Real-world residual: 2014 MDX Tech/Ent - Acura MDX Forum : Acura MDX SUV Forums
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post #1 of 25 (permalink) Old 12-26-2015 Thread Starter
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Real-world residual: 2014 MDX Tech/Ent

FYI all - the residuals for this car are terrible. Out of seven Acuras, this is the first to be "under water" towards the end of a lease.

Proves what a piece of crap Acura has pooped out.

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post #2 of 25 (permalink) Old 12-26-2015
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With that level of detail, sounds pretty compelling.....
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post #3 of 25 (permalink) Old 12-26-2015
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Originally Posted by lindros2 View Post
FYI all - the residuals for this car are terrible. Out of seven Acuras, this is the first to be "under water" towards the end of a lease.

Proves what a piece of crap Acura has pooped out.
I don't understand leases. How can you be underwater if you don't own or owe anything?

2014 MDX,TECH. CHERRY AWD Gone.
2017 MDX, ADV SP HYBRID. MODERN STEEL.
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post #4 of 25 (permalink) Old 12-26-2015
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I don't understand leases. How can you be underwater if you don't own or owe anything?
Just a guess, but I'd say that what the buyout would be on the lease is more than what the car is valued at. For example...when I leased my TSX, the buyout at the end of the lease was $18,000, but the book value on it was much more than that. I could have bought it at lease end, then turned around and sold it for what it was worth, and put some money in my pocket. In this case, I'm guessing the car is valued less than what the buyout on the lease is.
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post #5 of 25 (permalink) Old 12-27-2015
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post #6 of 25 (permalink) Old 12-27-2015 Thread Starter
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I don't understand leases. How can you be underwater if you don't own or owe anything?
Technically an auto lease is a "synthetic lease". Leasees have the option to purchase (buy out) the car at any time.

On EVERY Acura we've ever owned (seven by me; another five by my parents), the car(s) has (have) been above water the whole time.

That is - if we wanted to get out early, the dealer (or a private party) could purchase the car outright, closing the lease.

On my 2004 TL, I was able to do this at 19 months. 2011 MDX - four months early.

But on the MDX, we're $4000 under the dealer buyout.

So instead of going from MDX > TLX (which I wasn't happy with, but would have saved money in the long run), we're riding the lease out and going to another brand/model (most likely Nissan Pathfinder).
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post #7 of 25 (permalink) Old 12-28-2015
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So does that also mean that they inflated the residual value (for good lease deals) which would eventually cause the buy out way higher than the market value?
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post #8 of 25 (permalink) Old 12-28-2015
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Originally Posted by lindros2 View Post
Technically an auto lease is a "synthetic lease". Leasees have the option to purchase (buy out) the car at any time.

On EVERY Acura we've ever owned (seven by me; another five by my parents), the car(s) has (have) been above water the whole time.

That is - if we wanted to get out early, the dealer (or a private party) could purchase the car outright, closing the lease.

On my 2004 TL, I was able to do this at 19 months. 2011 MDX - four months early.

But on the MDX, we're $4000 under the dealer buyout.

So instead of going from MDX > TLX (which I wasn't happy with, but would have saved money in the long run), we're riding the lease out and going to another brand/model (most likely Nissan Pathfinder).
So they could charge less per month and basically force you to stay with it longer? Isn't it all about lower monthly payments? I've only leased a car once.

2014 MDX,TECH. CHERRY AWD Gone.
2017 MDX, ADV SP HYBRID. MODERN STEEL.
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post #9 of 25 (permalink) Old 12-28-2015
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It's just a game of numbers. At the beginning of the lease, and every month in fact, the auto manufacturer's finance arm sets residuals for models. For example (and I'm making these up), December 2015 MDX model may have a residual of 53% MSRP for a 39 month lease with 40K miles. This number is agreed upon and set at time of sale and not 3-4 years in the future, so it's a small form of speculative gambling by the finance arm.

That means at the end of 39 months, the car can be bought out for 53% of the original MSRP by the buyer. If the car ends up holding its value well, it may be worthwhile for the purchaser to buy it at 53%, keep it or perhaps even sell it for a profit (maybe it can sell privately for 60% of original MSRP). However, if the car value sinks more than expected, the original purchaser can walk away and the finance company basically eats the difference and gets what they can sell for it.

What the OP is saying, is for the first time ever, he is seeing his Acura not be worth more than the original residual. Acuras have always held their value well, perhaps this model hasn't or Acura got wise and set the residual more appropriately. It's hard to tell without the facts. It's not in a car company's best interest to set the residuals too low as it makes the lease payments high and they may lose out to competition. Meanwhile, it's not in their best interest to set the residuals too high as they may end up eating a lot of cars and have to sell them at a loss. So it's a balancing act.

