Don’t understand these Ford lease specials?

[veeman]

My Dad in the last 20 years has done a 180.  When I was a yoot, he drove our cars to the ground and didn't maintain them properly.  Now he buys a new car every 2 years.  As soon as the car hits close to 40,000 miles he trades it in.  He only buys GM or Ford.  Anyways, he wanted to trade in his Ford Escape and the dealer convinced him to lease instead of buy another car.  So with 0 down, he got a Ford Fusion Hybrid for $240/month.  3 years and 10,500 miles a year.  The trade in didn't affect this deal because he took cash for that.

How is that possible?  That's a great deal.  It's better than my 4 cylinder Camry lease because while that's $181 month, I put a thousand or two down and the Hybrid Fusion retails for around $4000 more than the Camry.  I thought lease rates were based on residual value?  In three years the Ford Fusion Hybrid shouldn't be worth that much especially with Ford canning all their sedans.

[12,000 RPM]

Manufacturers subsidize the hell out of leases. You look at pretty much any German manufacturer, their residual values are higher than what the cars retail for. Ford is probably playing ball to get the last of the Fusions out the door. Domestics have always played fast and loose with discounts... it's def possible to stack discounts in a way that will net you a 5 figure savings on a mid grade Fusion at the right dealer

[veeman]

Yeah that makes sense.  I was always under the impression lease rates on cars was based primarily on residual value at the end of the lease.  The more value the car has on the used car market at the end of your lease period, the lower your lease payment would be generally.  But I guess that's not true. 

[12,000 RPM]

The residuals on competitive leases are almost completely detached from anything in reality.

[BimmerM3]

So basically any good lease deal is mostly because the manufacturer doesn't want to have to store the cars in a lot somewhere?

FWIW, I really liked the Fusion Hybrid I rented a few months ago.

[CaminoRacer]

I'm pretty sure I'm gonna lease a Civic or something at the end of the summer. It just makes more sense - the monthly cost for a new $20k car is $50 cheaper than buying a used $15k car.

[12,000 RPM]

So basically any good lease deal is mostly because the manufacturer doesn't want to have to store the cars in a lot somewhere?

I wouldn't go that far

But the residuals are nuts. Just for giggles I looked up the residuals on a 2018 3 series.... $26K. A CPO '16 is going for about $22K. And they put another $3500 on the lease as an incentive. So in real life leasing, returning and re-buying a German car will save you like 20% on MSRP. Somehow they still turn a profit so it works

[Xer0]

I'm pretty sure I'm gonna lease a Civic or something at the end of the summer. It just makes more sense - the monthly cost for a new $20k car is $50 cheaper than buying a used $15k car.

IIRC, Honda was offering 199/month leases on the Si last summer.  If they replicate it this summer, that's a hell of a deal.

[BimmerM3]

I wouldn't go that far

But the residuals are nuts. Just for giggles I looked up the residuals on a 2018 3 series.... $26K. A CPO '16 is going for about $22K. And they put another $3500 on the lease as an incentive. So in real life leasing, returning and re-buying a German car will save you like 20% on MSRP. Somehow they still turn a profit so it works

Yeah I'm just trying to figure out how it's financially beneficial for the manufacturer to subsidize the lease.

The lease mentioned in OP is like $8600 for three years, on a $27k vehicle. But three year old Fusion Hybrids are selling for like $15k.

[CaminoRacer]

Yeah I'm just trying to figure out how it's financially beneficial for the manufacturer to subsidize the lease.

The lease mentioned in OP is like $8600 for three years, on a $27k vehicle. But three year old Fusion Hybrids are selling for like $15k.

Maybe they're actually going out the door at $22k?

[BimmerM3]

Maybe they're actually going out the door at $22k?

Oh, good call. I was looking at MSRP from Ford.com, but it looks like you're right based on dealer listings.

https://www.cargurus.com/Cars/new/searchresults.action?sourceContext=homePageNewCarTab_false_0&selectedEntity=d2702&zip=80301

[veeman]

No wonder they're canning all their sedans.  They're taking a beating on them.  Especially hybrids. 

[CaminoRacer]

Oh, good call. I was looking at MSRP from Ford.com, but it looks like you're right based on dealer listings.

https://www.cargurus.com/Cars/new/searchresults.action?sourceContext=homePageNewCarTab_false_0&selectedEntity=d2702&zip=80301

Oh wow, I was just guessing based on what would make sense for the numbers you threw out.

[HurricaneSteve]

Or they make their money back through service & "maintenance".

I wouldn't go that far

But the residuals are nuts. Just for giggles I looked up the residuals on a 2018 3 series.... $26K. A CPO '16 is going for about $22K. And they put another $3500 on the lease as an incentive. So in real life leasing, returning and re-buying a German car will save you like 20% on MSRP. Somehow they still turn a profit so it works