Residual Value

[HD5280]

Does anyone know what the current residual value % is on a 2019 2500? I know it’s slightly different per trim but I’m just looking for a general idea. Comparing purchase vs Lease pricing just for a math exercise. Payment seems much higher on lease than I would have expected which is why I’m purchasing. Much appreciated.

 

[wowens79]

A lease is always the most expensive way to buy a car long term. It’s just a way to get a lower payment so a person can buy a car they want, but can’t afford.
A turned in leased vehicle is many times a truck to buy. Let someone else take all that depreciation, although HD trucks do seem to hold their value better than most vehicles.

 

[Lary0071]

A lease is always the most expensive way to buy a car long term. It’s just a way to get a lower payment so a person can buy a car they want, but can’t afford.
A turned in leased vehicle is many times a truck to buy. Let someone else take all that depreciation, although HD trucks do seem to hold their value better than most vehicles.

I slightly disagree. A lease, if the plan is to convert to a buy, is often a bad deal. But... Lets say you are a buy a new car ever 2 years kind of guy. So you go look at a new RAM 1500 for $45K, you price it out as a 12K miles per year lease and as a flat out buy and see a lease payment of $600 and a buy payment of $850.

In 2 years on that lease, you know you walk away with nothing additional lost at worst. If you under mile the truck and/or maintain it like a champ.... you may get a couple dealers who want to buy it out at the end of the lease. I actually just did this and got $6,000 to turn my 2017 Rebel Mojave Sand edition in. So I saved about $250 a month in payment, hauled my Jeep, Kubota and camper for 2 years, and got $6000 applied to my purchase of a 2019 RAM 2500.

Now on the RAM 2500/3500 a lease does not work out the same. The reason as explained to me is that the lease company assumes that a leased HD truck is going to go to work and come back looking somewhat thrashed. So a lease payment is likley HIGHER than a buy payment! And quite often by a large amount.

If you leverage a lease (this includes paying "rent") and stack a buy loan to it after the lease ends..... you can allow yourself to pay interest for 9 years on a truck. Depending on your financing options (your credit score) you may buy a $50K truck that you pay $100,000+ for at the end of a bad lease and bad buy financing deal since you can spread that rent and interest out over a 3 year lease plus a 5 or even 6 year loan. Imagine.... 9 years of financing and massive interest on a rusted truck, far out of warranty and with mechanical issues. Your upside-down almost the entire time, you can not easily get out from under this loan and you hate your life.

A Lease is for a person who wants to jump in and back out cleanly in short time and repeat this over and over. Even at that you need to do the math and look at the lease deal. What is the buyout price? Do you think you can have equity at the end based on that contracted buy out? Is it cheaper to buy with current incentives? Cheaper to lease? Can you live within the miles and can you maintain the condition of the vehicle so that a lease is even an option? It is not as cut and dry as the monthly payment. You need to consider your specific deals and your situation. And you need to be honest to yourself.

 

[Blackfin]

dfafd

A lease is always the most expensive way to buy a car long term. It’s just a way to get a lower payment so a person can buy a car they want, but can’t afford.
A turned in leased vehicle is many times a truck to buy. Let someone else take all that depreciation, although HD trucks do seem to hold their value better than most vehicles.

I totally disagree. I worked at two OEMs for over 15 years and can tell you this is not universally the case. It completely depends on the incentive strategy of the OEM, the way they manage customer lifecycle, and your specific usage needs of the vehicle. Many OEMs prefer leases as it creates a near guaranteed purchase cycle of 2-4 years when customer leases end. Many will choose to incentivize leases with a combination of low/zero money factors (equivalent interest rate on leases is 24 x money factor), and inflated residuals. They will inflate the residuals to get the payment lower if the money factor is near zero. Now as a consumer you have basically interest free financing for 3 years and they are charging you less than market depreciation. You as the consumer have the choice at lease end to buy out the vehicle or simply hand the keys back (in some cases with a disposition fee, check the agreement), the OEM is 100% on the hook for resale value risk not you. For some people that convenience and piece of mind is worth a lot. Even if you plan to own the car long term, why would you turn down these incentives and the flexibility.

