Residual vs. resale

Can someone enlighten me as to why the residual on some cars is low if their resale value is high?

There aren’t a lot of cars that have residuals that are actually much lower than their resale. Lots with residuals that are higher than their resale though.

Largely comes down to the risk tolerance of the bank, how established long term pricing is, and if the manufacturer is trying to incentivize leases through inflated residuals.

ah hah! thanks!

Why any variance at all?

The residual is the value of the vehicle at lease disposition, as calculated at lease inception. It’s a contractually-agreed-to best-estimate.

What the car actually sells for at resale is what it’s actually worth.

A reason to lease is to get all the upside (eg you leased an STI or GTI and it’s worth more than the residual/payoff, so you can sell it and profit) with no downside (in the most likely where your perfect 3year old car is 5-8k upside down, it’s the captive’s headache; if it’s wrecked early and totaled then your car insurance/GAP pay it off).

makes sense i suppose as long as the higher monthly payment for a lower residual value doesn’t add up to more than you can sell it for at lease end.