Leases for dummies
04-21-2013, 05:00 PM
#1
Burning Brakes
Thread Starter
Join Date: Nov 2011
Location: Not far enough from Chicago
Age: 46
Posts: 893
Likes: 0
Received 190 Likes
on
119 Posts
Leases for dummies
Ok, give me the quick and dirty info on leasing. I've always thought it was a bad idea, but you lease guys give me the pros and cons.
Specifically, what happens if you have a trade-in - does that just lower your monthly cost? The GF and I change cars frequently, and trying to decide if getting one vehicle in a lease cycle would make more sense financially.
Specifically, what happens if you have a trade-in - does that just lower your monthly cost? The GF and I change cars frequently, and trying to decide if getting one vehicle in a lease cycle would make more sense financially.
04-21-2013, 05:26 PM
#2
The F&I guy at the dealership would be the only person qualified to answer those questions.
However, in most cases a lease is better for short term ownership plans, while a straight loan is better for people like me who tend to keep a car for many, many years.
In some rare cases a lease can be better financially than a straight loan, but only the F&I person could know what the best current HMCo offers are, and what you qualifiy for.
However, in most cases a lease is better for short term ownership plans, while a straight loan is better for people like me who tend to keep a car for many, many years.
In some rare cases a lease can be better financially than a straight loan, but only the F&I person could know what the best current HMCo offers are, and what you qualifiy for.
04-21-2013, 07:59 PM
#3
Suzuka Master
There are several articles out there on leasing, I will give you my opinion. The gf and I have leased 4 vehicles since 2009.
It depends.. not trying to be funny but it does. Here are some basic things to consider.
First leasing is usually for people that want a new car ever 3 years or so. Also it is almost never a good idea to buy the leased car at the end of the lease, unless you have so much extra mileage or wear and tear that you would owe them a ton of $$$. If you want a car longer than 3 years, don't lease buy it.
If you take decent care of the leased car it is a great way to not worry about being upside down at the end and trying to trade in a car you own.
Most lease ads require you put a few grand down, but you can get almost any terms you want. I typically only do first month payment down only. I also make sure to buy as many miles as I think I will need and pad a tad. My first lease was a 19K miles a year lease, my current one is 17K miles, I have done a better job of estimating so if I were to lease again I would do 15K-16K miles. Some companies will not do over 15K miles a year.
When you lease you negotiate just like you are buying, you negotiate the purchase price on the car and any discounts. That is the cap cost of the car. Then you need to get what the residual is, most decent cars will have around a 51-56% residual amount at the the end of the lease. The residual is the amount the car is worth at the end of the lease should you decide to buy it.
The way to get your lease payment low is to make sure they are giving you the best cost for the car with the highest residual. Leasing is basically you are paying to use the depreciated value of the car over the term of the lease. So to keep things simple:
If the they sell you a $110,000 car for $100,000 for a 3 years and it has a 50% residual then at the end of 3 years the car is $50K and you can buy it for $50K at the end of the lease. You are financing $50K over the term of the lease. Now the leasing company has to make money so the charge you interest on the payments over the term of the lease, this is called the money factor. When you lease be sure to ask them what the money factor on the lease is, then take that number and multiply by 2400. So if they tell you the money factor is .00232 that means they are charging you over 5.6% interest on financed depreciation. Often this is where they get you, most people don't ask what the money factor is and just look at the payment each month. Leasing usually carries a higher percentage rate than typical financing, unless there are decent lease incentives.
Some thoughts I have on leasing or even financing. First I put very little down on a car, why? If I lease form the manufacturer they usually give you gap insurance, if I purchase I always buy GAP insurance form my credit union or where eve I am financing. Why?
Say you buy a $50K car and put $10K down and 3 months later your car gets totaled. The insurance company is going to try and pay as little as possible and to a point concerned about covering the loan on the car. Once they satisfy the loan if you don't feel they are giving you enough that is a fight between you and them. Now same scenario, and you did 100% financing or little down lease and have gap and total the car. The insurance company pays whatever they feel is fair and the gap insurance covers the rest of the amount owed on the loan, thus less fighting you have to do. If you had put $10K down on the car and had gap then the gap is only concerned about paying off the loan not the fair price to you. Thus for me while it costs money to finance a car, lease and finance rates are dirt cheap lately so I would rather do that with gap and never worry about getting screwed if the car gets wrecked or stolen.
