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General Questions about Leasing Vehicles

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  • dino001dino001 Tampa, FLPosts: 3,538
    In case of a total early in a term, you will end up losing big. The payoff formulas are structured in a way to favor bank, not you so the prorated reimbursement will be a joke - a bad one I might say. Making up numbers, if your one-time 2-year lease payment was $20K and you total it in first month, you will likely get back less than $10K, or something like that.

    Lease is about transfering ownership risk (depreciation) to somebody else (lessor) - for a fee of course. Large cap cost reduction/one time payments transfer that risk back to the lessee.

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • lrguy44lrguy44 Posts: 2,197
    There are 3 cases where I have found they work. By doing a one pay, the money factor is less than a normal lease. The residual is the same. So if you where going to lease, but had the cash to do a one pay, it may be advantages. The other is for the cash buyer who trades every 2 or 3 years. A analysis may show that he can invest the difference between cash and one pay and make money. Also, he doesn't have to worry about depreciation, and pays less tax (at least here) than he would on a purchase. Finally, it is the easiest way for a credit challenged person to get a car. It is rare that the later category can afford a one pay lease. I don't know if it would be the same deal in Canada however.
  • user777user777 Posts: 3,341
    You meant by the third case, the easiest way for a credit challenged person to get a car they shouldn't be driving right? :shades:
  • dino001dino001 Tampa, FLPosts: 3,538
    So it works great if everything is fine. But from risk management point of view, it's terrible, as it combines disadvantages of ownership and leasing.

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • british_roverbritish_rover Posts: 8,476
    Well I have had a couple of customers who have large amounts of liquid cash but fair to poor credit because of unfavorable, and sometimes unforseeable, business outcomes in the past.
  • lilengineerboylilengineerboy Posts: 4,116
    In case of a total early in a term, you will end up losing big.

    How would this be affected by the type of lease you have? Them car has a given value, the insurance company pays off the total, the lien holder first, and then whats leftover goes to the leasee. I don't understand how when you give the bank the money would make a difference. :confuse:
  • dino001dino001 Tampa, FLPosts: 3,538
    There is something called GAP. In month-to-month lease with all costs other than minimum rolled into payment, they take the car payoff, your insurance hands them the check and cover the rest with GAP. So you walk away not owing anything, and you did not invest anything, either. Your ongoing rate was higher, but it never accumulated to anything significant, as the contract was terminated.

    Now, if you paid them $20K upfront, then there is insurance check for say $30K, the car was $34K, guess where the 4 grand comes from? It comes from that 20 grand you handed - GAP never kicks in. Factor in taxes, upfront fees, such as acquisition fee and others and your pro-rated reimbursement shrinks drastically. So if there is no total loss, you paid less with one-payment - perhaps significantly less. But if something bad happens, your bad luck just double dipped.

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • kyfdxkyfdx Posts: 30,476
    One-pay leases work differently than making a large CAP cost reduction....

    If the vehicle is stolen or totalled, the lease is pro-rated... and the difference is returned to the lessee..

    Otherwise, the risk would be too great..

    Also, you don't really need GAP on a one-pay lease, as the payoff is almost always less than the ACV.

    regards,
    kyfdx
    Host-Prices Paid Forums

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • dino001dino001 Tampa, FLPosts: 3,538
    OK, good to know. Maybe the're not such a terrible idea as I thought.

    Thanks. One question, though - does the payoff of a totalled on-time follow depreciation of the car, or is it pro-rated on "time-proportional" basis? Of course the latter would be much more advantageus, but I can't see banks "volunteering" that method.

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • kyfdxkyfdx Posts: 30,476
    Most one-pay leases work this way..

    They calculate it like a normal lease, only they'll drop the money factor.. say... from .0030 to .0022... Then, they add up the monthly payments and that is your one-pay (plus all the usual stuff... acq.fee, tax, etc.).

    Then, if your lease is terminated for stolen/accident, they calculate the payoff, as though you were making those payments each month.. the same as if you traded in your car early, etc...

    Early terminations aren't that big of a deal for the bank... Sure, they lose out on future interest payments, but they get their money back to loan out again.. At least this way, they don't have to worry about getting burned on the residual value.

    What banks really don't want? They don't want you to turn your car in at the end of the lease.

    regards,
    kyfdx

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • mudfudmudfud Posts: 6
    "If the vehicle is stolen or totalled, the lease is pro-rated... and the difference is returned to the lessee.."

    So if I've understood this correctly, most of the pre-paid lease amount would be returned if the car is totalled early.

    "Also, you don't really need GAP on a one-pay lease, as the payoff is almost always less than the ACV."

    Hmm..So why is the payoff amount less for a single pay lease?
    Thanks.
  • joel0622joel0622 Posts: 3,302
    So if I've understood this correctly, most of the pre-paid lease amount would be returned if the car is totalled early.

    If your payment is $300 a month and you total the car with 6 months left you get back $1800. The only thing I don't know about for sure is the taxes. You may not get those back

    "Also, you don't really need GAP on a one-pay lease, as the payoff is almost always less than the ACV

    Most leases include gap so you have it any how
  • I leased a Hyundai Sonata for 30 month/299 (no down, DMV fees rolled in).

