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regards,
kyfdx
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Not in this country ......
Terry.
1) Never lease a car out of warranty (though I've done this).
2) 39 or 42 months may be okay, if the car has a 4 year warranty, but the longer you lease, the increased chance that your needs or financial situation may change. 36 month is usually best, and 24 month is usually too expensive.
3) When in doubt, take the higher mileage allowance.
4) If the total lease payment is more than $15 per thousand of MSRP with tax included and minimal upfront charges, then you are better off buying. (this depends on the prevailing interest rates.. even this is a little too high right now).
5) If you don't understand leasing, or aren't sure which way to go.. always buy.
regards,
kyfdx
(not an expert)
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For example, if miles are $.10/each on the overage, an extra 2k/year better not increase payments by more than $16.67/month. If it does, than it would be cheaper to take the lower lease rate, and pay for the extra miles at the end.
2020 Acura RDX tech SH-AWD, 2023 Maverick hybrid Lariat luxury package.
Regarding mileage allowance, I personally would go for the low-mileage lease since our track record indicates that we generally would not exceed 18,000 km per year (per car). It seems most low-mileage leases are at 20,000 km which should be plenty for us.
I agree if available my first choice would be 39 -42 month term. But if only either 36 or 48 months available, I may be tempted to go 48 just to bring the monthly payments down and to level off the depreciation factor a bit. (Although I realize that, with most bumper to bumper warranty good for only 36 months, there is a bit of risk. Luckily most powertrain warranties are for 5 years)
BMW for instance, doesn't offer "supported" lease rates for anything longer than 42 months.. If you lease for 48 months, you have to use their standard rates, and sometimes the lease payment is even higher..
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Captive finance companies use lease rates to put incentives on cars, without using rebates or lowering the price...
Assume that 5% is the standard interest rate.. that equates to a money factor of about .0021
The manufacturer wants to move the XYZ model this month, so they drop the money factor to .0010.. that might drop $25/mo off the price of a lease..
That way, if XYZ model inventory returns to normal, they can just change the money factor, rather than have a rebate that expires, etc...
BMW has all sorts of different money factors and residuals depending on which model you select.. The lease computation on the website is usually not very accurate..
regards,
kyfdx
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The problem is I can't decided if I want to purchase the car or lease it. If I purchase, I will most likely have provide about 7-8Grand for the down payment (trade in included). This would most likely get it into my price range of under $260 a month Comfortablely. I like having low monthly payments, so that is an important factor. I have recently thought about leasing the vehicle as well. I've read that you can get a lower monthly payment with a lease. My plan would be to lease the car and then just buy the lease out at the end of the term.
I am just out of college, got a decent full time salary job, and I really have my heart set on this car. But I would like to have lower monthly payments in the beginning years that would be the rest of my life, so that I can better establish myself, and not have a ton of my monthly income ($1700) tied up in the car.
I am worried that after a 3 year lease might end up side down if I decide to purchase. The RSX holds its value quite high, im worried of paying too much during the lease and then not having that amount I paid reflect the value of the car. What do you all think I should do? Is leasing to later own the car a good solution, or should I just keep on saving up more money to purchase later on?
If you want lower payments now, and higher payments later.. keep most of your downpayment in the bank... and dip into it to supplement the payment for the first three years...
Example..
Assume you keep $3600 of your downpayment in the bank, resulting in a $350/mo. for 60 months...
For the first 36 months, take $100 out of the bank each month to supplement the payment.. resulting in an outlay of $250/mo.. Then when the money is exhausted in 3 years, your monthly outlay will be $350/mo for the last two years..
I didn't work up any specific numbers... this was just an example..
If you want to own, don't lease first..
regards,
kyfdx
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I just got a quote from the dealer.
They ahve a AHFC lease special right now. I can get an 05 RSX type-s for $250 /month for 36 months. With $2500 down at signing. The residual of the car after my lease would be 14-15 thousand. That doesn't sound like a bad price considering that an 02 Type-s is retailing for 17-18 Grand at most dealerships that I have seen in my area. What do you guys think of this deal?
Add the $2500 down back in, and you get about $320/mo.. And, don't forget the acquisition fee of $595.. You would probably need about $3800 at lease signing...
I'm betting you'd be better off buying, but I'd have to see all the numbers... You have to look at your total monthly cost including the downpayment and fees, to get a "real" picture of what you are paying..
I'm thinking AHFC has special APRs on purchases as well..
In general, it is not a good idea to lease a car that you could not afford to make the purchase payments on... Leasing just to get a lower payment that you can afford, is usually a sign that you need to look at a cheaper car..