If you decide to buy, shop credit unions, Pen Fed has a car buying service that can get you 1.74% on a 60 month note or 1.24% on 36 months and while they are military credit union anyone can join by making a $25 donation to one of they military charities. Also they have a 5% cash back on any gas credit card. I use that exclusively for all my cash purchases and get rebates every few months from them.
Finally, in some states the taxes or registration fees may make leasing less attractive. In GA they recently made some registration fee changes that at first made leasing insanely bad, but have tweaked it to be better, on par with before, but in the end buying and trading at the 4 or more year mark is still less expensive here in GA, assuming you are not upside down on the purchase
It depends.. not trying to be funny but it does. Here are some basic things to consider.
First leasing is usually for people that want a new car ever 3 years or so. Also it is almost never a good idea to buy the leased car at the end of the lease, unless you have so much extra mileage or wear and tear that you would owe them a ton of $$$. If you want a car longer than 3 years, don't lease buy it.
If you take decent care of the leased car it is a great way to not worry about being upside down at the end and trying to trade in a car you own.
Most lease ads require you put a few grand down, but you can get almost any terms you want. I typically only do first month payment down only. I also make sure to buy as many miles as I think I will need and pad a tad. My first lease was a 19K miles a year lease, my current one is 17K miles, I have done a better job of estimating so if I were to lease again I would do 15K-16K miles. Some companies will not do over 15K miles a year.
When you lease you negotiate just like you are buying, you negotiate the purchase price on the car and any discounts. That is the cap cost of the car. Then you need to get what the residual is, most decent cars will have around a 51-56% residual amount at the the end of the lease. The residual is the amount the car is worth at the end of the lease should you decide to buy it.
The way to get your lease payment low is to make sure they are giving you the best cost for the car with the highest residual. Leasing is basically you are paying to use the depreciated value of the car over the term of the lease. So to keep things simple:
If the they sell you a $110,000 car for $100,000 for a 3 years and it has a 50% residual then at the end of 3 years the car is $50K and you can buy it for $50K at the end of the lease. You are financing $50K over the term of the lease. Now the leasing company has to make money so the charge you interest on the payments over the term of the lease, this is called the money factor. When you lease be sure to ask them what the money factor on the lease is, then take that number and multiply by 2400. So if they tell you the money factor is .00232 that means they are charging you over 5.6% interest on financed depreciation. Often this is where they get you, most people don't ask what the money factor is and just look at the payment each month. Leasing usually carries a higher percentage rate than typical financing, unless there are decent lease incentives.
Some thoughts I have on leasing or even financing. First I put very little down on a car, why? If I lease form the manufacturer they usually give you gap insurance, if I purchase I always buy GAP insurance form my credit union or where eve I am financing. Why?
Say you buy a $50K car and put $10K down and 3 months later your car gets totaled. The insurance company is going to try and pay as little as possible and to a point concerned about covering the loan on the car. Once they satisfy the loan if you don't feel they are giving you enough that is a fight between you and them. Now same scenario, and you did 100% financing or little down lease and have gap and total the car. The insurance company pays whatever they feel is fair and the gap insurance covers the rest of the amount owed on the loan, thus less fighting you have to do. If you had put $10K down on the car and had gap then the gap is only concerned about paying off the loan not the fair price to you. Thus for me while it costs money to finance a car, lease and finance rates are dirt cheap lately so I would rather do that with gap and never worry about getting screwed if the car gets wrecked or stolen.
If you decide to buy, shop credit unions, Pen Fed has a car buying service that can get you 1.74% on a 60 month note or 1.24% on 36 months and while they are military credit union anyone can join by making a $25 donation to one of they military charities. Also they have a 5% cash back on any gas credit card. I use that exclusively for all my cash purchases and get rebates every few months from them.
Finally, in some states the taxes or registration fees may make leasing less attractive. In GA they recently made some registration fee changes that at first made leasing insanely bad, but have tweaked it to be better, on par with before, but in the end buying and trading at the 4 or more year mark is still less expensive here in GA, assuming you are not upside down on the purchase
Last edited by KeithL; 04-21-2013 at 08:14 PM.
