BoA lease return logic?

[marsarbu]

I'm trying to understand BoA logic here, of not being willing to lower the residual rate, to bring it closer to the used market value, so possibly have owners keep their Air instead of returning the lease.

1. My '24 AGT new, after incentives, was ~$130k. I'm paying $1.5k / month, zero down, for 18 months.
2. After 18 months, BoA will offer to sell me the car at $103k, when the used market price is $65k. Obviously I will say no and move on.
3. BoA will sell the car at auction for, what, $55k? The company that bought the car will add $10k and then put it up for sale on the used market at $65k. Full circle.

So instead of being flexible and selling it to me at $70k (I would pay a premium to keep my car) and only lose ~ $30k, they prefer to lose ~ $45k. What am I missing here?

 

[Batteryman]

I'm trying to understand BoA logic here, of not being willing to lower the residual rate, to bring it closer to the used market value, so possibly have owners keep their Air instead of returning the lease.

1. My '24 AGT new, after incentives, was ~$130k. I'm paying $1.5k / month, zero down, for 18 months.
2. After 18 months, BoA will offer to sell me the car at $103k, when the used market price is $65k. Obviously I will say no and move on.
3. BoA will sell the car at auction for, what, $55k? The company that bought the car will add $10k and then put it up for sale on the used market at $65k. Full circle.

So instead of being flexible and selling it to me at $70k (I would pay a premium to keep my car) and only lose ~ $30k, they prefer to lose ~ $45k. What am I missing here?

2023 are going for 65-70k, 2024 should be 10k more- 80k

 

[marsarbu]

2023 are going for 65-70k, 2024 should be 10k more- 80k

By the time I'm returning my '24, in Apr '26, they will probably be at the $65k the 23's are today.

 

[coma24]

I've wondered the same thing, actually.

I don't know how generative AI responses are viewed here, so I won't post the fully detailed response, but here is a shortened version:
BoA isn’t being irrational, rather they’re being rigid by design. The residual value is locked in at the start of the lease and is part of the contract, risk modeling, and in many cases, lease-backed securities. If they negotiated with one person, they’d risk legal exposure, set a precedent for every lessee, and complicate their accounting.

Sending the car to auction is a standardized, predictable process that fits their financial reporting and operational model, even if it results in a bigger loss on paper. It’s simpler, legally cleaner, and prevents future lessees from holding out for discounts. This is why BoA and other big lenders almost never negotiate residuals.

 

[RMSko]

I've wondered the same thing, actually.

I don't know how generative AI responses are viewed here, so I won't post the fully detailed response, but here is a shortened version:
BoA isn’t being irrational, rather they’re being rigid by design. The residual value is locked in at the start of the lease and is part of the contract, risk modeling, and in many cases, lease-backed securities. If they negotiated with one person, they’d risk legal exposure, set a precedent for every lessee, and complicate their accounting.

Sending the car to auction is a standardized, predictable process that fits their financial reporting and operational model, even if it results in a bigger loss on paper. It’s simpler, legally cleaner, and prevents future lessees from holding out for discounts. This is why BoA and other big lenders almost never negotiate residuals.

This is correct. The only flaw in the BofA model is the upfront pricing modeling. They are pricing the leases with an unrealistic residual which ultimately means that they are going to lose money on every transaction. They may be securitizing the leases though, which means they care a lot less, but my gut is that they will ultimately be increasing the residual values in their Lucid and other EV leases.

 

[TriumphToo]

Leasing companies typically have residual value insurance which provides them with protection for declining residuals versus what they originally modeled. If BoA has this, they’re not taking any losses, the insurers (or reinsured behind them) are.

 

[johnse]

The only time I leased was a 2013 Ford CMAX Energi. Great car for a compact hybrid. Residual at end of 3 year 15K/year lease was ~22K. I fully intended to purchase it.

The dealer had another lease return sitting on the lot. Same color, same spec, 12k fewer miles...$18K.

They could sell me that one, but could not drop the price on mine. They told me that it was not legal due to contract law--that a lot of lessors had been defrauded (or maybe insurance companies) by dealers giving customers low-ball deals undercutting the residual value.