There's no evidence in this thread that the MDX holds its value worse than other Acuras, it's quite possible Acura finance has just gotten wiser to what the real value is. I guess it's better to side on setting residuals too low as Acura can always recoup a lot of money by selling them as certified cars, etc.

In my history of cars, which includes leasing just one car, but my brother-in-law only leases, he (nor I) have ever been able to buy it out and turn it and sell it for a profit. He always walks away from the leases. It's the rare exception when you can buy the car and turn a profit, it takes a car that just holds its value exceptionally like the Toyota FJ Cruiser, etc. As a private party or trade-in seller, you'll never get the value that a dealer or manufacturer will get selling it as a certified, so the lease residuals are usually designed on purpose to not be profitable for the buyer. That said, many buyers may opt to buy it out as they just don't want to buy a new car and they can buy "their" car as a used car at the pre-negotiated residual rate.

SOLD - 2016 Acura MDX (Graphite Luster) - SH-AWD, Advance
2016 Volvo XC90 R-Design (Passion Red) - Polestar, Convenience, 4C Air Suspension, Bowers & Wilkins, CarPlay
2016 Cadillac ATS-V (Phantom Grey) - 6MT, Carbon Package, Luxury, RECARO, Suede, Red Brembos
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post #10 of 25 (permalink) Old 12-29-2015 Thread Starter
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Originally Posted by elvisfan View Post
So they could charge less per month and basically force you to stay with it longer? Isn't it all about lower monthly payments? I've only leased a car once.
Not entirely. It's only partially.

True that they're looking to make leasing attractive, but a larger driver on NEW cars (i.e. 2014 MDX in 2013) is how they play with the money factor (= interest rate divided by 2400).

On our new Pathfinder Platinum, residuals have been consistent (over the past year, really) at 55-57%.

The money factor is now 0.00003 (=0.7% interest).

But back to the other comment - every Acura I've leased has been above water, until this one. I think we got back between $1k-$3k (applied to a new Acura) each time.
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What were the residuals of past and present Acura's? If the residual was 55% before and is now 60%, that is the difference. If every Acura was truly always above-water, then someone in Acura finance has been continually settings the residuals too low which just means you paid more during the lease to get that $1-$3K back. Generally speaking, that is not a good business practice.

All other variables aside, in a perfect society, the buy out price should be precisely what the car is worth at the end of the lease. Whether that means what it's worth to a dealer (wholesale) or to a consumer (dealer sale price) is a grey area though. That grey area generally always protects the dealer and they definitely have a need and market for used Acuras still under warranty... In your statement, it sounds like you got $1-$3K more via a trade-in, so if that's the case as trade-ins are usually very low value anyways, then the residual calculations were VERY off and Acura corporate left a lot of money on the table...

If I was Acura and 7 cars in a lease in a row were above-water and getting positive return on a trade-in (the lowest value method to sell a car), I'd fire someone or completely revamp my leasing philosophy. Perhaps they did this and now you're in a proper lease residual. Just remember, if you get money back at the end of the lease, in some ways it also means you paid too much during the lease and financed more money for the rental period than needed, so it's not necessarily a good thing when all the money is added up, but it does feel good to trade-in the asset for positive money, but as stated, in a perfect lease, you would've paid that $1-3K less over the course of the lease (or even paid less since you based that cash back value on a trade in). $3K returned to you over a 36 month lease is almost $100 / month, with taxes and financing, it probably is about $100 / month too much that you paid during the lease. So please consider that...

SOLD - 2016 Acura MDX (Graphite Luster) - SH-AWD, Advance
2016 Volvo XC90 R-Design (Passion Red) - Polestar, Convenience, 4C Air Suspension, Bowers & Wilkins, CarPlay
2016 Cadillac ATS-V (Phantom Grey) - 6MT, Carbon Package, Luxury, RECARO, Suede, Red Brembos
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I don't understand leasing a vehicle for private use. If it is used on business maybe. I always purchase car with cash, saving for next one. After 4-5 years, I am ready to trade in the old one for new paying difference with cash. When I was working I had
company car for almost 40 years, more than 10 different vehicles. Leasing costs more than purchasing I believe.
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post #13 of 25 (permalink) Old 12-30-2015 Thread Starter
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Originally Posted by BrianV View Post
What were the residuals of past and present Acura's? If the residual was 55% before and is now 60%, that is the difference. If every Acura was truly always above-water, then someone in Acura finance has been continually settings the residuals too low which just means you paid more during the lease to get that $1-$3K back. Generally speaking, that is not a good business practice.
[TRUNCATED]
In a perfect market (or at least, open market), economics dictate what the fair-market value of a vehicle is. Do a normal distribution on market prices of 2014 Acura MDX's with similar trims, colors, etc.

They will vary.

My point is that the market was willing to PAY MORE for my PRIOR Acuras (due to perception of marketing stuff like 'leading-edge features' coupled with more tangible quality and reliability).

