AMG 63 Engine Impact on 55 Residuals?
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From: SF CA
'06 SLK55 AMG, del Sol VTEC
AMG 63 Engine Impact on 55 Residuals?
I'm going to take delivery of a SLK55 AMG next week. Given that the 63 engine has been announced as going into the SLK in 2007, I'm wondering what, if any, impact there has been on residuals in leases.
Also, my current plan is to pay down the residual well below the max allowable so I can buy the car for relatively cheap at the expiry of the lease in 36 months. However, if the resale value of a '55 will be substantially decreased by the existence of the '63 this may not be such a good bet. Any opinions or suggestions?
Also, my current plan is to pay down the residual well below the max allowable so I can buy the car for relatively cheap at the expiry of the lease in 36 months. However, if the resale value of a '55 will be substantially decreased by the existence of the '63 this may not be such a good bet. Any opinions or suggestions?
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From: San Francisco, CA
04 E 500 4matic wagon; CLS 63 AMG
Residuals
Since your residual is set at the time the lease is entered into, you can find out now what the residual will be. That should answer your question on residuals. But what you really need to know is what effect will the 63/65 have on market price of 55s. I don't know how one can handicap that, for there may be a variety of factors that could impact the prices of three or four year old 55s, three or four years from now.
If you are buying at the end of the lease you will be paying more at the time you purchase, if the lease residual is higher, as is usually the case with MB Credit leases. Pre-payng that down will not impact how much you may gain or lose on a resale ; that is a function of the market. What one really needs to know is what is theaggregate amount paid under the lease (discounted to take into account the payments dates) and upon purchase (similarly discounted), as compared with the the amount received upon resale. That will show you your all in cost versus the recovery upon resale.
That is my sermon for the evening.
If you are buying at the end of the lease you will be paying more at the time you purchase, if the lease residual is higher, as is usually the case with MB Credit leases. Pre-payng that down will not impact how much you may gain or lose on a resale ; that is a function of the market. What one really needs to know is what is theaggregate amount paid under the lease (discounted to take into account the payments dates) and upon purchase (similarly discounted), as compared with the the amount received upon resale. That will show you your all in cost versus the recovery upon resale.
That is my sermon for the evening.
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Joined: Oct 2004
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From: SF CA
'06 SLK55 AMG, del Sol VTEC
Thanks. Yes - that math is pretty straightforward. I guess I should reformulate my question.
The lease structure is such that the purchase option at the end of the lease can either be "in the money," "at the money" or "out of the money." A normal lease is structured such that the residual should be an ATM option excercise price (i.e. it is the expected fair market value at the end of the term). My intent in setting my payments such that my residual will be lower than the max allowable is an attempt to get the purchase option "in the money" using tax-advantaged payments (i.e. my lease payments are deductible), thereby effectively getting my car cheaper, on an after-tax basis.
So, my question restated: is it likely that the actual market value in three years will be $15K (the tax advantage) or more less than the residual that is used in a typical lease, due to the existence of the SLK63?
Obviously, this calls for speculation, but I figure that this isn't the first time a car has a big upgrade like this coming, and there are probably people around here who have experience with this sort of thing.
The lease structure is such that the purchase option at the end of the lease can either be "in the money," "at the money" or "out of the money." A normal lease is structured such that the residual should be an ATM option excercise price (i.e. it is the expected fair market value at the end of the term). My intent in setting my payments such that my residual will be lower than the max allowable is an attempt to get the purchase option "in the money" using tax-advantaged payments (i.e. my lease payments are deductible), thereby effectively getting my car cheaper, on an after-tax basis.
So, my question restated: is it likely that the actual market value in three years will be $15K (the tax advantage) or more less than the residual that is used in a typical lease, due to the existence of the SLK63?
Obviously, this calls for speculation, but I figure that this isn't the first time a car has a big upgrade like this coming, and there are probably people around here who have experience with this sort of thing.
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From: Cincinnati, OH
We do a lot of leases for this reason. For this situation you want to look for a lease program that has the lowest money factor as the residual will be set the same.
Originally Posted by lennyr
My intent in setting my payments such that my residual will be lower than the max allowable is an attempt to get the purchase option "in the money" using tax-advantaged payments (i.e. my lease payments are deductible), thereby effectively getting my car cheaper, on an after-tax basis.
Former Vendor of MBWorld
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From: Cincinnati, OH
It depends on the lender and I've seen policies change multiple times over the last few years.
If the cars are bringing good $$$ from the auction or other remarketing methods, then no, not much negotiating.
If the cars are bringing good $$$ from the auction or other remarketing methods, then no, not much negotiating.
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Joined: Dec 2004
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From: DFW
BMW M850i Gran Coupe
Originally Posted by LeaseCompare
It depends on the lender and I've seen policies change multiple times over the last few years.
If the cars are bringing good $$$ from the auction or other remarketing methods, then no, not much negotiating.
If the cars are bringing good $$$ from the auction or other remarketing methods, then no, not much negotiating.
Here's your quote from July of this year:
Never go into a lease thinking that you will be able to buy the vehicle for less than residual. This became common when the residual values were artificially inflated during the late 90s and lenders were losing a lot of $$$$ if you turned it in.
Most have a better lease disposition process in place now including upstream selling. Plus most have residual value insurance.
Also, don't use your trade-in equity as a cap reduction. You could end up losing it if the vehicle is totaled or stolen.
Here is a real example:
Cap Cost Reduction Lost
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If you're getting a 15 thousand dollar tax deduction over the next three years, I think you're going to do fine buying this car. I'm assuming the residual after 3 years is about 53%, so your buyout will be about 38 k? While there is no doubt the new 63 engine will reduce the value of this car, for it to get to a value of less than 23 thousand will be impossible. heck, I'll sign an agreement with you right now to purchase that car for 30 k when your lease is up! I don't think you have anything to worry about, imo.
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Former Vendor of MBWorld
Joined: Jan 2005
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From: Cincinnati, OH
Wells Fargo now has an upfront policy on their lease agreement that says the Purchase Options is residual + 500 OR Wholesale Black Book, whichever is greater.
I still think the residual will be higher than BB, but they are covering themselves.
I still think the residual will be higher than BB, but they are covering themselves.
