Lease Residuals

[Mikegcny]

Is it me, or have the lease residuals dropped a good amount?

I am getting 66% at 39 months on a Sport S.

Rubicon is 62% at 39 months.

EDIT: 12k miles per year.

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[PsyRN]

what were they before?

 

[Mikegcny]

what were they before?

I saw in the low 70s a while back.

 

[WXman]

Mine was 70% at 48 months, so yeah that's a significant drop.

 

[PsyRN]

so when the lease is up, and the value of the vehicle retains more then the residual, do you come out ahead? or do you want to come under the residual?

 

[NaughtyGeek]

@PsyRN , If the vehicle retains more than residual then you can trade it in and have some sort of down payment on what you're buying provided lease end fees and such don't eat up the difference. If residual is lower than projected you just turn it in at the end of the lease and the lease company eats the "loss."

 

[PsyRN]

@PsyRN , If the vehicle retains more than residual then you can trade it in and have some sort of down payment on what you're buying provided lease end fees and such don't eat up the difference. If residual is lower than projected you just turn it in at the end of the lease and the lease company eats the "loss."

so if I plan to lease then buy, having a low residual in the hopes the vehicle keeps it's value is what I want. so residuals going down is a good thing in that case, right? just trying to get some clarity on this.

 

[Mikegcny]

so if I plan to lease then buy, having a low residual in the hopes the vehicle keeps it's value is what I want. so residuals going down is a good thing in that case, right? just trying to get some clarity on this.

It all really depends on something called the "money factor" which is the interest you are paying. If the MF is lower than the current APR rate for a conventional type auto loan, and you are planning to buy it at the end of the lease, then it could work our in your favor. There is also another fee that comes with leasing, called the acquisition fee, that essentially is banks processing fee for the lease. Generally the MF is above what APR is.

I have all types of calculators that I have built that I can plug in a bunch of variables to figure out if leasing makes more sense. You also need to factor in the tax component, since in some states you only pay tax on the part of the vehicle that you are leasing (ex: Price of Truck minus the residual value).

Generally you lease when you just want to pay off the depreciation on a vehicle and do not want to build any equity in it. It works for people who want a new car every so many months (24/36/39/42) and don't want to tie up capital in a depreciating asset. This is why a high residual percentage works in your favor if you want a low lease payment, and want to turn the truck in at the end of the loan.

I used the be in the camp that said "I want my cars paid for", but I leased my last vehicle (F-150) simply because I did not want to write a check for 40k, nor did I want to write a $700.00 check each month for a truck that all of my neighbors confuse with the landscapers. We own all of our other vehicles outright. There are people who feel very passionately about each philosophy (lease or buy). My own personal belief is that buying a used car for cash in good condition is the best route.

 

[Rex3rd]

As the 2020 year goes on the value of such vehicle goes down that's why. I'm waiting for 2021 where numbers will be better hopefully

 

[Rex3rd]

so if I plan to lease then buy, having a low residual in the hopes the vehicle keeps it's value is what I want. so residuals going down is a good thing in that case, right? just trying to get some clarity on this.

From what I know if the residual goes down the vehicle is worth less at the end of lease and you pay More. The higher the residual the more it's worth at end of lease and you pay less

 

[PsyRN]

From what I know if the residual goes down the vehicle is worth less at the end of lease and you pay More. The higher the residual the more it's worth at end of lease and you pay less

it sounds to me like the residual is a projection of the value of the vehicle though, and then the at the end of the term it's compared to what the value is at that time. so it seems the higher the residual, the lower the lease payment but possibly a higher buy-out, but a lower residual has a higher lease payment but a possibly a lower buy-out.

but I could totally be wrong. that's why I'm asking.

 

[Rex3rd]

it sounds to me like the residual is a projection of the value of the vehicle though, and then the at the end of the term it's compared to what the value is at that time. so it seems the higher the residual, the lower the lease payment but possibly a higher buy-out, but a lower residual has a higher lease payment but a possibly a lower buy-out.

but I could totally be wrong. that's why I'm asking.

If you want to learn more look up some of the old threads about leasing. I'm a rookie at this like you. I can go on lease hacker and make a lease on a Rubicon the same as a bare bones sport model and it still don't make sense to me. You have to factor the residual for 36 48 ect (those numbers factory differently per trim level) and money factor which I guess is kinda like apr (the interest you pay on the lease) which differs per trim level. The best deals on lease when the 2020 gladiator arrived because it's a new model but as the year moves older it depreciates even if it's new the 2021 model is coming so as each month goes bye the residual has gone down and money factor has gone up. If your leasing wait till 2021 first comes out and pull the trigger

 

[Mikegcny]

it sounds to me like the residual is a projection of the value of the vehicle though, and then the at the end of the term it's compared to what the value is at that time. so it seems the higher the residual, the lower the lease payment but possibly a higher buy-out, but a lower residual has a higher lease payment but a possibly a lower buy-out.

but I could totally be wrong. that's why I'm asking.

Yes - The residual value is the amount of money that you can buy the Jeep for at the end of the lease.

1. Higher Residual = Greater Buy Out at end; Lower Monthly Payment
2. Lower Residual = Lower Buy Out at End; Higher Monthly Payment

But just to be clear, at the end of the lease, you do not have to buy the Jeep or pay any difference between actual market value and the residual value stated on the lease agreement. My feeling is that the people who leased the Galdiators when they just came out are going to have trucks that will be worth less than the residual value on the lease. I think the banks thought there would be more demand in 3 years time than there actually will.

 

[Mikegcny]

You have to factor the residual for 36 48 ect (those numbers factory differently per trim level) and money factor which I guess is kinda like apr (the interest you pay on the lease) which differs per trim level.

The residual is definitely dependent on trim, as higher trim levels generally have more markup and the features that come with them are less marketable in the used car market.

Money Factor is generally a standard rate set by the bank, and I don't think this is all that dependent on the trim. It can be dependent on the trim level if the manufacturer is trying to move a bunch of excess inventory. They will offer a lower money factor on the trims that they want to move.

 

[Rex3rd]

The residual is definitely dependent on trim, as higher trim levels generally have more markup and the features that come with them are less marketable in the used car market.

Money Factor is generally a standard rate set by the bank, and I don't think this is all that dependent on the trim. It can be dependent on the trim level if the manufacturer is trying to move a bunch of excess inventory. They will offer a lower money factor on the trims that they want to move.

As of right now the Rubicon has a money factor apr whatever you want to call it of 5.688. on Jeep website for 38 months. Sport and sport s it's over 6. I think there there trying to push as many Rubicons as they can.

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