Why a cheaper car can cost more to lease

The next owner of your car is already influencing your lease payment. You have not met them. The leasing company probably has not either. But the amount they might pay in a few years is part of the deal you are being offered today.

That expected second sale means the company does not need to recover the car’s entire purchase price through your payments. The more value it expects to recover at the end, the less depreciation it needs to charge you for. The end-of-term figure used in the calculation is known as the residual value. 1

This creates a possibility that a showroom price tag does not reveal: a cheaper car can cost more to lease if its expected resale value falls by even more. That is a comparison between new offers, not a rule that existing payments rise whenever used-car prices fall. For a French lease with a purchase option, the payment schedule is set when the contract is signed. 4

The leasing company is counting on two customers

Look at the transaction from the vehicle owner’s side. It buys a car now, collects payments while you use it, then gets back an asset it can sell. The purchase price and the expected resale proceeds belong in the same calculation.

The gap between them is expected depreciation: the value the car is expected to lose during your lease. Financing, fees, any included services and profit must be accounted for as well. The Federal Reserve’s educational leasing guide separates depreciation from financing and other charges. The economics travel across borders; the legal rules of a particular US lease do not. 2

Strip away the other costs for a moment:

Purchase price here means what the leasing company actually pays after discounts, not necessarily the retail list price. The two values also need to be measured on the same basis. Deducting tax-exclusive resale proceeds from a tax-inclusive purchase price would muddle the calculation. Our examples leave taxes and selling costs out altogether.

There is another important distinction. An estimate of future resale proceeds is not a promise from the used-car market. Nor must it be identical to the price written into a customer’s purchase option. The forecast, the contractual buyout price and the eventual selling price are different numbers with different jobs. 1 8

When the discount is smaller than the resale loss

Consider two invented scenarios, each lasting 36 months, with identical assumed use and no initial payment.

In the first, the company buys the car for €30,000 and expects to sell it for €18,000. That leaves €12,000 of depreciation to recover over the lease, or €333.33 a month, before any other charges.

In the second, the purchase price falls to €27,000. But the expected resale price also falls, to €12,000. The depreciation to recover is now €15,000, equivalent to €416.67 a month.

Depreciation to recoverExpected resale

Total bar length shows the purchase price. The solid section is depreciation; the open section is expected resale. Monthly amounts cover depreciation only.

Source: l0g calculations using fictional assumptions. No market prices. Financing, services, fees and profit margin excluded.

Data and calculations

A : (€30,000 − €18,000) ÷ 36 = €333.33 per month.

B : (€27,000 − €12,000) ÷ 36 = €416.67 per month.

The car is €3,000 cheaper to acquire, but the company expects €6,000 less when it sells it. The amount to recover during the lease therefore increases by €3,000. Over three years that adds €83.33 a month to depreciation alone. The purchase price has fallen by 10%; this component of the monthly payment has risen by 25%. That is not a prediction of a 25% increase in the total lease payment.

Nothing in the example says a €3,000 new-car discount normally causes a €6,000 fall in resale value. The assumptions are deliberately chosen to show when the result reverses. Financing costs, further discounts, financial support or a change in the provider’s margin could reduce, erase or widen the difference in a real offer.

Change the resale assumption and the outcome changes with it. At the same €27,000 purchase price, an expected resale value of €18,000 reduces monthly depreciation to €250. At a resale value of €15,000, monthly depreciation is €333.33 again: the acquisition saving and the resale reduction cancel out.

Purchase price stays at €27,000 in all three B cases. A €15,000 resale value restores the monthly depreciation of scenario A. All bars start at zero.

Source: l0g calculations using fictional assumptions. No market prices. Financing, services, fees and profit margin excluded.

Data and calculations

A : (€30,000 − €18,000) ÷ 36 = €333.33 per month.

B1 : (€27,000 − €18,000) ÷ 36 = €250.00 per month.

B2 : (€27,000 − €15,000) ÷ 36 = €333.33 per month.

B3 : (€27,000 − €12,000) ÷ 36 = €416.67 per month.

Why a new-car price cut reaches the used-car market

Imagine shopping for a used car when a comparable new model suddenly becomes cheaper, or offers better equipment for the same money. You now have a different alternative. The older vehicle may need a larger discount to remain attractive. Its price need not fall euro for euro with the new model’s price, but the comparison has changed.

There is a documented example. On 20 May 2024, Reuters reported that Tesla’s price cuts had reduced European fleet values and strained relationships with leasing companies. That is evidence of an earlier episode, not a survey of lease offers available today. 5

The same price cut can affect two generations of business. For cars already purchased, the owner cannot undo the original acquisition cost. Lower resale proceeds hurt the economics of those vehicles. For cars it is about to buy, it benefits from the lower new price but must also decide how much value will remain at the end of the next lease.

That second decision is where the next customer can feel the effect. A more cautious resale forecast increases depreciation in new quotes, all else equal. A manufacturer could offset it with a larger purchase discount or support for financing. A contractual buyback guarantee, where one exists, transfers the covered portion of the risk to its guarantor. Keeping the advertised monthly price attractive does not make the risk vanish.

The stakes are visible in company reporting. In results published on 30 July 2026, Ayvens reported net used-car sales result, including depreciation adjustments, of −€8 million for Q2 2026, against +€143 million for Q2 2025. Yet its net income attributable to the group was still €248 million in the latest quarter. 6

That used-car indicator combines sales results and accounting adjustments. It is neither a cash-flow measure nor a statement that every disposal lost money. It also does not establish that customer payments increased. It shows that the second life of a vehicle matters to the owner’s earnings without determining the entire company’s profitability.