The only real trap on leasing is if your usage pattern does not fit the lease as pointed out by Lary0071 above. If you drive 25k a year and sign up for a 12k lease you are now taking a lot of risk. The per mile overage charges can quickly add up and if the resale values tank you are now forced to either pay the mileage charges or overpay for a used vehicle at lease end. The other consideration is for people that use their vehicles hard, you could wind up with a bunch of lease end charges and be in the same situation as the over mile charges, either pay the charges or buy an overpriced vehicle (the buyout is not adjusted down for your wear and tear). In either case, you lose the option to just walk away financially.

In the case of RAM, they seem to be putting all of their incentive dollars into 0% financing and employee pricing at the moment. Assumption on my part, but given the low interest rate environment and uncertain times, this makes more sense to them than taking the residual value risk and generally allows them to address a bigger market than leasing. This is why the OP is seeing the payment differences in their own situation.

To answer the OPs question, any RAM dealer should be able to give you a residual from Chrysler Capital and maybe one other source. Residuals are the same for everyone but dealers are allowed to markup the money factor and it is dependent on credit score so buyer beware. Residuals are set every two months and generally decline with each cycle as a model year ages. If you are set on leasing you may get a better deal on a 2020 as those residuals should be stronger than a 2019.

 

[wowens79]

I slightly disagree. A lease, if the plan is to convert to a buy, is often a bad deal. But... Lets say you are a buy a new car ever 2 years kind of guy. So you go look at a new RAM 1500 for $45K, you price it out as a 12K miles per year lease and as a flat out buy and see a lease payment of $600 and a buy payment of $850.

In 2 years on that lease, you know you walk away with nothing additional lost at worst. If you under mile the truck and/or maintain it like a champ.... you may get a couple dealers who want to buy it out at the end of the lease. I actually just did this and got $6,000 to turn my 2017 Rebel Mojave Sand edition in. So I saved about $250 a month in payment, hauled my Jeep, Kubota and camper for 2 years, and got $6000 applied to my purchase of a 2019 RAM 2500.

Now on the RAM 2500/3500 a lease does not work out the same. The reason as explained to me is that the lease company assumes that a leased HD truck is going to go to work and come back looking somewhat thrashed. So a lease payment is likley HIGHER than a buy payment! And quite often by a large amount.

If you leverage a lease (this includes paying "rent") and stack a buy loan to it after the lease ends..... you can allow yourself to pay interest for 9 years on a truck. Depending on your financing options (your credit score) you may buy a $50K truck that you pay $100,000+ for at the end of a bad lease and bad buy financing deal since you can spread that rent and interest out over a 3 year lease plus a 5 or even 6 year loan. Imagine.... 9 years of financing and massive interest on a rusted truck, far out of warranty and with mechanical issues. Your upside-down almost the entire time, you can not easily get out from under this loan and you hate your life.

A Lease is for a person who wants to jump in and back out cleanly in short time and repeat this over and over. Even at that you need to do the math and look at the lease deal. What is the buyout price? Do you think you can have equity at the end based on that contracted buy out? Is it cheaper to buy with current incentives? Cheaper to lease? Can you live within the miles and can you maintain the condition of the vehicle so that a lease is even an option? It is not as cut and dry as the monthly payment. You need to consider your specific deals and your situation. And you need to be honest to yourself.

When I buy a vehicle, I plan long term. You get killed swapping constantly. I've been in my current truck for 18 years, and my next truck I'll buy in the next year,should last me to retirement in 15 years. Sticking those $500 a month payments in investments has worked out well., much better than swapping trucks constantly.

 

[Tom716]

The only real trap on leasing is if your usage pattern does not fit the lease as pointed out by Lary0071 above. If you drive 25k a year and sign up for a 12k lease you are now taking a lot of risk. The per mile overage charges can quickly add up and if the resale values tank you are now forced to either pay the mileage charges or overpay for a used vehicle at lease end. The other consideration is for people that use their vehicles hard, you could wind up with a bunch of lease end charges and be in the same situation as the over mile charges, either pay the charges or buy an overpriced vehicle (the buyout is not adjusted down for your wear and tear). In either case, you lose the option to just walk away financially.

