Lease acquisition fee = Euphemism for minimum interest rate?

rhinestonefuse

I'm new to car leasing and have a question for others with experience.

I'm looking to finance $10,000 worth of agreed upon depreciation over 36 months. My credit is just under 800.

Dealer says that loan will cost me, non -negotiable:

$488.28 in interest (.0013 MF = 3.12% APR)
$795 acquisition fee
====
$1,283 for a 36 month $10,000 secured loan = 8% Interest Rate

Isn't this a very high cost for $10K worth of secured top tier credit?

kyfdx

rhinestonefuse said:

I'm new to car leasing and have a question for others with experience.

I'm looking to finance $10,000 worth of agreed upon depreciation over 36 months. My credit is just under 800.

Dealer says that loan will cost me, non -negotiable:

$488.28 in interest (.0013 MF = 3.12% APR)
$795 acquisition fee
====
$1,283 for a 36 month $10,000 secured loan = 8% Interest Rate

Isn't this a very high cost for $10K worth of secured top tier credit?

All leases have an acquisition fee... From your numbers, I'll assume this is a BMW. $795 is the base fee. It's an assignment fee for the bank, which covers GAP insurance, commission to the dealer's finance office for writing the lease and profit for the bank.

Also, you aren't financing $10K of depreciation, you are financing the full CAP cost.. You are only paying down the $10K of depreciation. Your amount financed over the lease term is the average of the NET CAP Cost and the residual. So, if your CAP is $40K and your residual is $30K, then your average amount subject to the money factor is $35K.

After all, the bank doesn't get the car from the dealer for $10K... They pay the full $40K for it.

rhinestonefuse

So the $795 fee + 3.12% APR fee covers $35K, not $10K?

I don't think I should be financing the full value of someone else's asset.

kyfdx

rhinestonefuse said:

So the $795 fee + 3.12% APR fee covers $35K, not $10K?

I don't think I should be financing the full value of someone else's asset.

You have full use of the vehicle while you are renting it.. so, you pay the full finance charges that are due during that lease. Once you are done with it, it reverts to the bank and then it's their issue.

Compare it to renting a house... Your rent has to cover the finance charges, at a minimum. And, that's an appreciating asset. For a car, you have to finance it and cover the depreciation.

No bank is going to lose money to lease a vehicle..