SonicDark

As an example lets take a 2007 Acura TL with Navigation. I priced one out at MSRP for $36,795. Acura has a dealer holdback of 3% of MSRP, which is ~$1100 over the difference between MSRP and invoice. Let's say hypothetically we pay $34,000, which still gives them a hefty profit. Now that we've got the options and price down we'll look at our lease options.

Now you can go with whatever terms you like, but this is a general guide. For this example I'm going to go with 36 months and 12k miles. The factors listed above are for 15k miles so I'll add 2% to the residual bringing it to 60%. The two factors involved are the depreciation (residual) and interest (money factor). We'll add in the lease acquisition fee as well at the end, rolling it into our monthly payment with a $0 cap reduction (down payment).

The first factor is the depreciation that you'll pay. You take 60% and x it by $34,000, giving us $20,400. You subtract the cars purchase price from the depreciation and we get $13,600. That’s one part of the price that you'll pay. This $20,400 is what Acura determines that car will be worth after three years. You need to pay for the depreciation that the car will ensue.

The second factor is the interest rate that you'll pay. You take the purchase price ($34,000) and you add the residual value ($13,600) to get $47,600. You then x it by the money factor, in this case .00280 to get $133.28. That’s the amount of monthly interest you'll pay. You take that and times it by 36 (the length of the lease). That gives us $4,798.08.

The final factor is adding in the lease acquisition fee ($595) and adding in our total payments. That gives us $595 + $13,600 + $4,798.08 = $18993.08. Next we take that and divide it by 36 (the length of the lease) to get our monthly payment of $527.59. That's assuming $0 down. The only thing that you'll pay when you leave the dealership is the first month’s payment and any car registration and other fees that your state may have. As a last item you'll want to add any sales tax that your county might have to the $527.59 payment. Remember, you don't pay tax on the full purchase price of the car, only on $527.59 every month.

2007 Acura TL 4dr Sedan / (10)

24 mo/15k mi – Residual Value 68% of MSRP – .00385 Base Money Factor Rate
36 mo/15k mi – Residual Value 60% of MSRP – .00280 Base Money Factor Rate
48 mo/15k mi – Residual Value 49% of MSRP – .00270 Base Money Factor Rate
60 mo/15k mi – Residual Value 38% of MSRP – .00460 Base Money Factor Rate

24 mo/12k mi – Residual Value 69% of MSRP – .00385 Base Money Factor Rate
36 mo/12k mi – Residual Value 62% of MSRP – .00280 Base Money Factor Rate
48 mo/12k mi – Residual Value 51% of MSRP – .00270 Base Money Factor Rate

2007 Acura TL 4dr Sedan Navigation / (10)

24 mo/15k mi – Residual Value 66% of MSRP – .00385 Base Money Factor Rate
36 mo/15k mi – Residual Value 58% of MSRP – .00280 Base Money Factor Rate
48 mo/15k mi – Residual Value 48% of MSRP – .00270 Base Money Factor Rate
60 mo/15k mi – Residual Value 37% of MSRP – .00460 Base Money Factor Rate

24 mo/12k mi – Residual Value 67% of MSRP – .00385 Base Money Factor Rate
36 mo/12k mi – Residual Value 60% of MSRP – .00280 Base Money Factor Rate
48 mo/12k mi – Residual Value 50% of MSRP – .00270 Base Money Factor Rate

2007 Acura TL 4dr Sedan Type S / (10)

24 mo/15k mi – Residual Value 67% of MSRP – .00385 Base Money Factor Rate
36 mo/15k mi – Residual Value 59% of MSRP – .00280 Base Money Factor Rate
48 mo/15k mi – Residual Value 49% of MSRP – .00270 Base Money Factor Rate
60 mo/15k mi – Residual Value 38% of MSRP – .00460 Base Money Factor Rate

24 mo/12k mi – Residual Value 68% of MSRP – .00385 Base Money Factor Rate
36 mo/12k mi – Residual Value 61% of MSRP – .00280 Base Money Factor Rate
48 mo/12k mi – Residual Value 51% of MSRP – .00270 Base Money Factor Rate

2007 Acura TL 4dr Sedan Type S w/HPT / (10)

24 mo/15k mi – Residual Value 67% of MSRP – .00385 Base Money Factor Rate
36 mo/15k mi – Residual Value 59% of MSRP – .00280 Base Money Factor Rate
48 mo/15k mi – Residual Value 49% of MSRP – .00270 Base Money Factor Rate
60 mo/15k mi – Residual Value 38% of MSRP – .00460 Base Money Factor Rate

24 mo/12k mi – Residual Value 68% of MSRP – .00385 Base Money Factor Rate
36 mo/12k mi – Residual Value 61% of MSRP – .00280 Base Money Factor Rate
48 mo/12k mi – Residual Value 51% of MSRP – .00270 Base Money Factor Rate

The key is to only use the base numbers. Don't let the dealership steer you into third party leases as they're generally poor. Also the base money factor is what you want. Don't let them tack it up, as thats just more money, and you shouldn't be penalized for leasing over buying. They make enough money as is. Remember, anyone selling cars is there to make money, not to be your friend.