I am currently in that situation. Every two years my wife was trading our purchased vehicle in for something she liked better. After about 4 vehicles I suggested she just lease a vehicle. In november of 2017 she comes home with a new leased Dodge durango. We have never leased a vehicle before but she got what she wanted at a monthly payment she was happy with. All is great for the first two years until I check her mileage and she is 2K miles away from her agreement and 1 year left. Now what? I go and buy my dream truck in my signature and her lease sits in the driveway while we pay insurance and monthly payments until January of 21. Live and learn I guess .... Ughhhh

 

[Blackfin]

I am currently in that situation. Every two years my wife was trading our purchased vehicle in for something she liked better. After about 4 vehicles I suggested she just lease a vehicle. In november of 2017 she comes home with a new leased Dodge durango. We have never leased a vehicle before but she got what she wanted at a monthly payment she was happy with. All is great for the first two years until I check her mileage and she is 2K miles away from her agreement and 1 year left. Now what? I go and buy my dream truck in my signature and her lease sits in the driveway while we pay insurance and monthly payments until January of 21. Live and learn I guess .... Ughhhh

Couple of options to consider:
1. Turn the vehicle in early. You will still be liable for the remaining payments but at least you won't have to pay the insurance on an unused vehicle.
2. Some manufacturers have "pull-ahead" programs that allow you to turn in the lease up to 6 months early and often waive lease end charges if you purchase a new vehicle from the same manufacturer. It may or may not be tied to a new lease (ie sometimes a loan or cash deal may also qualify for the lease pull-ahead)
3. Dealer may help you trade out of it, there could be some back end incentives they have access to if you buy another FCA vehicle. Especially if you have been a loyal customer.
4. Buy the vehicle out now yourself and use it or sell it. The market for trucks/SUVs is still strong in parts of the country with no new production coming down the pipe.
5. Just drive it and eat the mileage charge. The incremental cost may still be less than a new vehicle.

Good luck. I have no knowledge of FCAs current programs, but hopefully you have a good local dealer that can help you out.

 

[WXman]

I'm going to refresh this discussion because I'm wondering the same thing. I'm currently leasing a 1500. I have leased several trucks and Jeeps. Financially, it just works out way better for me. Anyhow...so I'm leasing a 1500 and due to recently getting a larger enclosed trailer I'm starting to desire a 3500 instead, probably a Cummins truck. Historically, my Jeeps have all had residual values in the 66-71% range at 4 years. The Ram 1500 is garbage at 50-55% at 4 years, but it's still better than having a $978 payment. In my brief discussions with dealers about the 3500 trucks, it seems the lease residuals are LOW. Even though the Cummins trucks hold value VERY well, the leases on them are terrible. Why is that? Makes NO sense.

Anyway, to get to the point, what are you guys seeing for residual values at 4 years on leases with, say, a 3500 crew cab 4x4 and Cummins engine? Is it at least 60%?

 

[wowens79]

Best best is to buy a 2-4 year old one and let the original owner take that 40-50% hit. If it’s got 30-40k miles on it you the truck still has 75% of really good life in it, but you only have to pay for 50% of it. Even at 150k the truck still will have $5-10k of value it it.

 

[Lary0071]

I'm going to refresh this discussion because I'm wondering the same thing. I'm currently leasing a 1500. I have leased several trucks and Jeeps. Financially, it just works out way better for me. Anyhow...so I'm leasing a 1500 and due to recently getting a larger enclosed trailer I'm starting to desire a 3500 instead, probably a Cummins truck. Historically, my Jeeps have all had residual values in the 66-71% range at 4 years. The Ram 1500 is garbage at 50-55% at 4 years, but it's still better than having a $978 payment. In my brief discussions with dealers about the 3500 trucks, it seems the lease residuals are LOW. Even though the Cummins trucks hold value VERY well, the leases on them are terrible. Why is that? Makes NO sense.

Anyway, to get to the point, what are you guys seeing for residual values at 4 years on leases with, say, a 3500 crew cab 4x4 and Cummins engine? Is it at least 60%?

Leading on HD or what is considered commercial trucks is horrible. Typically a lease on an HD will have higher monthly payments than a buy. It's assumed that the truck will see service induced wear and tear so the amount of value that you pay for in the lease much higher to cover that.

On half tons and below, the story is typically very different.

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[asplund_swe]

The used HD market seems super high with trucks selling in the 60-65k range after 3 years with 50k miles and a MSRP of $85k. I’ve been debating buying new vs used but it seems I can buy new and not loose more than buying used. What’s everyone’s experience with this? I’m new to HD trucks..


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