That is a nice car, though... I'd recommend it.. Have you checked insurance rates?
regards,
kyfdx
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Someone must be made of money.
Reminds me of when an ole Master Sgt commented that my car loan (back in 1992) and payment were higher than his first house loan (I was a captain then).
That was 13 years ago (and I don't know when his first house loan was), but now, that lease payment is higher than my morgtage payment!!!!!!
And no, I don't live in a trailer park ;-)
But in this case we're talking a 3 yr 60,000 mile vehicle not 40K.
You lost me here. Is the above statement based on a 3 year term loan to purchase the lexass versus the $900/month lease with the difference in payments being $34,000.00?? Meaning that you would either own the car (with 60,000 miles) or have the $34,000.00 that you didn't have to pay out over the past 3 years??
what are the advantages of leasing car over buying?!
I am in a current situation where my income will dramatically increase in the near future (2 yrs)and therefore would like to keep lower payments for right now.
The question are 1- is it usual for the balloon payment option financing to run a higher interest rate than conventional financing 2-is this type of balloon option financing any better than a lease. Should I just look at a traditional lease. 3- is the conventional purchase the way to go with this interest rate?
I am not the kind that keeps cars forever and usually get a new car every 4 years.
I am in a current situation where my income will dramatically increase in the near future (2 yrs)and therefore would like to keep lower payments for right now.
The question are 1- is it usual for the balloon payment option financing to run a higher interest rate than conventional financing 2-is this type of balloon option financing any better than a lease. Should I just look at a traditional lease. 3- is the conventional purchase the way to go with this interest rate?
I am not the kind that keeps cars forever and usually get a new car every 4 years
'11 GMC Sierra 1500; '08 Charger R/T Daytona; '67 Coronet R/T; '13 Fiat 500c; '20 S90 T6; '22 MB Sprinter 2500 4x4 diesel; '97 Suzuki R Wagon; '96 Opel Astra; '08 Maser QP; '11 Mini Cooper S
Also, if you want a cheaper payment upfront and backload your payments, use that $5K in the bank to supplement your payment for a couple of years..
IOW, say you borrow $25K at 2.9% for 60 months.. with no money down.. Payment is about $450/mo..
Withdraw $200/mo out of your $5K stash to make the payment each month.. making your monthly outlay only $250/mo. for the first two years..
Then, when you expect your income to be higher, you can afford the $450/mo. payment for the last three years..
regards,
kyfdx
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The Honda Lease Option:
I figured the Lease with only the first payment due at signing.
A 36 month lease @ 15,000 miles a year the payment would be $430.00
The money factor on this lease arrangement is .00123%
The resid. value is 52% on this option.
Probably not a bad deal either. I guess the decision is lease vs purchase now. Any thoughts either way?
That payment seems a little high... Did they quote you that payment, or did you figure it yourself?
regards,
kyfdx
EDIT: If you are figuring this yourself, be sure to figure the residual on the total MSRP, not the negotiated price...
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Any comments on these balloon payment option purchases -is it customary to charge a higher finance rate than conventional purchases?
So, here's the calculation... I got monthly payments on a 36 mo lease, 15K miles out of the websites with 0 cap cost reduction, 1000, 2000, and 3000... then I compared the monthly payments, extended that out over the 36 months and compared the amount saved to the amount put "down." Results for a randomly selected A4 1.8 cab (with what must be a pretty good set of numbers given that they probably want to move these before the 05.5 models come in, but I found almost identical patterns (not payments, obviously) for a BMW X3, 330xi (05) and MB c240):
Down -- Monthly
0 -- 603.37
1000 -- 573.05
2000 -- 542.72
3000 -- 512.39
if I compare the monthly amt for 1000 down to 0 down, I see that it's a difference of 30.32... over 36 months, this is 1091ish... in other words, my 1000 put down ended up saving $91 over the 3 years...it ain't much and it won't make or break the deal, but it doesn't seem to argue AGAINST putting the $1k down...(and it's even more than the interest on that $1k would have been)
Furthermore, the values increase as the amount down goes up... by the time we get to 3K down, the difference is $90.98 per month compared to the 0 down payment, and the overall difference over the 36 month term is $275ish. Again, not a huge amount, and not enough to make a decision for or against.....
SO, here's my question...what am I missing? Why is it so much better not to put anything down on the lease? I get the argument of saving my $3k in a separate account and paying the extra $90/month from that in order to keep the payments where I want them... but if there's no added cost (and even a little kickback from putting it down) then I'm not seeing the disadvantage...
