Earlier quoted context omitted.
The listed residual value is normally set to make it extremely unfavorable to buy out the lease. The appropriate amount of depreciation still occurs, they just achieve this by inflating the sales price for leases as most people only care about direct costs to themselves when starting a lease. It’s stuff like this that’s the real reason dealerships love leases. Their much more complex than a sale so the dealerships ha…
>The listed residual value is normally set to make it extremely unfavorable to buy out the lease. Close but it's a little more nuanced. You lease a trendy car (4Runner or something) and they expect able to turn it around, detail it and sell it on their CPO lot for way to much money to someone who thinks they're being savvy by buying CPO. You wanna keep it then you gotta pay them the way too much money they'd otherwis…
They loose more money but they make up for it in volume and get to book profits now and losses later (financial engineering).
I don’t think leasing a 4Runner ever makes financial sense unless you flip though cars every 2 years and live in a high sales tax state.