just isn't available in an ordinary lease - in some cases, death is not enough to cancel a lease. These folks would have been left making all of the payments on the car for the rest of the term. Plus, ordinary leases have very low mileage caps. They may not have made much money, but they would have lost thousands if they had a conventional lease.
- for those who keep the car say 3 years and put on 200k miles: they would pay a total of $18k and return the car with a couple thousand dollars of value. If the purchase price was say $22k, then they got a completely fair deal.
That's the thing - I don't think the terms were sub-prime at all, they were simply priced to only appeal to serious professional drivers working 50-60 hours and 1500 miles per week, which is not atypical for cabbies and limo drivers (mileage might even be low).
I agree with you, but the places don't hold a lot of the luxury cars in inventory for this reason too. As you noted the depreciation is too large to accomodate this kind of strategy. Once in awhile you do get a deal; I flew into San Diego on a friday evening and had a mid-sized car with Enterprise, and they went into the upgrade pitch. I was half-listening until I heard they'd get me in a 7-series BMW for $5/day. I asked them to repeat it and sure enough, that's what it was. It was a rare weekend where convertible BMW's didn't rent out, so they slashed prices for a 3 day weekend rental.
It's rare but it happens. It does show that they usually rent out of that stock though at the crazy prices you do see, otherwise you'd expect to see those cut-rate deals more.
I think the lease thing is more to avoid dealing with any maintenance issues as well as the wear and tear on a less than new car. It’s not to get the newest tech or style all the time AFAIK.
I'm not taking sides in this debate, but I am surprised that we haven't yet seen a product which is a car lease for 3 years where the hood doesn't even open. The car ships with synthetic oil and high mileage tires and literally the only thing you do is put gas in it. The high end version of the lease involves someone driving to your place of work and filling up your car with gas, so that for three years you literally just get in and drive.
I think there is enough of a luxury market for that to be a thing, and I am surprised we haven't seen it yet.
That is not even the worst of it. There are people leasing vehicles (more expensive vehicles then they could buy) without saving the money they need to put down on a new vehicle after the term is up. Worse yet they drive the car past the mileage limits and then after the term is up they then roll the old lease into the financing for a new lease. It is a vicious cycle.
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