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Getting residual values This will take a little homework and shoe leather. 1. Identify several cars having similar features that can be leased for similar monthly payments. 2. Note and write down the residual value of the cars. 3. If youre not married to a brand name (most cars today have similar high quality) then if features are similar, go with the car having the highest residual value The Internet may not be the best place to try to get this information. Surveys show that 60% of people looking to buy or lease a car do some searching on the Internet. This has made the manufacturers less willing to disclose residual values. In fact, some of the Big Three (GM, Ford, Chrysler) will not print them in a quotation from the dealer. Residual values risks
Therefore the only reliable value is the one you get from a local dealer. All the rest are really an average. Manufacturers are uniform in not giving out residual values to third parties, so one has to wonder where the Internet sources get them. Decide on term of ownership Before asking for the residual value of the lease, decide on how long you plan on owning the car. Leases are offered for up to five years, or 60 months. Just be sure to get a residual value for the number of years you plan on owning the car. By Federal law all pertinent financial data must be provided before signing a contract. Ask any salesperson for a lease offer, and insist on the residual value. He may give it to you only verbally, since every effort is being made to hide this from you. Insist on it, and they will deliver the value. Say Thank You and move on If you get a hard time from the dealer or his salesperson, here is the law you can quote Note: For the sake of brevity, much of the material has been omitted as not relevant to residual values, but may be seen in whole om the Internet searching for Regulation M, then look for sub paragraphs as follows: Regulation M Consumer Leasing Sec. 213.4 Content of disclosures For any consumer lease subject to this part, the lessor shall disclose the following information, as applicable: 4) Residual value. The residual value, with a description such as the value of the vehicle at the end of the lease used in calculating your base [periodic] payment This means you have legal right to the residual value, under Federal Regulation M Financial gain For any two vehicles, whether a Sedan, Van, SUV, or light truck, costing about $25,000, it is not unusual for the trade-in value after three years to differ by up to $3,000. This is money that stays in your pocket. So the effort to do this fact finding before buying the car is handsomely rewarded. Financing terms The interest rate that determines the monthly payment is immaterial. All that is to be compared are two cars for which the monthly payment is essentially identical, and then develop an estimate of what each might be worth in x number of years. Its essentially money-in vs. money-out. If you pay the same monthly payment for car A as for car B, will car A cost $3,000 more to trade it in for the new model A than if you had bought car B? Copyright 2006 by Beacon Data LLC All rights reserved |
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