Another way of looking at it is this... I have the option in the next 3 months of either paying off my current Chrysler or keeping the money I'd use to do that in the bank. If I pay off the car, I've got about $3k in equity that could be used in trade as cap cost reduction... if it's a bad idea to put the $$$ down, then I'd rather walk into the dealer with the Chrysler about breaking even...
Whew! Long introductory post...if you've read this far, thanks. I'll welcome any feedback or thoughts folks might have... Again, thanks.
If I read this right, this is your first swing at the bat ... leasing can work for some folks, but for others it can be like a leaky canoe without the oars ..... if you get hired, fired, shot, married, change locations, buy a dog, buy a boat, sell your home ~ everything can change --- what sells leases is one thing and one thing only: payments .. after that, your renting this dude, hard to sell (if at all) hard to trade (if at all) ..
Being kinda new in the "lanes of life", I would do my first deal as a purchase - I would get me some cheap loan money, then drop the taxes and flea's down and perhaps another ghee whiz or so to be equity bound (or close to) .. it's a Honda, so at least then, "if" something does happen (and I see it everyday of every week, of every month, and the lease boards are filled with them) you are still the Master of your own destiny (or close to) ........ good luck ....
Terry.
Listen to Terry's advice. Especially the part about being "in control of your destiny". That is a comfort that leather seats cannot provide.
"I am not the kind that keeps cars forever and usually get a new car every 4 years"
We'll give you free memebership in CCBA (Chronic Car Buyer's Anonymous) if you buy a $250/month Civic LX now (notice: "buy").
In a couple years or so, when you're rolling in it as expected -- or is that "if"? -- then you can, as my dad likes to say, blow a feather in the air. The cool thing to do then is, of course, to keep the Civic and get a 740iL or somethin'.
We'll be happy to help you choose at that time :-)
-Mathias
(Who is on his first and probably last-ever car loan...)
That is the whole reason, right there... It is a big risk... Stick around here a couple of years (I know, I know..), and read 100 sob stories about the guy who got his car totaled in the first three months of his lease and is now out the $5K he put down... Making his average cost to drive the car about $2K/month..
It can happen to you...
(I do like how you got the point right away, though... at least you understand)
regards,
kyfdx
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It looks like maybe your dealer is trying to take advantage of you... He can't do that on the financing, because it is too straightforward..
Terry and Mathias are giving good advice..
Don't buy a car that you can't afford right now, based on your expected ability to afford it later... If you lease a car for the lower payment, because you can't afford the higher loan payments, then that is too expensive a car for you..
If you decide that you can afford this car, then buy it with the 2.9% financing.. the balloon deal looks bad all the way around..
regards,
kyfdx
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And I see, too, that I'm better off to walk into the dealer being essentially even on my trade (i owe about 4K it's worth about 3.3K, but I can easily make up that difference)... so that I don't end up with extra $$$ that would be put into the equation as cap cost reduction.
(FWIW, I know I'd be better off to sell it myself, but I guess I'm willing to waste some $$$ for convenience in this case...)
So many variables... but that's all part of the fun... Thanks again,
Scott
IOW, your leased car is totaled.. it has a payoff of $25K, but the insurance adjuster says it is only worth $22K... GAP insurance makes up the difference..
Almost every captive finance company that is owned by the manufacturer includes GAP at no extra cost.. Some independent banks don't, and some charge extra for it.. Never lease a car without it..
And, if you roll negative equity into a lease, that is a cap cost "addition", not a cap cost reduction..
regards,
kyfdx
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Not a week goes by without this question arising. I am a CPA. The leasing industry is based in large part on the ability to deduct a far greater amount of the monthly cash payments required to lease a car compared to the loan payments required to purchase. And the lease payments are invariably less than a principal and interest payment. Depreciation on passenger cars is severly limited, while one can deduct the % of the lease payment which relates to business use. I expend approximately 80% of my annual lease payments, while the depreciation of 80% of the cost basis of the same vehicle would hardly ever be equal to the tax deduction available through leasing. And the APR (2400x the Money Factor, approx.) imbedded in leases is usually well below conventional purchase financing. So if you use your vehicle more than 50% for business, the lease is usually more favorable. Of course, the lease drive-off is also far less than a customary down payment of at least 20% of the cost. It is a bit cumbersome to sell a leased vehicle if you have equity in the auto; I have tried that lately and several potential buyers backed off. If you can borrow money at 1% or less on a promo, and your car is not used for business, the economics may justify a purchase. All leases I have executed require "commercial" insurance limits like 100k/300k vs. minimum coverage of $ 50k/100k, which increase your insurance premiums. Finally, disposing of a used car upon lease termination requires minimal time, while attempting a sale to a private party is time-consuming and can be fraught with risk. Some guy phoned me from Cleveland last week from my E-bay Motors ad to "fly out to L.A. and buy my Lexus." I would never accept a cashier's check, by the way, unless issued by a local bank and which could be converted immediately before delivering the vehicle you're selling.