The following 5 users liked this post by KeithL:
drivinginmy04tl (04-22-2013),
HeartTLs (04-22-2013),
TeamAcura (04-22-2013),
TheOMan (04-22-2013),
UKwrath33 (04-22-2013)
04-21-2013, 10:17 PM
#4
I want to stress one point, that KeithL has provided. Negotiate the sale price JUST as if you were buying. In the middle of your lease term you may want to get out of the car and get into something else, who knows. But by ensuring the purchase price is as low as possible means that the car's payoff, based on the price you have agreed to when you signed the lease, will be lower through out the term. Having the payoff on the car lower throughout the term means that more money will stay in your pocket if you decide to exit early.
04-22-2013, 06:01 AM
#5
Great info- I had never considered leasing before. When I went to the dealer Saturday I was presented with th option to lease, they showed me a schedule of payments. I don't know too much about it, this is great info.
The following users liked this post:
Mr Marco (04-22-2013)
04-22-2013, 06:51 AM
#6
There are several articles out there on leasing, I will give you my opinion. The gf and I have leased 4 vehicles since 2009.
It depends.. not trying to be funny but it does. Here are some basic things to consider.
First leasing is usually for people that want a new car ever 3 years or so. Also it is almost never a good idea to buy the leased car at the end of the lease, unless you have so much extra mileage or wear and tear that you would owe them a ton of $$$. If you want a car longer than 3 years, don't lease buy it.
If you take decent care of the leased car it is a great way to not worry about being upside down at the end and trying to trade in a car you own.
Most lease ads require you put a few grand down, but you can get almost any terms you want. I typically only do first month payment down only. I also make sure to buy as many miles as I think I will need and pad a tad. My first lease was a 19K miles a year lease, my current one is 17K miles, I have done a better job of estimating so if I were to lease again I would do 15K-16K miles. Some companies will not do over 15K miles a year.
When you lease you negotiate just like you are buying, you negotiate the purchase price on the car and any discounts. That is the cap cost of the car. Then you need to get what the residual is, most decent cars will have around a 51-56% residual amount at the the end of the lease. The residual is the amount the car is worth at the end of the lease should you decide to buy it.
The way to get your lease payment low is to make sure they are giving you the best cost for the car with the highest residual. Leasing is basically you are paying to use the depreciated value of the car over the term of the lease. So to keep things simple:
If the they sell you a $110,000 car for $100,000 for a 3 years and it has a 50% residual then at the end of 3 years the car is $50K and you can buy it for $50K at the end of the lease. You are financing $50K over the term of the lease. Now the leasing company has to make money so the charge you interest on the payments over the term of the lease, this is called the money factor. When you lease be sure to ask them what the money factor on the lease is, then take that number and multiply by 2400. So if they tell you the money factor is .00232 that means they are charging you over 5.6% interest on financed depreciation. Often this is where they get you, most people don't ask what the money factor is and just look at the payment each month. Leasing usually carries a higher percentage rate than typical financing, unless there are decent lease incentives.
Some thoughts I have on leasing or even financing. First I put very little down on a car, why? If I lease form the manufacturer they usually give you gap insurance, if I purchase I always buy GAP insurance form my credit union or where eve I am financing. Why?
Say you buy a $50K car and put $10K down and 3 months later your car gets totaled. The insurance company is going to try and pay as little as possible and to a point concerned about covering the loan on the car. Once they satisfy the loan if you don't feel they are giving you enough that is a fight between you and them. Now same scenario, and you did 100% financing or little down lease and have gap and total the car. The insurance company pays whatever they feel is fair and the gap insurance covers the rest of the amount owed on the loan, thus less fighting you have to do. If you had put $10K down on the car and had gap then the gap is only concerned about paying off the loan not the fair price to you. Thus for me while it costs money to finance a car, lease and finance rates are dirt cheap lately so I would rather do that with gap and never worry about getting screwed if the car gets wrecked or stolen.
If you decide to buy, shop credit unions, Pen Fed has a car buying service that can get you 1.74% on a 60 month note or 1.24% on 36 months and while they are military credit union anyone can join by making a $25 donation to one of they military charities. Also they have a 5% cash back on any gas credit card. I use that exclusively for all my cash purchases and get rebates every few months from them.
Finally, in some states the taxes or registration fees may make leasing less attractive. In GA they recently made some registration fee changes that at first made leasing insanely bad, but have tweaked it to be better, on par with before, but in the end buying and trading at the 4 or more year mark is still less expensive here in GA, assuming you are not upside down on the purchase
It depends.. not trying to be funny but it does. Here are some basic things to consider.
First leasing is usually for people that want a new car ever 3 years or so. Also it is almost never a good idea to buy the leased car at the end of the lease, unless you have so much extra mileage or wear and tear that you would owe them a ton of $$$. If you want a car longer than 3 years, don't lease buy it.
