Where do lease residual quotes come from? Really, not in theory.

I know that leasing has been the subject of about a half dozen threads over the past year, but this is concerned only with how leasing companies come up with the residual value.

The reason I ask is because from what I’m seeing, they pull these numbers out of their ass.

Now to be clear, the odds of my actually getting a Porsche Cayman-S are pretty small since what I drive now is a Honda. But don’t deny me my dreams god damn it!!!

So I was on leasecompare to see what the monthly cost would be for one of these lovelies. The shortest lease is 24 months, longest is 60. The 24 costs nearly $2000 per month while the 60 is $800.

Now for the interesting bit. Residual on the 24 is $26.5k. On the 60, it is $22k ($21.9 for accuracy).

Does that make any kind of sense to anyone? Think about it. They’re saying, that over the next 3 years of the lease (the difference between a 24 and a 60), the car depreciates by only $4.5k. Really?

Even if that sounded realistic, and I suppose it could since those types of cars tend to maintain their value, we see it is pure fantasy if we also look at the purchase price.

For the base model, that is about $58k. So based on the 24 month lease, the car depreciates by about $32k in the first 2 years. But after that, the annual rate of depreciation seems to fall at an astounding rate.

Here is the full table - unformatted, sorry, but at least in a spoiler box to save space.

Lease Term
Residual Payment 60 months
51 months
48 months
39 months
36 months
24 months

Understand that I have never leased a car and don’t know jack about leases. Well, that’s not really true, I could calculate one if you give me all of the information, but the real issue here is how do arrive at this one very important input.



They come from determining how much the market will bear and from making their customers behave in the way most profitable to the leasing company.

Also you are comparing the wrong numbers. If you enter such a contract and purchase the car at the end of the lease, you will have payed, starting with a 60 months lease and ending with the 24 month: