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Lease Residual Values Show More of a Future Loss

By Liz Opsitnik
Friday, Jan 22 2010 12:22

Auto loans became the primary way to finance a new car purchase last year, as leases were scarce and required a prime credit score to even be considered.

Although leases and leasing incentives are becoming more common now, leases written in 2009 are predicted to have more than a $2,000 difference between the contracted residual value and what the vehicle will likely be worth at the end of the lease, according to CNW Research’s Future Residual Analysis.

This is not necessarily a good thing. The leasing industry almost came to a halt last year as SUVs and trucks that came off lease were worth considerably less than the predicted value. Lessors lost a lot of money from this and were leery to offer leases to consumers, considering the big losses they took.

CNW reports that although the loss-per-vehicle may decline somewhat by the end of the lease contract period due to outside influences such as a run-up in new-car prices causing used values to climb, the trend is what matters.

CNW lease residual value loss chart

Chart via CNW Research.


Confused or unsure about some of the car loan terms used in the article? Click here for our Auto Loan Glossary.



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