End of 24 mo Lease Residual vs. Trade-in Value
12-04-2015, 02:57 PM
#16
Rennlist Member
Porsche hedges all their residuals, they have no risk and the result is they won't move downward to meet FMV should it be lower. If the car is above market, the dealer may purchase it and negotiate the CPO with Porsche, otherwise its off the wholesaler.
I had an interesting lease end situation in August on a push forward deal. There was an identical car to mine (even the mileage was within 500) that was being offered for $75k which was 4k above residual and it was a CPO with new tires. The cost of the CPO on that car, including rehabilitation was $4,500. I assumed the dealer would sell it for $71k or $72k, a reasonable discount on the asking price. So, I asked if I could buy my car for $2k below the residual which was apples to apples without the CPO. Porsche would not reduce the residual on my car. They would rather lose money on the deal. Go figure!
I had an interesting lease end situation in August on a push forward deal. There was an identical car to mine (even the mileage was within 500) that was being offered for $75k which was 4k above residual and it was a CPO with new tires. The cost of the CPO on that car, including rehabilitation was $4,500. I assumed the dealer would sell it for $71k or $72k, a reasonable discount on the asking price. So, I asked if I could buy my car for $2k below the residual which was apples to apples without the CPO. Porsche would not reduce the residual on my car. They would rather lose money on the deal. Go figure!
12-04-2015, 03:25 PM
#17
Rennlist Member
The money has been made for PFS. You buying the car off them is icing on the cake. The dealers want the car off of PFS because they get it for a bit less than he trade in value. Your price and the dealer price are about $10K apart for PFS sales. You can negotiate the buyout if you wanted, they rather sell to you. If not, turn the car in to the next dealer (Porsche or not) and ask for a discount on your next car since you're giving them a car that will profit them heavily in the used car market.
" regular " , high volume production versions of 911s have ALWAYS depreciated worse than , say, every Toyota model the first 5 yrs , so most large automakers with profitable in-house lending divisions ( like VWAG's PFS ) protect themselves a little bit with " residual gap " insurance policies sold by specialty insurers since they know to the penny what their cars will be worth at end of any term and in PFS case , they hope they can still turn a profit on the lease interest paid , after adjusting for auction price plus gap insurance but make up for it by pulling you through at or near the end of lease term to step into another model in their lineup
recall how BMW sold most of their 3 and 5 series in the 90s and 00s with those $299 or $399 /month leases by setting ridiculously high residual values which they ate at turn-in auction time , costing them ultimately billions of dollars...all in the aim of maintaining their leading market share in that size class ....the aims of the CMO and CFO are usually a tug of war...in BMWs case, not enough of their 5 owners stayed with the brand as BMW driving exoerience went softer just as Audi / MBZ went more hardcore ...ergo the ultimate losses...which forced them a few years ago to write more market correct higher cost leases on their 3s and 5s ( was shocked to read that 90% of current new 5s are leased in the US ..transitional posermobile ? ...vs only 40% of 3s , as I suspect latter are more often loyal fans over decades who buy instead of lease and hold each one much longer )
12-04-2015, 05:04 PM
#18
Rennlist Member
I don't think you can worry too much about Porsche's side of the ledger - much there we'll probably never understand.
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
12-04-2015, 05:50 PM
#19
There are more answers than questions when it comes to leases, but one thing is for sure. PFS profits more when the lessee buys out the car. Wholesale values are lower than residual values by miles.
If one had leased a 997.2 GT3 in 2011, the residual and market values would be weighed down by the obscene GT3 prices we now see. Porsche still made money. Even with a skewed and unorthodox pricing outcome.
If one had leased a 997.2 GT3 in 2011, the residual and market values would be weighed down by the obscene GT3 prices we now see. Porsche still made money. Even with a skewed and unorthodox pricing outcome.
12-04-2015, 06:07 PM
#20
I don't think you can worry too much about Porsche's side of the ledger - much there we'll probably never understand.
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
I'm not worried about Porsche at all. I enjoyed the car, but it'll probably be my last Porsche. The extra value Porsche provides in the areas of performance just don't seem as valuable to me for what Porsche charges.
12-04-2015, 06:27 PM
#21
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I don't think you can worry too much about Porsche's side of the ledger - much there we'll probably never understand.
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
From your perspective, if the residual is higher than the FMV - just hand the keys back in and walk away happy you paid less in "rental" than you would have if you bought the car and suffered depreciation if you had to now sell it. The offset being the higher interest rate you paid vs if you had bought and financed the car.
There's so many ways to look at this - some will say pay cash so you don't pay interest vs others who will say you could get a better return on investing that cash. Some will say buy and finance it as the interest cost is lower. Some will say you should hold the car longer and maybe purchasing makes the most sense. Some can't understand how you could possible want to limit your miles through a lease. Everyone's perspective and reasoning is different - a personal decision.
Stepping back, with a lease, it's almost like you have a purchase option on the car after a set amount of time which costs you a little more (just like when you hedge anything) through the higher interest rate charged.
If you really don't have to have that new / perfectly customized car though - going used/CPO sure is attractive when you look at STG's thread!
And don't forget that the finance company also assumes the liability of decreased market value of the car if it is involved in an accident. Another significant benefit to leasing.And often, the interest rate (money factor) is the same/lower than financing. At end of model year, for example. Unless you are big into modding your car, leasing makes tremendous sense.
12-04-2015, 06:29 PM
#22
That was the primary reason I leased actually. After a bad experience of having my CLS550 hit and having to sue the person that hit me to recover some loss value, I was ready to not have to worry about that.
12-04-2015, 06:37 PM
#23
Burning Brakes
Decided to do my first lease for my 991.2 for most of the reasons listed above.
Plan to lease for three years. If I still want a 911 after three years then I will buy the car. If not then give it back to dealer. Easy. I want to have that option instead of having to sell a car I am paying a loan on. If in that 3 years the car has any kind of accident and acquires the dreaded Carfax curse, then either it's back to the dealer or I keep it very long term. Only downside is it costs me a bit more if I buy the car compared to a low interest loan. I am paying for choice and less potential hassle.
Plan to lease for three years. If I still want a 911 after three years then I will buy the car. If not then give it back to dealer. Easy. I want to have that option instead of having to sell a car I am paying a loan on. If in that 3 years the car has any kind of accident and acquires the dreaded Carfax curse, then either it's back to the dealer or I keep it very long term. Only downside is it costs me a bit more if I buy the car compared to a low interest loan. I am paying for choice and less potential hassle.
12-04-2015, 10:55 PM
#24
All good points thus far.
I have been leasing my cars for past 15+ years with various brands and have always just turned in the keys. Sometimes there is a fee for XS wear/tear but usually not too bad.
My last 911 lease I had worn rear tires and I got PFS to waive the replacement cost. I am sure it helped that I was getting into another P car though.
I have been leasing my cars for past 15+ years with various brands and have always just turned in the keys. Sometimes there is a fee for XS wear/tear but usually not too bad.
My last 911 lease I had worn rear tires and I got PFS to waive the replacement cost. I am sure it helped that I was getting into another P car though.