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Why do Residuals suck?

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Old 12-21-2017, 06:15 PM
  #16
Apbc2
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Some good points here. Another reason that Porsche is so conservative with their residuals on TT and TTS is the Carfax/Accident factor. At the end of the lease, if you haven't had an accident you will undoubtedly have equity in the car. If, however you have some accident, even if repaired perfectly, the residual will plummet.
So, in the case that you're done with your 3 year lease and the car has a bad Carfax, Porsche credit doesn't want to be upside down. Poor residuals put accident damage risk on the lessee, not the lessor.
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Old 12-22-2017, 08:42 PM
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If Need4S had an accident just before the end of the lease and the car was totalled, he would have been out of pocket by a big sum because the insurer would have paid of the lease to the leasing company, but they wouldn't have paid Need4S the equity in the lease. There is no reverse gap insurance.

So the point is you should always buy not lease. Do balloon financing if you want to keep the payments low. I just finance my car on a 5 year loan at 1.9% and I think that optimizes my TCO including the opportunity cost of money.
I hadn't thought of that! Good thing nothing happened! On the other hand, if the accident was not my fault, I'd at least in theory have a claim against the other driver for my loss of equity. In theory.
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Old 12-23-2017, 12:56 AM
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Originally Posted by Need4S View Post
I hadn't thought of that! Good thing nothing happened! On the other hand, if the accident was not my fault, I'd at least in theory have a claim against the other driver for my loss of equity. In theory.
Nope, both your insurance and some other driver's insurance would have to pay the value of the car, not the lease payoff or loan payoff. Gap insurance is there only if you owe more on the car payoff than the determination of value for either the lease or the loan. How much you owe, and to whom, does not even factor in to the insurance company's declaration of the vehicle value. Also, you don't always have to settle for the insurance company's initial value, either. Leases are often sold as "what if it gets hit" but they are still overpriced for Porsches, and I don't fall for that anymore.
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Old 12-23-2017, 02:24 AM
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MaxLTV
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Originally Posted by Randyc151 View Post
Nope, both your insurance and some other driver's insurance would have to pay the value of the car, not the lease payoff or loan payoff. Gap insurance is there only if you owe more on the car payoff than the determination of value for either the lease or the loan. How much you owe, and to whom, does not even factor in to the insurance company's declaration of the vehicle value. Also, you don't always have to settle for the insurance company's initial value, either. Leases are often sold as "what if it gets hit" but they are still overpriced for Porsches, and I don't fall for that anymore.
In most states, the other driver's insurance company would be responsible for the diminished value of the car. when my M3 got rear-ended, the diminished value claim was fairly straight-froward and made me whole and a little more on the sale of the car - basically the amount I sold the fixed car for plus the diminished value compensation together were near the top of the range I was hoping to sell the ar for before the accident.
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Old 01-01-2018, 02:10 PM
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Personally as a dealer the residuals seem to be an effect to steer certain types of buyers to certain types of cars.

The higher the msrp, the worse the residual. Even though we know the GT3 or Turbo are their best cars the residuals on both after 36 months are below 50%... it's protection for Financial Services- if you nuke your car and walk away, they are hosed on a 200k car. If the same things happens on a macan then it's way less of a big deal.
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Old 01-01-2018, 06:14 PM
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Originally Posted by C.J. Ichiban View Post
Personally as a dealer the residuals seem to be an effect to steer certain types of buyers to certain types of cars.
I appreciate the perspective from a dealership owner.

Interesting. I have a household income that puts me in the top 2% and I have never personally crashed a car (yet) and I know many people who are UHNWI (Ultra high net worth individuals are people with investable assets of at least $30 million) that crash a car every couple of months. I personally don't feel there is a strong correlation between ones affluence level and accident risk. However this is based on my own Imperial evidence and a larger sample size would be needed to yield more accurate results. I can interpret your answer to mean Porsche is "ok" with only selling turbo and turbo S cars to those who don't care about $800 a month difference that is a pure conservative play by Porsche Financial. I do care about cash flow as that is $800 a month that I could be investing elsewhere. However, I recognize that I'm right between the line of those who can't afford the car and those who don't care about a lost return on $800 a month. I know that I'm part of a minuscule group of buyers and Porsche selling a few extra cars to my income group if they made the residual more realistic is not worth the risk for all leases. Hence why as much as I love the 911 TTS this made me choose a different car and manufacturer. I'm still young at 29 and if I can break that 1% mark than surely I will be ordering a 911 TTS Cab as I will no longer care about that $800 a month. As most people on this forum know giving up money when your younger costs you more than when you are 45. Hence why I'm sure the average 911 Turbo S owner is 40+.

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Old 01-01-2018, 06:56 PM
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I understand the conservatism in residuals but Iĺve never understood the huge markup on the money factor. Essentially 3% per year over a good rate from a CU... I can only assume their high MF number fell out of a profit maximization trade study.
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Old 01-01-2018, 06:59 PM
  #23
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Originally Posted by ace37 View Post
I understand the conservatism in residuals but I’ve never understood the huge markup on the money factor. Essentially 3% per year over a good rate from a CU... I can only assume their high MF number fell out of a profit maximization trade study.
Yes, when you add everything up the 911 TTS was pushing north of 3k a month for a lease. I was able to get a customer order Alpina B7 for $1,800 a month. Personally, (don't hate guys) at my income level the 911 Turbo S is not worth $1,200 a month more over a B7. A B7 is a lot of performance and luxury for the value. It drives well for what it is but certainly not as crisp as a 911.
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Old 01-07-2018, 01:46 AM
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Originally Posted by icebeam View Post
I personally don't feel there is a strong correlation between ones affluence level and accident risk.
I believe his point was car companies offer high residuals and low money factors to cars they want to sell more of, not that you have fewer accidents with higher net worth.
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Old 01-13-2018, 04:42 PM
  #25
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So for those that have turned them in after lease, has anyone gone back to see what the dealership is selling it for later?

-TJ
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Old 01-13-2018, 10:26 PM
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Originally Posted by Top Jimmy View Post
So for those that have turned them in after lease, has anyone gone back to see what the dealership is selling it for later?

-TJ
I've turned them in, but I make sure I get equity towards the new one.
My residual is 99K on this current one. When I give it back to the dealer, they're gonna clean it up and sell it for $145-$150K. (market value).
A big chunk of that $50K in equity comes back to me on the new lease in terms of equity as the dealer writes me a nice check and that goes towards the new lease.
I don't get the full $50K, but I get a nice chunk of it.
That's been my experience.
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