If you take decent care of the leased car it is a great way to not worry about being upside down at the end and trying to trade in a car you own.
Most lease ads require you put a few grand down, but you can get almost any terms you want. I typically only do first month payment down only. I also make sure to buy as many miles as I think I will need and pad a tad. My first lease was a 19K miles a year lease, my current one is 17K miles, I have done a better job of estimating so if I were to lease again I would do 15K-16K miles. Some companies will not do over 15K miles a year.
When you lease you negotiate just like you are buying, you negotiate the purchase price on the car and any discounts. That is the cap cost of the car. Then you need to get what the residual is, most decent cars will have around a 51-56% residual amount at the the end of the lease. The residual is the amount the car is worth at the end of the lease should you decide to buy it.
The way to get your lease payment low is to make sure they are giving you the best cost for the car with the highest residual. Leasing is basically you are paying to use the depreciated value of the car over the term of the lease. So to keep things simple:
If the they sell you a $110,000 car for $100,000 for a 3 years and it has a 50% residual then at the end of 3 years the car is $50K and you can buy it for $50K at the end of the lease. You are financing $50K over the term of the lease. Now the leasing company has to make money so the charge you interest on the payments over the term of the lease, this is called the money factor. When you lease be sure to ask them what the money factor on the lease is, then take that number and multiply by 2400. So if they tell you the money factor is .00232 that means they are charging you over 5.6% interest on financed depreciation. Often this is where they get you, most people don't ask what the money factor is and just look at the payment each month. Leasing usually carries a higher percentage rate than typical financing, unless there are decent lease incentives.
Some thoughts I have on leasing or even financing. First I put very little down on a car, why? If I lease form the manufacturer they usually give you gap insurance, if I purchase I always buy GAP insurance form my credit union or where eve I am financing. Why?
Say you buy a $50K car and put $10K down and 3 months later your car gets totaled. The insurance company is going to try and pay as little as possible and to a point concerned about covering the loan on the car. Once they satisfy the loan if you don't feel they are giving you enough that is a fight between you and them. Now same scenario, and you did 100% financing or little down lease and have gap and total the car. The insurance company pays whatever they feel is fair and the gap insurance covers the rest of the amount owed on the loan, thus less fighting you have to do. If you had put $10K down on the car and had gap then the gap is only concerned about paying off the loan not the fair price to you. Thus for me while it costs money to finance a car, lease and finance rates are dirt cheap lately so I would rather do that with gap and never worry about getting screwed if the car gets wrecked or stolen.
If you decide to buy, shop credit unions, Pen Fed has a car buying service that can get you 1.74% on a 60 month note or 1.24% on 36 months and while they are military credit union anyone can join by making a $25 donation to one of they military charities. Also they have a 5% cash back on any gas credit card. I use that exclusively for all my cash purchases and get rebates every few months from them.
Finally, in some states the taxes or registration fees may make leasing less attractive. In GA they recently made some registration fee changes that at first made leasing insanely bad, but have tweaked it to be better, on par with before, but in the end buying and trading at the 4 or more year mark is still less expensive here in GA, assuming you are not upside down on the purchase
04-22-2013, 06:52 AM
#7
Three Wheelin'
In addition to the great info already provided another advantages to leasing is if you use the car for business purposes the lease payment is 100% tax deductible. If buying only the percentage used for business only can be deducted. PS - Acura offers very good lease incentives when buying and re-leasing with them. They will even rollover unused lease-end miles into your new lease. If I remember correctly Acura also includes gap insurance as part of the leasing equation.
Trending Topics
04-22-2013, 02:38 PM
#9
Burning Brakes
Thread Starter
Join Date: Nov 2011
Location: Not far enough from Chicago
Age: 46
Posts: 893
Likes: 0
Received 190 Likes
on
119 Posts
Thank you KeithL - very useful
So with your points in mind, a trade-in toward a lease really doesn't save any money since the residual value/depreciation will be the same - it may just save a few bucks on the monthly payment. Better to sell the car privately, or just get a check on the trade.
So with your points in mind, a trade-in toward a lease really doesn't save any money since the residual value/depreciation will be the same - it may just save a few bucks on the monthly payment. Better to sell the car privately, or just get a check on the trade.
