Thinking about leasing a new vehicle?
If it’s an SUV (sport-utility vehicle), a Mercedes-Benz GLC300 4MATIC ($46,149) will be worth $23,230.60 after just under four years (45 months). Monthly payment: $607.46.
Minivan? Lease a fully loaded Kia Sedona worth about the same as the GLC ($46,995) will be worth much less after 48 months: $16,181.55. Monthly payment: $763.
So the residual value – the value of a ride at the end of the lease – is far richer for Merc’s luxury SUV than Kia’s mainstream rig. By about $7,000. That means a lower payment – to the tune of about $155 a month.
If you’re among the several hundred thousand people who lease a new vehicle each year, this is the sort of detail you need to research. Residuals are particularly important. The higher the residual value, the lower the monthly payment.
Ah, residual values. They are grounded in many factors, from quality to brands to the popularity of individual types of vehicles.
Auto analyst Dennis DesRosiers he points out in a note to clients that certain types of vehicles are holding their value much better than others: “SUV residuals are all much stronger than minivan residuals. Similar for sub-compact cars which are now out of favour and thus have the lowest residual values within the passenger car segments.”
Minivans have really tanked. While light trucks on average hold 53.4 per cent of their value after four years, minivans are worth just 45.8 per cent – 7.6 per cent lower than industry average. Luxury SUVs like the GLC come in at 58.8 per cent of the original value after four years — 1.4 per cent higher than the average.
DesRosiers notes that 32.8 per cent of Canadian consumers leased a new vehicle last year and sales trends suggest leasing will take even more of the market this year. Those who rent a car long-term – which is what leasing is – will find the most attractive monthly payments on SUVs and other light trucks, not passenger cars.
The most shocking development is in passenger car residuals. Canadian Black Book reports than after 48 months, the average resale value for a passenger car is a rather pitiful 41 per cent. The average subcompact car is worth just 33.2 per cent of their original value after four years – 7.8 per cent below the car average.
On the other hand, small pickup values are incredibly strong — worth 21.1 per cent above the light truck average 48 months down the road or 74.5 per cent after four years. Why? Supply and demand. Buyers are stampeding to trucks, away from cars, and the supply of small pickups is tight.
“New light truck sales have increased from less than 40 per cent of the market to nearly 70 per cent of the market over the last couple decades. Because they are so popular new, they also are very popular used and this increase in demand is one of the reasons light truck residuals have increased,” notes DesRosiers.
If you plan to lease your next vehicle, take this information to the bank.