Would you rather have a low residual or a high residual and why

Ask the Hackrs
1

I am just curious to learn what people thing about this topic. Would you rather have a low residual or a high residual and why.

2

I think I’d rather have a low residual if i can save that money on the payment from the MSRP of the car, that way if I decide to buy at the end of the lease Im not overpaying. Alot of companies over inflate residuals to move cars. Thats a super low payment at the begining but buying the car becomes stupid because you overpay at the end…

I’d figure most people don’t care to buy at the end and will just lease again so it doesnt bother them.

3

Leasing a car and paying the same as financing and then buying in the end is stupid.

1 Like
4

There are very few if any cases that you would pay the same payment over 3 years to purchase and lease the same vehicle… Leasing at the beginning can be seen as a trial for people who are new to the company as well. It also extends the payments at a much lower interest rate most of the time as the MF are so low compared to most interest rates on financing (besides the generic 3 years 0% which would mean a massive payment) Someone may like their car and want to keep it. How is that stupid?

5

I exaggerated, obviously. The idea of leasing is to pay less for more car and drive new one every 2-3 years. If you like the car, you return your lease and buy the same, but new one.

6

Of course. There are sometimes though that if you get a sweet deal on a sweet car you may want to keep it even if it doesn’t make financial sense in the short term. Im at a crossroads with my ATS-V. I absolutely love the car and I still have almost 2 years left but the RV was marked so unrealistically high that the buyout is absurd.

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7

I rather have high residual high MF rather than low residual and low mf when I can use msds, otherwise it just depends on rebates/dealer discounts.

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8

Residual is just one factor; interest and incentives/discounts matter equally. A car with a high residual but no discounts and high interest can be worse than a car with a low residual but low interest and lots of incentives. The goal is to make all 3 line up.

9

I would think the answer would always be that you’d want a high residual. The higher the residual the lower the lease payment. At the end of the lease, if you want to buy it, see what the real value of the car is, and if it’s lower than the residual amount of the lease contract, don’t buy it, just turn it in. If it’s higher, you can either buy it (getting a good deal), or potentially take the car to Car Max (or some other dealer that buys cars outright) and sell it to them, if they’ll pay above residual, then you pocket the difference.

Frankly, I can’t see why you’d want a low residual. (But then again, I’ve only been hanging around this forum for about a month)

10

I want high residual, low mf and low sales price. I also want low bs from the salesman and high responsiveness to my emails. I also want low maintenance costs.

That would make me happy but drive the dealers out of business.

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11

If the Residual is high and you want a lower residual you can always just increase the mileage on the lease right? By increasing the mileage you lower the residual and I think most leasing companies let you max out a 30,000 miles per year.

12

If low residual is compensated by large discounts it could make a good flip play, the incentives/discounts being the key part of that equation. Otherwise, for a vehicle you want to keep, high residual, big discounts and the ability to use MSDs are key.

13

I once had a lease on my Audi. I was almost two years into a 39 month lease. I went to Carmax and got a buy bid for $1,500 over my buy out. So I ended up advertising it on Auto Trader and sold it for $2,800 over my buy out. I used the money to jump into a new vehicle.
My buddy tried to do the same with his Mercedes Benz right after when he saw I got out of my lease almost a year and a half early and made money. When he went to CarMax he found out he was $8,000 negative. He had to wait until the end of the lease to get out with out paying extra.
He probably had a higher residual than I did meaning he paid less of his car during the lease but i thought it was cool that I got to do what I did and he was always green in the eye over it, which was fun to poke at for the time being.

14

if the discount is the same on the lease and the purchase the deciding factor is the interest charged.
If I can lease it with a money factor of 0.00062 / 1.5%apr or less, which is common today, it will be cheaper for me to lease and buy at end then to finance for 72 months.
The typical interest on 72 months now is 3.9%. And with the way the loan amortizes, I am paying more interest in the first three years than I would be if I leased it for 3 years first. So as long as my MF is lower than my purchase APR it would be best for me to lease first. Not to mention the other benefits you get from the added protection of coverage against negative equity and free gap insurance. If I finance the car and the value bombs in 3 years I have to pay it off no matter what, I’m protected on the lease. If I total the vehicle 2 years in i get to walk away and get something new with out worrying if the insurance company will pay off my loan because I financed my tax and DMV fees into it causing me to be upside down by 10% the moment I signed.

15

Tl;dr. This discussion is the Pandora’s box and been discussed here and everywhere else. You can read about it, no need to explain anything to me.

16

Its a tripod of mf , incentives and RV . Incentives and RV go hand in hand , great RV with no incentives can be winner see at Subaru , Honda . Crazy incentives and inflated RVs see Chevy , Hyundai … MF again is subsidized by car maker so at the end of the day all 3 combined determines …