My lease buyout quote is significantly lower than my residual, is this correct?

[rodgewalsh]

Hi, apologies for this potentially confusing question. I leased a G70 in North Carolina around 6 months ago. I was given a a very healthy amount for my trade and long story short, I only had a total of about $7,500 in actual lease payments ($225 for 36mo) because I got 20k in credit for my trade. Recently, I just made a lump payment that would essentially leave me lease payment free for the next 2.5 years. I checked today for the buyout quote expecting it to just be the residual amount from the original contract but the amount was nearly 6k less than the original residual amount as stated on my terms. Is this common for the buyout amount to be lower than the residual just because I paid all of my lease payments in a chunk?

Can this possibly be right? I know I can just call the 800 number and ask but I was wondering if anyone has ever heard of this. Ive never leased a car prior to this one.

Thank you in advance for any advice or insight.

 

[Decimus Brutus]

Hi, apologies for this potentially confusing question. I leased a G70 in North Carolina around 6 months ago. I was given a a very healthy amount for my trade and long story short, I only had a total of about $7,500 in actual lease payments ($225 for 36mo) because I got 20k in credit for my trade. Recently, I just made a lump payment that would essentially leave me lease payment free for the next 2.5 years. I checked today for the buyout quote expecting it to just be the residual amount from the original contract but the amount was nearly 6k less than the original residual amount as stated on my terms. Is this common for the buyout amount to be lower than the residual just because I paid all of my lease payments in a chunk?

Can this possibly be right? I know I can just call the 800 number and ask but I was wondering if anyone has ever heard of this. Ive never leased a car prior to this one.

Thank you in advance for any advice or insight.

It is not uncommon to have a difference between your residual value and buyout offer on the vehicle. When an OEM sets a residual value working their captive finance company (Genesis finance) they analyze several variables including ALG (Automotive Lease Guide) that estimates what the value of the vehicle will be three years down the road with XX amount of miles on it. Setting the residual too low will result in the monthly lease payment being higher. If you set the residual higher, the monthly payments will be lower and more attractive, but create financial risks for both the OEM and the finance company when the actual value of the vehicle is lower due to market conditions. A high quality desireable new car typically holds its value better than a vehicle that does not adequately compete in the market. While the G70 is an awarding winning vehicle, its general awareness, demand as a used vehicle, and brand perceptions will affect its value. Due to the lease structure and contract language you typically are forced to purchase the vehicle you own as the residual amount, good if the value of the vehicle is greater but not good if the value of the vehicle is less than the residual.

If the market value is less you may be able in some cases to work with the finance company and negotiate a buyout but they will be somewhat reluctant due to a perception they wil get more for a vehicle at auction. If you want to buy your vehicle and are forced to buy at the residual when the market value is lower, best to walk and get something else as you will be upside down.