04-22-2013, 05:31 PM
#10
Suzuka Master
Thank you KeithL - very useful
So with your points in mind, a trade-in toward a lease really doesn't save any money since the residual value/depreciation will be the same - it may just save a few bucks on the monthly payment. Better to sell the car privately, or just get a check on the trade.
So with your points in mind, a trade-in toward a lease really doesn't save any money since the residual value/depreciation will be the same - it may just save a few bucks on the monthly payment. Better to sell the car privately, or just get a check on the trade.
Another thing to keep in mind is most makes will also have 2 additional fees, a lease acquisition fee and a lease end processing fee, these 2 fees can add in another $1K or more. Acura I believe is one of the few that does not charge a fee to process end of lease.
Also read the terms of the lease carefully and understand any specifics of normal wear and tear. For instance on my M37 the car when returned must have 4 matching tires and those tires must have at least 4/32 of tread left. I am likely going to cut that close at the end of my lease, not worried too much of I get another M because I will have them take the tires off the new M and buy better tires for the new M.
The gf and I have leased 4 cars since 2009, but we are both likely purchasing next cars.
04-22-2013, 10:50 PM
#11
Pro
Every so often I would ask car consultants or others about leasing versus buying. Of course that was back a bit when cars were proportionately much less versus income. But it always came down to a simple rule-of-thumb. If you like keeping cars more than a couple of years then buy. If you liked changing every couple of years then lease. Since I tend to keep cars (shortest ownership was about 7 years and longest about 14) buying is what made sense for me.
04-23-2013, 07:25 AM
#12
Instructor
There are certain financial advisers out there that will tell you that even buying a NEW car is a bad idea. Their mantra is to let some other sucker pay for most of the depreciation, buy it used some three or four years later, then drive it til the wheels fall off. Sorry, but I simply can't do this. They'll also tell you that leasing is a bad idea, without even considering the person's specific circumstances. For me, that's BS advice.
I like new cars. Leasing makes sense to me. But, I have a slightly different motive. I was losing my shirt by getting in and out of vehicles too often. Leasing locks me in for a given amount of time and makes it harder to get out of the vehicle. I needed this (dis)incentive to make me more responsible when it comes to cars.
I like new cars. Leasing makes sense to me. But, I have a slightly different motive. I was losing my shirt by getting in and out of vehicles too often. Leasing locks me in for a given amount of time and makes it harder to get out of the vehicle. I needed this (dis)incentive to make me more responsible when it comes to cars.
04-23-2013, 07:59 AM
#13
Burning Brakes
All good points here but also, leasing makes sense for those who want a luxury car while making low monthly payments. Something that fits their budget. I read 75% of luxury cars bought as leases. And people confuse leasing a car with renting one. Two totally different things, leasing a car is another form of financing because at the end of the term you have the choice to buy it out, trade it in or simply walk away. Whereas renting a car, you have to return it. If you know how to take care of your car and not neglect it and also have good credit, leasing is a excellent option.
04-23-2013, 08:38 AM
#14
Racer
Keep in mind that if you do lease it, technically if you dont decide to keep it after the term and pay/finance the buy back amount you would have to return the car to them. Keep the car as stock as you can, any non oem add-ons can actually end up costing you money in the future as they would want the car back just like how they gave it to you.
04-23-2013, 11:02 AM
#15
Every so often I would ask car consultants or others about leasing versus buying. Of course that was back a bit when cars were proportionately much less versus income. But it always came down to a simple rule-of-thumb. If you like keeping cars more than a couple of years then buy. If you liked changing every couple of years then lease. Since I tend to keep cars (shortest ownership was about 7 years and longest about 14) buying is what made sense for me.
Again, only the F&I person at the dealership is qualified to do the math on these. They are the only ones who know the current incentives offered from HMCo and have the experience to put you in the transaction that suits you best.
A credit union employee knows nothing about the current HMCo offers and incentives, as they may change daily.
04-24-2013, 08:54 PM
#16
Cruisin'
Join Date: Apr 2013
Location: bronx ny
Posts: 19
Likes: 0
Received 0 Likes
on
0 Posts
If u like to modified our car then buy it. If u don't care about hooking up our ride then it dose not make sense to put money and time if u going to go give it back.i will modified until I die
Thread
Thread Starter
Forum
Replies
Last Post
08_UA7_Gr33k
Member Cars for Sale
13
02-11-2016 02:17 PM
lanechanger
Member Cars for Sale
4
10-13-2015 10:56 AM
