Open Access

Christian Grimberg

• The automotive business has been facing financial threats on the field of automotive leasing recently. Many different endogenous and exogenous reasons affected the residual value of fleet returnsThe automotive business has been facing financial threats on the field of automotive leasing recently. Many different endogenous and exogenous reasons affected the residual value of fleet returns negatively. The line of business had to face a massive decrease in residual values of leasing returns. The VMF residual value indicator identified a downturn in residual values from October 2008 to October 2009 by nearly 8 % of the former new car prices. The average residual value dropped from about 42 % to only about 34 % within this time period and stayed on the low level even in the beginning of the year 2010. In the majority of the cases the estimated residual values for returned automobiles out of leasing and finance contracts do not match the actual market value and leads to losses out of the leasing business on the used car market. This discrepancy leads to financial charges of car manufacturers, leasing companies and car dealers and in a remarkable number of cases even to operating losses and insolvencies. This situation is no longer bearable for all participants of automotive financial services. Some experts even consider the residual value problem as one of the current biggest challenges for OEMs, financial service providers and car dealers and do not expect a quick solution or a market recovery from its own.The thesis explains the basics of automotive leasing, gives definitions for residual value terms, explains illustratively the residual value risk and describes several influencing factors on the residual value of leasing cars. Furthermore the cause and effects of the current residual value crisis on the automotive leasing market are presented and the situation for car dealers, leasing companies and OEM illustrated. In the last main chapter the author is trying to show some measures for the market participants to counterbalance the residual value risks and losses.…