The true winner is the guy who can select exactly which model to buy (or sell) at exactly the right time. We've all heard how bad, bad, bad leasing a vehicle is, right? Well, if you by chance leased a full sized SUV or full sized pickup in the last couple of years you made a wonderful decision! Part of what my company does is teach this sort of thing to auto dealership managers; teach them how to be compliant with federal regulations and teach them how to be compliant with federal privacy laws. I found that about 9 out of 10 dealerships were improperly disclosing leases. What a shocker, huh?
The reason I say that you made a wonderful decision to lease an SUV or full sized pickup if you did so in the last few years is because lease companies establish two important factors when calculating a lease payment. One is the money factor; how much the money is going to cost you. Since I no longer do business in all states I don't know if it's federal law now or not, but the states I deal in now require the lease companies to use a percentage rate of interest; like you'd see on a loan. Before your lease money factor would be something like .01724. My personal opinion was that some of the lease companies intentionally used a 'money factor' as to prevent the consumer from knowing exactly what their interest rate was. The other major factor in establishing a lease payment is the residual value. That is the all important value that the lease company puts in writing as what the value your vehicle will be worth at the end of your specific lease period. This value has always been a dollar amount that is calculated as a percentage of the original MSRP, before any additions such as sales taxes, license fees etc.
As it turns out, lease companies 'guessed' way, way too high on the residual values of SUVs and full sized pickups. The customer who leased one of these, say two years ago, wins because they are making lease payments calculated on the assumption that their vehicle will be worth, say, $25,000 after their three year lease is over. Now, with today's economy, that vehicle is actually worth about $15,000 at the end of that three year lease. The customer "wins" because they can (and should) simply 'walk away' from the lease at the end of their term. The lease company takes the bath. This is exactly why Chrysler Corporation completely quit doing leases about a week ago. They had no idea what residual value to place on their vehicles and opted to take the bad press and dealer anger as opposed to take the risk of losing millions and millions on lease turn-ins.
Attached is a couple of clips from a trade magazine I subscribe to in my industry. It gives some stark examples of what has happened to these lease residual values. Now, remember, even if you don't lease anything, this information is important to you because it gives you a true 'best guess' from the insider's point of view as to what your vehicle will be worth at the end of a specific time.
Maybe I jumped too soon, but I sold a highly desirable Cummins powered one ton Dodge just last month because for my particular year truck and the condition of my truck, the value hadn't fallen at all. I sold it in less than 2 days for more than $2000 over the KBB 'Suggested List Price' value. At the same time I purchased a ten year newer one ton diesel pickup that I really liked (and was in mint condition) for more than $2000 under KBB 'Trade In Value' for that particular truck. I went up ten years in truck, about half the miles on the truck, and to a truck with all the options I wanted for less than $6000 difference. It's really hard to say if I did extremely well or not because it's possible the truck I bought may continue to plummet in value. Of course, I was concerned about how long my 'old' truck would be immune to losing value.
Anyway, as I've written here before, short of having a dealer's license and subscribing to Black Book online the best way to find a rather close dollar figure for the ACV (Actual Cash Value - the amount of money the car dealer will really appraise your vehicle for) is to use KBB's "Trade In Value" and not check any of the additional boxes for options. Enter the correct mileage and correct model, but don't check any of the boxes for adds. The value that KBB will then give you will be extremely close to what the actual appraisal of your vehicle will be at a car lot. True, some dealers are crooks, but a lot of them are good people and simply have to make some money to stay in business. They are scared right now because if they don't sell your trade in less than 60 days, they likely are going to lose big time on it.
