So I leased an IS 250 F sport 3.5 years ago and the 36mo/10k residual was over 60%. Now that same vehicle residual value is 51%. I’ve heard grumblings that certain vehicles, and specifically sedans RV’s are in the dumps. They’ve obviously tried to make up for it with major lease cash incentives, but lease costs still seem higher.
Does anyone keep track of a list of residual values? Or anyone know some of the top residual value luxury vehicles? Anyone with thoughts/insight?
A lot of the luxury sedans had subsidized residual values, so you were seeing inflated numbers. Then manufacturers got stuck with a ton of 3 year old lease returns just as the sedan market was softening. Now you are seeing more realistic residuals. That’s been my observation from reading various reports at least.
I was shopping for a wide variety of vehicles and almost all the 3 year residuals were in the mid 50s somewhere including SUVs and just about everything else. The lowest was about 49 - 50% which was the VW Passat and the Alfa Giulia, the highest was upper 60s to 70% which was the Toyota Tacoma and Jeep Wrangler with an honorable mention of something like 64% going to the Subaru Crosstrek.
Leasing is a very cyclical business and we experienced a wild roller coaster of used price swing from 06 until now. The people in the industry that set RVs (there are about 100 of us at various captives, banks and guidebooks) are trying to constantly make sense of all the macro and micro variables that affect future wholesale vehicle prices. Forecasting this stuff is a blend of science, art and dumb luck.
Here is a brief overview of the supply/demand dynamics that got us to today’s expensive lease situation.
Prices bottomed out in 08/09 due to the gas price crisis and the economy tanking simultaneously. RV losses were HUGE for leases terminating then because none of the crystal balls saw that event taking shape until it was too late. This caused lenders to hammer RVs and leasing became very expensive. Many banks even quit leasing altogether. Luckily rates were low du inflation this time so with incentives they could still price leases low enough to sell them.
Between 09 and 11, the lease origination volume was very low (compared to prior 3 years). This caused a major drop in used supply 3-4 years later which resulted in dramatic used price increases on nearly all segments during the 2012-2015 time frame. All the forecasters couldn’t believe how strong prices were so they kept setting higher and higher RVs. So if you are coming out of a 2-3 year lease now, they were written during the good times of the cycle and the lender most likely took a big loss on any luxury vehicle and mainstream cars. Most mainstream utilities and trucks were set conservatively still so if you are coming out of a lease on those, check for possible equity.
Now all the forecasters believe future prices will be lower than today’s prices so they have RVs set to where they all think a relatively safe position is. Rates are also a lot higher today than they were in the last 5 years so it costs A LOT for the lender to buy the rate down to get you the screaming lease deals you are all chasing.
Expect leasing to keep getting more expensive but realize that the cycle will bounce back the other way at some point when the used market out performs the low RVs and the forecasters forget the last cycle and set RVs too high again. My wild ass guess is that if you start a lease today, you have about 3-5 years until the prices for new leases get less expensive than they are today. But who knows really… the whole tariff stuff is a giant monkey wrench that could cause another used supply glut (new car prices increase dramatically and cause something similar to the 08/09 cycle).
I’ve been curious about this as well. I’m in the market for a small SUV and liked the CX5. Based on what used cars are going for and what residuals are, it seems like a lease would offer a cheaper buyout cost than what a used car sells for with 36k miles. Am I missing something here?
