Mike5215

Maybe it's a Florida thing? What's confusing to me is that on a lease, someone has agreed to buy the car back in advance, based on the residual. A typical three year residual per Mercedes on an S is in the neighborhood of 57%. So on a hypothetical $100,000 car MB would agree to buy the car back at $57,000 in three years presuming it's okay on miles and condition. So instead, a 3rd party bank does the lease.

They buy the car from MB for $100,000 and over three years you pay back the depreciation ($43,000) in monthly installments plus interest.

Now they've been repaid their $43,000 and some minimal interest. But to close the deal and not get burned they need to sell the car for at least $57,000.

I get how the manufacturer can agree to do that because if they're wrong on residual value they can eat a little on the resale and it's all in house. They never really cared about making the nickle and dime interest on the lease interest...they want to move units.

But a bank isn't in the car business...they loan money in return for the principle and interest paid over time. The interest rate isn't great, 3% or 4%. Why would the bank risk the car being worth less than $57,000 at turn in? It could be 55,000 or 50,000. The slightest miscalculation on residual would wipe out the profit on the loan and could actually cost them money. MB isn't going to guarantee to a third party lender that they'll buy the car back for $57,000.

Has anyone in this thread (or on the forum) ever leased a Mercedes using a 3rd party bank? If so, how did they handle the residual situation?

alx

mike is correct. 3rd party leases are very rare as no bank will take the risk of eating up the difference between residual and wholesale at the end of the lease.

audi, bmw and mb financial are the three biggest players on the high line lease return markets with audi being the biggest by a long shot (unit-wise).

Mike5215

Exactly. And if no bank will touch it who will?

1bad540

well maybe in Ny its different, at the high line auctions you could literally walk into the "chase" section of Bmws or benzs. Maybe things have changed .

alx

Yes, Chase is still a player in the lease arena, but they have been steadily shrinking in the last 5 or so years

DaveW68

I've leased 2 vehicles in my lifetime, and neither lease was through the manufacturer. In 1990, I leased a Honda Accord and the lease was done through GE Capital.


In 1996, I leased a Ford Expedition, and it was through some company that was definitely not Ford Motor Co. At the end of the term, the leasing company contacted me and scheduled a time to come to my house, inspect the truck, and pick it up. The residual was super high on that vehicle as it had just come out when we got it. The residual value was much higher than what the actual book value was at the end of the contract, so I assume that was just the leasing company's problem.

1bad540

I don't make things up when I post them.

Prochambers

I'm glad that I posted this topic on here. You all are coming back with some very interesting points to be considered. I'm learning new things everyday through this. Keep them coming. Thanks.

Mike5215

Timely info there, Dave. I'd like to ad that in 1947 my grandfather bought a car for three goats and a chicken, so it's probably how people buy cars today. With livestock and poultry.

Smalone01

Exactly, I have already bought a few from Suntrust this year that were 2014 model Mercedes. Like I said eariler, MBFS is the main lessor of Mercedes, but not the only. I buy a lot of off lease cars and not all are from factory banks.