    4 days later the dealer is calling me telling me that they made a mistake, and that the program they offered me is not still available. They want me to come in and re-do the lease, and pay more.

    They're offering 24 months at 357, or 36 at 327.

    I can't see why they should be able to even suggest this - can anyone here shed some light for me?

    Thanks!
  • carnaughtcarnaught Posts: 1,599
    4 days later the dealer is calling me telling me that they made a mistake, and that the program they offered me is not still available. They want me to come in and re-do the lease, and pay more.


    I'd have them honor the lease as is or cancel it. It was their mistake.
  • joel0622joel0622 Posts: 3,302
    Call back and say, I am sorry the program changed, I really like this car. Oh well I will return it to you at 3:00 pm today
  • louiseblouiseb Posts: 12
    Now that I know what residual value and money factor means, who determines this? Is it up to the dealer?? Does it change daily? Where do I find out what the car company is offering(if they are the ones who set these numbers) before I go to the dealer?
    TIA,
    Louise
  • joel0622joel0622 Posts: 3,302
    Louise, the Residuals and Money Factors are determined by the leasing company, be it the manufacture or a bank. Normally they change quarterly with the residuals being the highest at the beggining of the year and going down each quarter.

    This is a rule of thumb not set in stone.
  • kyfdxkyfdx Posts: 30,476
    Where do I find out what the car company is offering(if they are the ones who set these numbers) before I go to the dealer?

    Right here, of course... Prices Paid: Buying & Leasing Experiences

    There is a Lease Questions discussion for every make and model.

    regards,
    kyfdx

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • louiseblouiseb Posts: 12
    If the dealer was offering 2.9% interest(or what ever promo interest rate) then why would they not offer the same for a lease?
  • joel0622joel0622 Posts: 3,302
    If the dealer was offering 2.9% interest(or what ever promo interest rate) then why would they not offer the same for a lease?

    Because an interest rate and a lease factor ar two totaly different things.
  • Hey all,

    I have a simple question regarding the logistics of a lease. I currently live in Philadelphia and will be graduating from medical school come May of 2008. I am 100% sure that I will not be in Pennsylvania and will most likely be in Texas or Washington state for the next 5-6 years at least starting that June. I will be in the market for a new car around January of 2008. While I'm still determining whether it will be in my best interst to buy or lease, my question is will it be a problem leasing/buying a car here in Philly knowing I will be moving 6 months or should I just tough it out until the big move and just buy/lease once I get settled there??

    I know that some dealerships have deals with free oil changes, maintenance, etc. Are these deals with that car only good at that specific dealership or will I be able to take it to any Acura (for example) dealership?

    I also know that if I do not intend to buy out the lease at the end of the deal that the vehicle must be returned to the dealer. Is this implying the vehicle must be returned to that specific dealership that I purchased it from or just any "Acura" dealer?

    Thanks in advance for any advice!!
  • tidestertidester Posts: 10,109
    Personally, I would wait until I made the move before committing to a lease. Also, if you're driving the leased vehicle to Texas or Washington, that will contribute significantly to your mileage limits.

    tidester, host
    SUVs and Smart Shopper
  • carnaughtcarnaught Posts: 1,599
    Personally, I would wait until I made the move before committing to a lease. Also, if you're driving the leased vehicle to Texas or Washington, that will contribute significantly to your mileage limits.

    tidester, host
    SUVs and Smart Shopper


    Good advice!

    To my knowledge, only BMW has a maintenance program included with the car (Audi does for the first service). Some brands have a service policy that you buy extra which is more dealer specific, while still others are brand specific. Bottom line, consider following Tidester's advice.

    Good luck in Med School.
  • Ok, that makes sense. Any other thoughts?

    I know this is a leasing thread, but what if I planned on purchasing the vehicle rather than leasing it? Should that change my approach or would it still be advantageous to wait until I moved, if possible??

    Thanks again for everyone's help!
  • Kirstie_HKirstie_H Posts: 10,914
    Ah, in that case, you'll want to check the vehicle sales tax rate of your current place of residence, then compare to your proposed places of residence in a year. If there's a big difference, your decision could save/cost a lot of money.

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  • mcpheect5mcpheect5 Posts: 1
    I have a 2005 Town and Country with 18 months left on the lease. I need to get out of this lease ASAP due to life changes. Needing a cheaper payment. Any suggestions or ideas. Can anyone help?
  • scottinkyscottinky Posts: 194
    2007 Passat Wagon 2.0t with Package 1
    MSRP is 29,439
    selling price is 27, 613
    36 months, $2250 down, payment of $409.
    residual is 49%, money factor .00106

    Would be trading Pathfinder I owe 11.5k on, paid off in 18mos.
  • Kirstie_HKirstie_H Posts: 10,914
    You might Google lease swapping - that's probably your best bet. To get out of the lease, you would have to pay all of the remaining payments at the least.

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  • Kirstie_HKirstie_H Posts: 10,914
    Hi Scott,
    Since this is a general discussion about how leases work, you're better off looking for a response in the Passat Lease Questions discussion where you posted earlier.

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  • avljmaxavljmax Posts: 10
    I'm confused about a prior post... one of the hosts said that you can't trade in a leased car, except that every dealership I've spoken with seems happy to have me trade in my leased 2004 Honda Civic. Am I being misled? Thanks for your insights.
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