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Why was the manufacturer losing money on program

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Reference no: EM132366218

In the late 1990s car leasing was popular. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the residual value computed at 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999 the manufacturer lost and average of $480 on each returned car. Why was the manufacturer losing money on this program? What should the manufacturer do to stop losing money?

Reference no: EM132366218

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