In other words, when they quote, say 55% residual, is that 55% on the final negotiated selling price only, or 55% on the price + freight, delivery, etc.?
IOW, every XYZ car that has an MSRP of exactly 35K and a residual of 60% is going to be worth the same $21K at the end of the lease, whether you got a good deal or a bad deal...
There are some exceptions... Some Toyota regions don't residualize options.. This causes highly optioned units to be extremely expensive to lease.. Some banks allow dealer added options to be fully or partially residualized... So, that $600 CD changer may add $350 to the residualized MSRP.. But, some other banks don't allow any residualization of those add-ons..
Dealer prep, document fees, selling price, tax, etc, etc.. have nothing to do with the residual..
regards,
kyfdx
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I'm negotiating to lease a Mini thru BMW financing. Their % residual is calculated on MSRP plus factory options. They do not residualize any dealer-installed option. Plus (this is the one I was mainly wondering about) they do not residualize freight and PDI (pre-delivery inspection). Up here, freight and PDI is always one number. But from what you said, it appears what they are doing is par for the course? Nothing untoward?
And, obviously, things could be different in Canada.. So, I guess it is possible that destination isn't included in the MSRP for the residual calculation.. (which doesn't help any).
One thing for sure, the dealer can't play with the residual.. that is set by the leasing company... Your only risk is some kind of miscalculation by the dealer..
But, you need that info to make sure you are getting a fair deal..
I've noticed that in the USA, the lease deals on MINIs seem reasonable, even with the purchase price being MSRP.. As long as you get the base rates..
regards,
kyfdx
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Walt's absolutely right on this, it can be a huge risk. Keep in mind that GAP doesn't cover a downpayment of 5k, or whatever. Only the difference between what's owed and what the car's worth. I had my leased Subaru crunched by some idiot a few months into a lease. It wasn't totalled, although it probably should have been, but I was glad I hadn't put anything down. If the car had been totalled, say goodbye to the downpayment.
Here's something I never see discussed. It's always recommended that if you're going to lease, don't lease beyond the length of the warranty. I've taken that to heart, but added onto it a bit.
For instance, say you lease for 15k miles a year, 3 year lease. If you drive right at 15k miles yearly, a typical 3yr/36k manufacturers warranty will end with 9 months left on the lease. If that's not taken into account when negotiating, you can be out of warranty for several months. I've always arranged for an extended warranty to be added to cover those few months, so far at no added cost. Probably because I don't grind to death. Anyway, I've never had to use it, and maybe it's overkill, but it's GREAT for piece of mind. Which is the main reason I lease to begin with. So, just some food for thought.
-Dan-
Now, I've taken all this a step further too - i think... I had been worried about needing to come up with the $3k down payment (or amount from the cushion account) every 3 to 4 years... so rather than dealing with that, I decided to try to just up the line in my budget for the automobiles rather than trying to set aside and pay down from a separate account. That way, I can plan to go from lease to lease without needing to come up with a ton extra (of course there will be a little, but not too much). I want to thank you folks for your thoughts on the lease because it's really simplified this for me... My target date to start this grand adventure is August 1, so now I just have to turn the pages, pick the car ;-), and have fun. Thanks again, Scott
The V70 (XC70 in particular) has a higher residual % than the S40. The V70 has been around for awhile, it's getting a little long in the tooth, and should actually be due soon for a complete makeover, yet it supposedly retains its value better than the brand spanking new S40?
There lease rate on the V70 is lower, which I expected, since I expected they'd need to offer more incentives to move the V70. But then how does that reconcile with a high residual. And second, it is not just high compared to the S40, it is right up there with BMW residuals, a fact that in and by itself I find surprising.
That way, they don't show the loss, until the car is turned in, and sells for less than the residual...
An example:
BMW 330i sedan.. 52% residual.. MF of .00225
BMW 330Ci coupe.. 57% residual.. MF of .0008
So, the sedan looks like a terrible lease, but BMW has a cash incentive on the sedan of $4200.
The coupe has no cash incentives.. All of the incentives are in the below-market money factor, and the pumped up residual..
Chances are, the coupe will actually retain less of it's value than the sedan.. But, BMW is subsidizing the lease through a higher residual.
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