Quick S2000 lease question...
Thread Starter
Registered User
Joined: Apr 2001
Posts: 449
Likes: 0
From: Grand Rapids
Quick S2000 lease question...
Out of curiosity, does anyone know what the S2000's residual value is after a one year lease? Does the residual value vary from region to region or is it set by honda?
Thanks
Thanks
Registered User
Joined: Dec 2000
Posts: 573
Likes: 0
From: Nashville
The residual is determined my the leasing company, be it Honda Lease, Acme Lease. Whosit Lease, Citibank, or whomever is financing the lease. The dealer MAY use Honda Lease but they don't have to or you can arrange your own lease. Think about it. The leasing company gets the car back at the end of the lease. If they can't sell it for at least the residual they will lose money so they determine in advance what they think it will sell for (usually wholesale at auction) and hope they guessed right. The lease payments are then calculated based on the difference between the "capitalized cost" and the residual, plus interest and a profit for the leasing company.
Example. Dealer sells to leasing company for $32,000. That's the capitalized cost. Leasing company figues it's worth 24k in one year. Divide the 8k difference by 12 months and you have $666.67/month. Now add the interest cost. The average balance for the year would be 28k which at say 6% would be $1680 or another 140/mo. Now the leasing company must make something (after all they are assumming a risk if they miss on the residual and also the owners/stockholders sort of expect it!). So in this example you are probably looking at about $900/month (PLUS sales tax, license, etc). Obviously the residual selected greatly affects the monthly payments
The only exception to this is what I call "subdized leases". A good example would be when you see ads for Accords at $199/mo. Honda shuns cash rebates but they accomplish much the same thing with "subsidized leases". Here's what happens. The dealer sells the car to Honda Lease for a reasonable profit. Honda Lease then sets a HIGH residual which lowers the lease payments. Then Honda Lease (which is owned by AHM) wholesales the car at lease termination, usually for a loss of about $2000, which they fully expected. A few years ago Infinity was doing subsidized leases on the Q45 and losing 5k or better on the back end!
Call this "Leasing 101". Any questions?
Example. Dealer sells to leasing company for $32,000. That's the capitalized cost. Leasing company figues it's worth 24k in one year. Divide the 8k difference by 12 months and you have $666.67/month. Now add the interest cost. The average balance for the year would be 28k which at say 6% would be $1680 or another 140/mo. Now the leasing company must make something (after all they are assumming a risk if they miss on the residual and also the owners/stockholders sort of expect it!). So in this example you are probably looking at about $900/month (PLUS sales tax, license, etc). Obviously the residual selected greatly affects the monthly payments
The only exception to this is what I call "subdized leases". A good example would be when you see ads for Accords at $199/mo. Honda shuns cash rebates but they accomplish much the same thing with "subsidized leases". Here's what happens. The dealer sells the car to Honda Lease for a reasonable profit. Honda Lease then sets a HIGH residual which lowers the lease payments. Then Honda Lease (which is owned by AHM) wholesales the car at lease termination, usually for a loss of about $2000, which they fully expected. A few years ago Infinity was doing subsidized leases on the Q45 and losing 5k or better on the back end!
Call this "Leasing 101". Any questions?
Thread
Thread Starter
Forum
Replies
Last Post