Why is the market (including dealers) willing to PAY LESS for my 2014 model?

That comes back to the original post. Quality, features, reliability and desirability are less than prior generations - especially on the open market.

Feel free to your opinion to "fire the leasing program manager". But that's a pretty shallow way to view things - especially since selling new cars coupled with profiting on pre-owned/certified cars is profitable, creating an ecosystem (virtuous cycle, in economic terms).
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You've provided no facts to actually have a discussion. You seem to believe the "market value" of your MDX has some relation to the money being offered above or below your lease buyout for your leased car, but it simply does not work that way.

I present two lease cases:

Case 1 - Under-Water
MSRP and purchase price = $50K
Residual = 60%
Buyout = $30K
Trade-in offered at end of lease = $29K
Underwater by $1K
lindros2 has BAD feeling about Acura resale

Case 2 - Above-Water
MSRP and purchase price = $50K
Residual = 50%
Buyout = $25K
Trade-in offered at end of lease = $29K
Above-water by $4K
lindros2 has GOOD feeling about Acura resale

In both of these cases, the car and its value are the same, it's only the residual that changes.

In Case-1 which is the feel-bad experience, lindros2 actually leased $20k of the car over 36 months. Tax and interest not included, you paid $555 / month

Now in Case-2 which is the feel-good experience, lindros2 actually leased $25K of the car over 36 months. Tax and interest not included, you paid $684 / month

$684 - $555 = $129 / month difference because of residual difference

$129 * 36 = $4,644 more in payments.

So that feel good experience cost you the nut difference.

All that said, I'm not saying you're wrong, but you can't come in here and state that what's offered at the end of the lease for trade-in value above/below your lease buyout is the deciding factor on whether a car holds it value. As I mentioned above, if you truly leased 7 Acruas and was always above-water on them, then Acura is really bad at leasing, they're leaving money on the table, so they may have adjusted the residual on your last lease to be more inline with their past numbers so they're not leaving money on the table. Acrua is in the business of maximizing profits, not making people feel good about their value at the end of the lease

Your point of the market willing to pay more for your prior Acuras seems to be based on how much upside you had on your lease, but that has less to do with the market of the car and more to do with the residual.

My "fire the leasing manager" is not shallow, it's business. If someone is constantly missing the market and losing money for the company, a very realistic conclusion is that they failed.

I'm actually curious about the value holding of these vehicles, as it was a major deciding factor in buying. In looking at my used market, I see plenty of Tech package 2014 MDX for sale in the high 30s and low 40s. Here's one:
http://bit.ly/1SmzzjU

A near 3 year old car with 30K miles. 2014 MSRP for that config is $48.5K, and it's listed for $38.3K or 80% of its original value. This is for a non-certified mind you.

In my brief comparison with the Lexus RX350, the MDX is holding its value better it seems. In my personal comparison from this past August, my $54K 2.5 year old Volvo SUV only fetched $26K on trade with 20K miles, so that's less than 50% of it's original MSRP. Privately, they listed to sell it at $31K, so apples-to-apples with that Acura link above, it retailed for 57% of it's original MSRP after about the same time as that Acura I showed above with 80% (that is Acura dealer selling Volvo vs Volvo dealer selling MDX ironically, so fairly comparable). This was my MAIN reason I bought the MDX over the new XC90 as I feared taking a bath on resale. Granted, the Volvo was bought with more significant discount at purchase, the math still tells a bad resale story for Volvo and a fairly strong one for the MDX.

I ask that you please share the lease residual of your past and present leases so we can really determine if there's a resale value issue at hand.

SOLD - 2016 Acura MDX (Graphite Luster) - SH-AWD, Advance
2016 Volvo XC90 R-Design (Passion Red) - Polestar, Convenience, 4C Air Suspension, Bowers & Wilkins, CarPlay
2016 Cadillac ATS-V (Phantom Grey) - 6MT, Carbon Package, Luxury, RECARO, Suede, Red Brembos
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post #15 of 25 (permalink) Old 12-31-2015 Thread Starter
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You've provided no facts to actually have a discussion. You seem to believe the "market value" of your MDX has some relation to the money being offered above or below your lease buyout for your leased car, but it simply does not work that way.
To put a nail in this coffin of a thread, residual values have been consistent.

I will say it again - the market value of the vehicles has changed.

It's not "trade value 29k but I owe 25k VERSUS 29k but I owe 31k".

The fact is - just using my 2011 MDX as a reference case - that throughout most of the term of the lease (after the first couple months), I could have sold/traded it to the dealer (both "dealer" to be clear) for more than I owed.

Same with RDX, RL's, TL's, and TSX's.

Not on this one.

And honestly, I wouldn't want to buy one either.

Hello Pathfinder (yesterday). Bye bye MDX (in a couple months).
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