pancakes213 wrote:I'm a newbie to leasing. How would the residual value change at the end of your lease? I was assuming that if I'm given a residual value of $29k right now when I sign my lease, then that would be what I agree to pay after the lease if I want to purchase it.
If the car is actually worth a lot less than what you your residual, if you wanted to buy it, you'd still have to pay the residual value unless you could negotiate with the dealer. But, in the time you had it, because they thought it would be worth more, you only are paying for essentially the depreciation, and would have had a bargain verses buying it, then trading it in. On the other hand, if it were worth more than your residual, you'd be getting a bargain if you bought it, even if you then sold it...you would have paid more for it during the lease, but may be able to make it up if you bought it and then resold.
So, when it is worth more than the residual...you've paid too much. ANd, the opposite, if it is not worth the residual. The 'winner' can flip-flop. It only comes out even if the guess is correct for all involved (well, the dealer is making money regardless).
Basically, a lease is a guess at what the depreciation will be, and you pay that plus a bit for profit. Who ends up the biggest winner, depends on how good the guess was. In the interim, you get to drive the car.