Who absorbs an overoptimistic forecast?

Suppose a car expected to sell for €18,000 eventually fetches only €15,000. Where the lease leaves market-value risk with the vehicle owner, that shortfall does not automatically become an extra bill for a customer who returns the car in accordance with the agreement. The owner, or a guarantor within its commitment, absorbs the disappointment. The Fed’s guide describes this allocation for US closed-end leases, where the customer does not guarantee the final market value. 3

Contract types and rights vary between countries. In France, LLD is a long-term rental without a purchase option. LOA includes the right, but not the obligation, to buy the vehicle at the price specified in the agreement. The labels should not be treated as interchangeable with every lease or car-finance product elsewhere. 4

The option can matter. When the car’s market value is below the buyout price, returning it may be preferable, subject to the return conditions. When it is worth more, buying it may be attractive. But fees and the money needed to complete the purchase still count. An apparent gap between two prices is not necessarily a profit the driver can pocket. 3 8

Nor does returning a vehicle remove obligations over its use and condition. France’s consumer authority, the DGCCRF, has reported isolated depreciation charges that could effectively make customers pay to restore a car to new condition. Its report, published on 14 April 2025, covered inspections from April 2023 to June 2024. That finding does not make every return charge improper, or every market loss the customer’s responsibility. The actual contract and the reason for the charge matter. 9

Depreciation is not the whole cost of driving

A weak resale value is not a final verdict on a powertrain or a model. A driver can lose more through depreciation and still come out ahead through lower energy or maintenance costs. Equally, a seemingly inexpensive lease may offer little advantage if insurance is costly or the mileage allowance does not fit the driver’s needs.

Arval’s TCO Scope, published on 16 June 2026, puts electric models ahead in 16 of its 17 passenger-car comparisons. This is a leasing company’s study of business-fleet use and taxation, not a finding that applies to every household. It also warns against directly comparing the averages for its electric and combustion samples, which contain different mixes of vehicles. 7

The useful lesson is to look beyond a single price. A fall in used-car values can make a vehicle affordable to a second owner while reducing the proceeds of the company that already owns it. Both outcomes can be true. Lower resale prices are not bad news for everyone in the transaction.

The arithmetic behind a €199-a-month offer

Even before considering resale, the advertised monthly figure deserves a closer look. Take two invented offers over 36 months, assuming the same services and mileage allowance.

Offer one requires €4,000 as the first payment, followed by 35 payments of €199. Total payments are €10,965, equivalent to €304.58 per month across the term. Offer two requires 36 payments of €250, with no enlarged first payment: €9,000 in total. The lower advertised monthly figure adds €1,965 over the period. This comparison leaves out payment timing, possible end-of-contract charges and any purchase of the vehicle.

A refundable deposit is different from a non-refundable initial rental. It ties up cash but is not a final expense if returned in full. France’s Service Public guidance notes that an enlarged first rental is not refunded when a LOA customer decides not to buy the car. 4

Compare total payments over the same term, with the same mileage and services. Add the buyout only to the scenario in which you intend to own the car. And a comparison between leasing and buying must account for the vehicle the buyer still owns at the end. Counting outgoing cash while ignoring the remaining asset is not a complete comparison.

Try changing the next owner’s price

The depreciation lab lets you change the acquisition price, expected resale value and common term for the two scenarios. It shows monthly depreciation, the difference between the scenarios and the resale value needed to match the original depreciation component.

It is not a lease quote. There is no invented market interest rate, no commercial pricing feed and no claim to calculate an all-in payment. The tool isolates one relationship that real offers combine with many other inputs.

A lease makes more sense when you follow the car beyond the first driver. Your payments compensate the owner for its use and loss of value, while the next owner is expected to provide another part of the recovery. When that future receipt looks smaller, today’s quote can change. A new-car discount changes the beginning of that calculation. It does not settle the end.

Sources and reading notes

[1] Consumer Financial Protection Bureau – Regulation M, § 1013.4 – Content of disclosures Payment definitions in § 1013.4(f), purchase option in § 1013.4(i). US regulation is not presented as French law.

[2] Board of Governors of the Federal Reserve System – Vehicle Leasing – Ongoing Costs Archived institutional guide. Economic components of a lease payment.

[3] Board of Governors of the Federal Reserve System – Vehicle Leasing – Future Value Archived institutional guide. Resale risk in US closed-end leases and purchase-option costs.

[4] Service Public / DILA – Location de voiture : LOA ou LLD Page verified on 12 June 2026. French contract, return, initial-payment and deposit guidance.

[5] Reuters – Tesla doing damage-control, discounts for European fleet buyers Published 20 May 2024. A historical case, not a source of current lease prices.

[6] Ayvens – Ayvens Q2 2026 Financial results Published 30 July 2026. April–June 2025 versus April–June 2026. Issuer-reported results; the used-car indicator includes depreciation adjustments.

[7] Arval Mobility Observatory – TCO Scope 2026 Published 16 June 2026. A commercial study of business fleets. Sample composition differs between powertrains.

[8] DGCCRF – Location avec option d'achat d'un véhicule : les règles à connaître Published 27 October 2025. French LOA rules.

[9] DGCCRF – Contrats de location avec option d'achat : clauses abusives et information du consommateur Published 14 April 2025. Inspections from April 2023 to June 2024. An isolated depreciation-charge finding, not a claim about all leases.

Sources checked on 6 September 2026. Charts and tool use fictional assumptions, not market data. US economic definitions do not substitute for local contract law.