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      12-29-2019, 02:16 PM   #3
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Drives: 9Y0 Cayenne S
Join Date: Mar 2019
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GenXer, what are your views on the questions you pose?

- Lexus values are high, because there is demand for late model low mileage Lexus vehicles. I shopped Lexus before we bought the X3, and there was effectively zero Lexus inventory in my region, with 1-3 years of age and less than 20k miles. No supply = high demand = high value in comparison to alternatives.

- BMW values might be high, I do not have experience with this. It is in BMW's interest to set high lease end residual values, because it lowers the monthly payment, which gets consumers to sign the lease. The residual value may, in fact, be higher than what the vehicle may be resold for after the lease terminates. This is a net present value story, where BMW is prioritizing up front cash flows (lease payments from the consumer) over what may, or may not, be a loss on the resale transaction in the future. This is all known, all knowable, and all predictable by BMW.

- Is BMW "subsidizing"? If you like that word, then yes the lease transaction is being subsidized by BMW's setting of high lease end values. It is the method BMW chooses to extract value from the consumer' pocket. It gives the consumer a lower hurdle, the lease payment, to step over before signing the lease.

- How does BMW make a profit? They make money during the lease term on the lease contract and on service and maintenance. They make money on fees, if any, at the start of the lease. When the lease term is finished, they make money on selling used vehicles, with or without financing for subsequent owners.

Agreeing with Flacht3, BMW USA and dealers make profit on financing, commissions on financing, and on parts and service. The vehicle itself is simply the instrument by which they make the aforementioned profit.