That’s right, depreciating value is actually a good thing, maybe even a GREAT thing as it pertains to new vehicle leasing. The base payment is based on this value, crazy right? Why in the world would this be a GREAT thing you ask? Well, if we understand lease residual value then this would be the next part of the lease puzzle that we need to uncover.
It Is Puzzling!
Depreciation, as it relates to new vehicles, has always been shared in this manner.. “New cars lose 20% when you drive them off the lot” or “When you sign your name on the dotted line” etc. Either way this is referring to the depreciated value at time of purchase, whatever percentage of depreciation you choose there is truth to it. Knowing the new vehicle depreciated lease value can come in very handy.
So What Does It Mean?
Actually its all in the phrase. Follow along, if the selling price of the new vehicle is $34,560 and the residual value is $22,809.60 this would leave the balance in between these numbers as the new vehicle lease depreciated value. The value today is $34,560 and the forecasted value in 33 months is $22,809.60 so the difference of the two is considered depreciation or the “Depreciated Value”. Pretty simple actually. Well it will be once we uncover the “Capitalized Cost” of the new vehicle which will not be today.
Okay, So Now What?
What? This wasn’t exciting enough for you? Yea, agreed, this is pretty Mundane information but to understand the basic leasing structure can be very helpful when discussing terms with your local car dealership. If you know the residual is based on 60% then that leaves the remaining 40% as depreciation? Far higher than the 20% from earlier. Would you want to own that car now? Not me, I’d rather borrow it for less then a few years and walk away.
Connect with us
