I think your understanding of how incentivization affects average net vehicle pricing* is already 100x more than almost anyone else on LH haha.
(* net transaction capitalized value inclusive of manufacturer and captive finance money… but before consumer cap-reductions, dealer fees, add-ons, taxes, etc)
TBH, I don’t think even the people setting residuals know how the black box works. They basically have a crap-ton of data on hand to show how the typical depreciation curve run-off works for different types of vehicles. And each model year vintage is measured against the effective age of the vehicles when they’re sold relative to that model year’s peak. Basically the first dealer allocation built for MY 2025 would be the peak, and subsequently every time period that passes after that should see an erosion from that peak for net pricing.
That is why a buyer hunting for a 2025 model year close out in 2026 should see similar transacted pricing to a low-miles used car of that same model year (one that was sold at the start of the model year). Because they’re not buying at the peak, they’re basically buying at Y1 to Y1.5 depreciation levels.
When I was at DCFS, someone thought that all the special edition vehicles would pick up 2 or 3% resid at wholesale. Like a Rocky Mountain Jeep or some PoopPack Dodge was worth more than a generic trim level. So the product folks were like “let’s just make everything a special edition then.” And of course, when everything is a special edition, nothing is special. So the resids got all screwed up.
Anyway, to me whiffing on the residual usually where the troubled-asset programs rear their heads. They can hedge some of the risk, but for the most part I don’t think any model can reasonably predict the residual well. It’s more about managing the volatility than getting that residual estimate perfect. Same attaches to car buyers. They individually can’t really manage to a resid… it’s more about accepting the reality that they’re 100% exposed to that residual. But normal car buyers can’t do anything about their situation other than sell the car or ride it out.
You should also get a hold of some dealers on LH. There used to be times when the captive financing arm actually tried to mandate dealerships who ground a lease return vehicle to actually buy a % of vehicle lease returns at the resid (not at MMR or adjusted MMR). This was a way for the captive financing arm to reduce its exposure to the resid, and was a “price” those dealerships were supposed to take on for the privilege of handing out more leases.
And some manufacturers don’t even want the RV to be ‘right’. They use as a profit tool (Porsche keeping low) or setting ‘high’ to move sitting product. So the RV is just a made up number to hit another goal.
That approach works for Porsche, because their products/engineering/marketing are so good haha.
But for most automakers, the RV is usually subvented since less depreciation in the lease structure makes the vehicle more affordable. @themachine posted some securitization detail for MBFS and BMWFS I think?. And prior to the pandemic, it looked like there was about $1,000 to $2,000 of resid subvention on their leases.
Ultimately leasing is just another way to help someone get into a new car. Lots of on-paper blah blahs with the ultimate goal of getting some folks to sign on the dotted line. The good news is LH users tend to sign leases that are much cheaper than your average consumer. But ultimately the automaker and its captive need all this volume to clear their channels.
Porsche just seems to clear their channels by making not-enough quantity of really-good cars heh
@IAC_Scott and others.
If i like the deal and go ahead with it, how much time does it take to get the process completed.
Dealer asking to come in and get it done, but what i want to understand is if I need to go more than once, or the application and car deliver happens in one visit.
P.s. i tried looking for help on the forum but couldnt locate the right resource on the process and tinelime.
If you have solid credit you should be one and done. I would ask to do the credit app and everything ahead of time so you’re just going in, signing, and leaving.
Thanks.
So i should ask the dealer to send a credit application and only go in when that is submitted and is through?
Do i need to worried about dealer quote changing in the mean time?
No on any adds. Is dealer meeting your calculated target payment with DAS you want? If not and you don’t understand what this means just walk out now and save yourself thousands.
Target deal is met but warranty was just mentioned. This is additional warranty on tires, brakes, rotors etc.
Not sure if this should be taken in a leased vehicle which is to be returned after 3 years. Please suggest. This is my first lease