Check out: http://automotiveauthority.blogspot.com/ or my lease example on a BMW 330 at http://automotiveauthority.blogspot....sedan-now.html if you need more information

bignips

very nice post, thanks for the info.

just curious, but how do you get the base money factor rates and the residual value of msrp? or are they standard for typically every vehicle?

urbaita1

Great example, thanks. Can you explain why the money factor is higher for a 24 month lease, then drops for a 36/48 month lease, and increases again for a 60 month lease?

Unless these were arbitrary numbers for the example, I would think that the money factors would follow the normal interest rate trend, i.e. shorter period = less interest.???

Unless they are hitting you twice for the initial depreciation?

SonicDark

The numbers depend on the bank or credit institution that is providing the lease, which in this case is Honda Finace, and the vehicle in question. Some vehicles lease better than others. Like I've stated before, current TL leases are not as attractive as they were before. I pay $450 a month + tax for my lease, while the same car today, albit a 2007 model goes for $530 + tax. The slightly higher MSRP doesn't justify that increase. You can find the numbers for various cars at websites around the internet. You can also find out the dealer holdback to see exactly how much the dealer is making on a vehicle.

I'm not 100% sure why finance companies do that. It is not unique to the TL, or to Acura. They are not arbitrary numbers, and are the exact numbers you should be quoted when you go to your Acura dealer. Any lower residual or higher money factor and the dealer is padding his own pocket further. I typically only recommend 36 month leases, because the residual is normally higher relative to a 24 month and the money factor is lower. I personally believe that its a way to make 24 month leases less attractive, so that finance companies can make more money given the short amount of time on the lease.

Tripp11

Nice series of posts (both this thread and others), SonicDark.

Good info to have and quite knowledgeable regarding the topic.

Thanks!

SonicDark

Thanks. My goal is that people who are interested in leasing at least go to the dealership prepared. You don't have to really know much about leasing, other than the numbers I quoted are the set in stone minimums for the month of November for the TL and TL-S. If anyone has any questions just post them here or PM me or you can check out the website.

jdb8805

That varies by state.

rkdiddy

SonicDark,

Excellent write up. This is one of the best explainations I've read about a lease. I do have one question.

If a person put let say $2,000 down where is that amount deducted from in your equation.

Is it the total amount of: $18993.08?

Thanks in adavance.

SonicDark

That is true, and I should have mentioned that. This is applicable for those who lease in the state of California tax wise.

You just take the total amount from the money factor and residual like what we calculated in our example and subtract $2000 (minus taxes on that $2000 if you're in Cali for example) and then you would get a lower payment. Let me know if you want me to work in the $2000 as an example.

I would advise putting your money into ING or another bank instead of putting money down, as you're just letting the financial institution collect the interest. I also forgot to mention that the money factor rates that I quoted are for super prefered credit (720+ usually), so if you have a lower credit score don't be surprised when the dealer knocks on a few for the money factor.

rkdiddy

Hi Sonicdark,

Thank you for the clarification. I feel kind of foolish now. I was under the impression that when you leased a car you were just paying the depreciation, plus interest. Therefore, by putting additional money down you were just lowering the depreciation owed (therefore a lower monthly) and less interest paid.

On the last car I leased (an FX) I put $3,000 down just to lower the payment. My wife doesn't like the idea of having a $600+/month car payment, let alone two of them. The only reason we lease is because I inherited my father's "car gene".

If you wouldn't mind reworking the scenerio up top with $2k down that would be great.

Thanks,

R

SonicDark

I don't advocating leasing in all scenarios. It depends on the lease terms as to if I were to buy or lease. As I've stated before, you can lease a $10k+ more expensive BMW 330 for the same price as a TL currently. The lease terms are what makes it possible.

rkdiddy

Hi SonicDark,

Do you know how often these lease rates change? Also, do you know of a site I can visit to get the rates for other cars: Infiniti, Lexus, BMW and Audi?

Thanks,

R

SonicDark

Lease rates change on a monthly basis for national leasing companies such as Honda, Toyota, Nissan, GM, etc, etc. If you check out my site at googlejeff.com on my links is a buying/leasing forum. You can ask the moderators there to pull the rates on specific cars for you.

bignips

didn't realize that was your site...I just added the feed to my google homepage, Thanks again for the info.

SonicDark

Thanks! The actual blog is at:

http://automotiveauthority.blogspot.com/

The www.googlejeff.com 301 redirects you to that, but either one is fine. A friend of mine and I maintain the blog, and although it has ventured off from strictly leasing information since I've posted this I've got lots of questions and concerns about leasing so I have made a recent post asking people for what information they would like to see, so that I can address the concerns people have.

Jeff