[quote]I see similar tactics being used on Honda Accords: 3 year lease and 53% residual. Who in their right mind would *not* buy out that lease at termination? [/quote]
No one will know whether you should buy until 3 years has past and your lease is almost over.

I wouldn't buy if the accord ended up being 50% of its original value instead of the agreed upon 53% at lease signing.

I would buy if the accord ended up being 60% of its original value instead of the agreed upon 53% at lease signing.

The depreciation used to determine a lease can work for and against you. If the agreed upon residual value ends up being higher than the actual market value after 3 years, you got a good deal on your lease. This is because you've been paying montly lease payments that were calculated with 53% residual instead of 50%.

If the agreed upon residual value ends up being lower than the actual market value after 3 years, you got a poor deal on your lease and it would be a good idea to buy and sell the car at the end of the lease to counter your inflated monthly payments.

Internguy said:I see similar tactics being used on Honda Accords: 3 year lease and 53% residual. Who in their right mind would *not* buy out that lease at termination?
No one will know whether you should buy until 3 years has past and your lease is almost over.Well, you don't know with 100% certainty, but you can have a pretty darn good idea where things are going to be at. What are the chances that a $20k accord will only be worth $10,600 after 3 years? How much are 2004 Accord LX Automatic with 36k miles selling for? That car stickered for about $20k when new and KBB thinks it is worth $14k now in "Good" condition for private party sales. The local CarMax is selling one with 37k miles for $16,098. Given these data points and the fact that the Honda Accord has been an extremely consistent performer in the market, I would wager that a 53% residual on an 3-year Accord lease would result in a buy-out at the end. Would you walk away from $3500 to $5500 of value if you were in such a position?

I wouldn't buy if the accord ended up being 50% of its original value instead of the agreed upon 53% at lease signing.

I would buy if the accord ended up being 60% of its original value instead of the agreed upon 53% at lease signing.

The depreciation used to determine a lease can work for and against you. If the agreed upon residual value ends up being higher than the actual market value after 3 years, you got a good deal on your lease. This is because you've been paying montly lease payments that were calculated with 53% residual instead of 50%.Just realizing that the lease residual can work for or against you is not enough. You must analyze what the likely outcome will be at lease end, and whether the current lease being offered will work for you. If there is a high likelihood that it will work against you, then don't take the lease. You should never go into a lease thinking "I guess I'll find out 3 years from now."

If the agreed upon residual value ends up being lower than the actual market value after 3 years, you got a poor deal on your lease and it would be a good idea to buy and sell the car at the end of the lease to counter your inflated monthly payments.The key is not just to realize that this is possible, but to plan ahead and try to anticipate the likely outcome.

Internguy said:
This is a poor lease deal, in the sense that you "HAVE" to buy at the end of the lease in order to negate the inflated monthly payments.

Realistically the accord should hold its value well, like you said, in which case you shouldn't have to pay the high monthly payments that come with using a 53% residual value. Using 53% REQUIRES you to buy, unless you like throwing away money.

The best lease is one in which the residual value is very realistic, since this will give you a good option after 3 years of buying the car or returning it at the end of the lease.I think the best lease deal is one where the residuals are unrealistically high, and the money factor is lower than a comparable term financing rate. Audi did this for a while but stopped after realizing that they ended up with a bunch of off-lease cars that were worth far less than the residual.