I leased a 2018 Volvo V90 CC, with the Polestar tune, about 11 months ago. Don’t have all the LH type numbers at my fingertips but MSRP was $70k, Selling price was $59k, monthly payment is $682. I put nothing down, paid taxes and fees up front. 39 mo/10k mi.
Thing is, as great as the car is in many respects, I simply haven’t found my way to loving it. And I’ve really tried. But the 4 cylinder engine, no matter much of an engineering marvel it is, just doesn’t do it for me.
I know Volvo doesn’t allow lease transfers so I looked into Carvana, Vroom, some dealers, etc. and their offers are around $40-42k when my current buy out is in the low/mid $50k’s (!!)
I guess the depreciation in the lease is linear, whereas the depreciation curve in reality isn’t. Is that really what it comes down to? Dumb question…? I guess I was hoping that 11 months in they wouldn’t be so far apart.
I “don’t love” the car enough to eat maybe $1000-2000, but not $13000!
The 1st year is the worst depreciation generally. The used market knows how much discounts and incentives were applied to some of the cars when sold new, so the market value adjusts down accordingly.
Absolutely agree with @adamcar and along the same line. Some cars have 24 month depreciation around 6% higher than the 3 years.
So if the 3 year residual value is 60%, the depreciation would be 40% which averages to 13% per year.
On a 2 year being 66%, the average depreciation would be 17%.
Given that on a 3 year lease, the last year only causes 6%, the average on the 2 years is 17%, then we can probably predict that the first year depreciation to be around 22%, second year on 12% third year on 6%.
If we depreciate your sales price by 22%, you get a price of $46,800 and given that they need to make some profit, their 40-42k offer seems reasonable.
Read his post, at least. Volvo doesn’t allow transfers.
@wantcar - you won’t get close to the payoff any time soon, and most likely ever. I’m 6 months away from the lease end on my S60 and still around $3k negative.
At the end of my Hyundai Genesis lease the delta between market value and residual value was thousands of dollars. To subsidize the leases, manufacturers can inflate the RVs (my Genesis had a %58 RV if I remember correctly for 36/15), which also keeps you locked in for the entire duration of the lease term since trading the car in early is such a costly option. I have learned my lesson after the Genesis lease so now I am not leasing any cars with the high RV high MF so I have a better chance of keeping the payoff and market value close throughout the lease…
What you call “locked in”, others call “a great deal”. I mean, if the RV is inflated, you’re getting the car cheaper (for 3 years) than it actually costs, and the manufacturer takes a bath on the car when they get them back…
Absolutely, I’ll always take an inflated RV and lowest MF, that’s how you make your lease as close to $0 as possible. The closer they are, the easier to get out as well.
Your statement is very confusing. I agree with sportsCar. Having an inflated RV lowers your monthly payment. If the RV is low then the manufacturer typically has to offer massive rebates to get people into leases. Kia is known for doing that. Even then, the RV could still be inflated.
I don’t really understand what your end game is here. Are you trying to get a lease for as little as possible or have flexibility to get out of the lease at any point in time? Also, there is no way to know for sure what a vehicles RV will be 3 years from now. It’s all estimates. You really wouldn’t be able to fully protect yourself from getting into the Genesis situation again even if you tried.
If you leased it for 24 months by chance, you could do a pull ahead in 4 months. Otherwise, you could probably shorten it by 9 months with a pull ahead. But even then, you’re still looking at that 4 cylinder unless you combine it with the electric motor T8 hybrid. I agree with you to a large extent that the 4 cylinder engine detracts from a luxury feel, being a little uneven in power delivery. But it does pull pretty hard. My vote would be to sacrifice a little fuel economy for a 6 cylinder, but I don’t think that will ever happen.
I don’t know the miles or options on your car, but if the MSRP was $70K, that was pretty loaded. What are dealers selling new or loaners for- $10-15K off MSRP? You would need to be around $50-52K I would think to attract someone’s attention if you sold it yourself. Eating $1-2K to get out now on a wholesale basis is unrealistically cheap on a $60K car, don’t you think? Offers of $40-42K sound conservative, but you’re too far upside down, anyways.
The lease payoff goes down on a curve, just like a mortgage or auto loan. More of the payment goes to rent (interest type of payment portion) than depreciation early on, more towards principal later on. Like you said, the depreciation curve bows the other way, on the other side of a linear line. So the car goes down in value faster at first, which the payoff goes down slower at first. There was also a $695-995 acquisition fee you paid, and a $350 purchase option that you’ll have to pay if you pay it off.
As an old friend of mine (a very capable finance manager in his day- he died early) used to say, “you’ve got a firm grip on that car.”
I realize that but if you are like me and start looking for your next car weeks after getting a new car, being locked in for the full lease term is not fun. Now I am leasing cars with realistic RVs and very low MFs. Combined with good discounts and incentives one can still get a good lease value and still have the flexibility to get out of the lease early. My current leases are:
Lexus RX450H - practically no interest thanks to MSDs, 11% dealer discount and $2,750 in manufacturer incentives and %51 residual for 45mo/12k
Mazda 3 GT Hatch - 0.00001 MF, $2,350 in incentives and 9% dealer discount 56% RV (arguably a little optimistic) for 36/12
Yes my end game is to have the flexibility so I can change cars often without taking a hit in the early lease trade-in. There is no way of knowing with 100% accuracy if a RV is spot on but you can make some predictions by checking the current value of a 3 year old car that you are considering leasing new. Also some brands and segments are hot while others are not. If you look at my previous post, my Lexus SUV has a very good chance of retaining half of its value at the end of the lease thereby having market value and residual value being very close for most of the lease term while a luxury sedan by Hyundai had no chance of maintaining nearly 60% of its original value after 45k miles.
A high RV is a “bird in the hand.” If you don’t keep the car, it’s one of the reasons the payment was lower than it could have been. The trade off is you have to make up for it with an increased negative equity situation if you get out early (unless GAP insurance covered it). If you keep the lease to the end, then you paid more for the car with the lower RV.
If you engineer the car you lease around low RV and MF, then chances are you’re going to lease second or third choice vehicles. If you hang onto the car until the end of the lease, all you have to consider is the payment itself vs the MSRP, a rough estimate of the lease’s value, like the 1% rule of thumb.
Would you turn down a $300/mo payment on a $60,000 car if the RV was high?
2 years was the better deal on S90 T6 in April with 8% difference in RV and tons of cash. But in most cases it is not, if you roll everything in and have the tax on the full price.
2 years can shine depending on miles. For example, someone driving 15K miles/year or more- less likely to buy tires or brakes, or an $800 40K service. Getting out sooner is a luxury. 24 months minus 9 months is fairly awesome.
You are right, it is the depreciation curve but also combined with generous residual values used in leasing and taxes that have to be paid on a buy out that make it rare you will ever break even on selling a leased car.
