An influential US guide to residual values says the controversial new BMW 7 series will lose value faster than the Mercedes-Benz S class.
Automotive Lease Guide projects the redesigned BMW flagship will be worth 48 percent of its original price in three years, compared with 47 percent for the model it replaced.
But when the new Mercedes-Benz S class was introduced in 2000, the same guide rated a new S430 at 63 percent of original price at the end of a three-year lease. The model it replaced retained 54 percent of its value.
The publication's rating has no direct effect on sales in the USA, where a new BMW 745Li has a sticker price of $72,495 (E82,380).
But many private lenders set their lease payment terms based on the guide's estimates, so the net effect is that customers privately leasing a new 7 series pay substantially more per month. BMW Financial Services offers sharply lower lease payments because it assumes used models will retain 61 percent of value.
The difference in payments is so great, 95 percent of 7-series leases have become BMW-financed, concentrating the risk for BMW.
Automotive Lease Guide President Raj Sundaram said that styling and complexity aside, BMW's 7-series pricing is the main reason for the guide's lower residual rating.
'One of biggest reasons Mercedes got a huge pop and BMW didn't was that Mercedes actually lowered prices,' he said.
BMW increased the price of the new generation, Sundaram said.
'If you look at how we expect people to equip these cars, the 745i is up about $6,000 over the old one,' he said.
BMW said it's not worried about the residual rating.
'Automotive Lease Guide is an independent business,' said BMW CEO-elect Helmut Panke. 'We can talk to them and explain our views, but they have to set residuals the way they determine them.'
If BMW is wrong and Automotive Lease Guide is right, BMW Financial services will eventually own a lot of three-year-old cars each worth $34,798 that it thought would be worth $44,222.
It's the latest marketing problem for BMW on the 7 series. Initially, critics criticized rear-end styling, saying the unconventional trunk looked awkward and bulbous.
But the new i-Drive system that replaces many interior knobs and switches is proving more troublesome. Batteries on some new 7 series failed because salespersons and owners drained them demonstrating the complex i-Drive.
In the USA, BMW puts pre-printed sticky notes in 7-series glove boxes so owners can stick one inside the car when leaving it with parking attendants. The notes explain how to start the car and put it in gear.
Despite the fuss, demand for the new 7 series is strong. In western Europe, first-quarter sales were 5,168 units, up 98 percent from a year earlier. After a January 7-series launch, US first-quarter sales rose 64 percent to 4,554 units.