General Questions about Leasing Vehicles

Kirstie_H

Ask 'em here - questions about specific models should still be placed in discussions about those vehicles.

d1ane

Looking to lease a new car-first time buyer so I have many questions. however for this thread i want to ask about incentives for recent college grads...any truth to that and how can i make the dealership aware of this?

tidester

Try Rebates, Incentives, APRs - Questions & Comments.

tidester, host

parnelli66

Why do people lease cars? Doesn't it mean that they are always stuck with a car payment and will never own their cars?

Kirstie_H

That debate is being covered in Leasing vs Purchasing

Kirstie_H

http://www.edmunds.com/advice/strategies/articles/118780/article.html

Edmunds.com is the only Web site to identify the best lease deals using a numerical formula rather than subjective opinion. The calculation takes into account the average transaction price of the car and then determines the savings provided by the lease.

Currently, the top five lease deals available nationwide are:

2007 Audi A4 2.0T Quattro sedan
24 months, $379/month
30,000 total miles
$954 drive-off fees*

2006 Mazda Mazdaspeed 6 Sport
24 months, $269/month
24,000 total miles
$2544 drive-off fees

2007 Saab 9-7X 4.2i SUV AWD
27 months, $429/month
27,000 total miles
$2999 drive-off fees

2007 Mercedes-Benz CLK350 3.5-liter V6 coupe
27 months, $449/month
22,500 total miles
$3994 drive-off fees

2007 Subaru Outback 3.0 L.L. Bean Edition AWD
24 months, $299/month
20,000 total miles
$2923 drive-off fees

*”Drive-off fees” include lease acquisition fee, first month’s payment and any required capital cost reduction (down payment).

According to Edmunds, of course. Agree, or have you seen a better deal?

blkhhr

I am interested in a 12-month lease, non-vehicle specific at the moment. I know 12-month leases are "possible" because I have read a little about them before; like with a one-payment lease. But my concern is, how "available" are these? Most, if not all manufacturers' websites only advertise or provide calculators for leases of 24 months or more. Would these have a ridiculous MF? Any feedback is appreciated.

kyfdx

I know that Infiniti had some 12 month lease specials a few months ago on the '06 FX and G35 models...

That is the only recent instance that I can think of.. The total cost for 12 months was around $6K, which isn't too bad of a deal on a lease that short..

Generally, you have to go out to 24 months to get a reasonable deal.. and that is only on select models... If they aren't running a special on the short-term leases, they are way too expensive...

regards,
kyfdx

cccompson

As the host said, it's virtually impossible to do 12 month lease on a new car for a reasonable amount of money. I did it once years ago on a Grand Cherokee. It was some sort of dealer promotion and seemed then (and now) a once in a lifetime sort of thing.

There are some lease assumption websites around where you can find a wide variety of short term opportunities.

maradag

I’ve been looking to get into a new car since my ’03 LR Freelander is coming due in April. I pay 295 pm so I’m a bit shocked by some of the quotes I’ve been getting.

I’ve been reading a lot of leasing tips but there’s so much involved that I’m becoming a bit overwhelmed and I’m not sure how to apply the information that I’m reading. :confuse:

I’ve been pricing several different cars to see what I can get that fits my criteria. My requisites are: $300-$320 pm, $2500-$3000 TOTAL out of pocket and 15k miles per year. I also need a 3rd row seat and AWD. I’ve considered Saturn’s Outlook, GMC’s Acadia, Buick’s (now discontinued) Rendevouz, Toyota’s 4Runner and Highlander, and Mercury Mountaineer.

I’ll use my experience at the Chrysler dealer as an example. The Touring version had an MSRP of $31,110, dealer said he’d give it to me at his price of $29,110 (now that’s 31,110 - $1500 Chrysler cash for $29,600) and he’s knocking another $500 off. (I didn’t ask for the money factor or residual because I felt the lease payment of $339 he quoted was still too high) Here starts the confusion… Edmunds says invoice is $28,588, so did he give me a good price or was there more room to negotiate down??? If there’s more room, how much more? Do I offer $25k? That’s sounds like a good number to me but probably won’t get me a deal. Help!!

Also, is there a better time in the year to be leasing? Is September better than February?

One more question: Is it better to go thru an independent leasing company rather than to attempt a lease thru the dealers’ finance companies?

Thanks in advance!!
Mara :sick:

cccompson

Mara, while your capitalized cost ("price") of a leased vehicle is important, there are other critical factors at play - residual and money factor (in addition to down payment) - that dictate your payment.

As was pointed out in another thread here today, generally speaking, this is a good time of the year to lease as residuals have yet to decline.

I assume that you're talking about a Pacifica Touring. If so, your pricing should start at invoice and go down down from there. Figure invoice less rebate less $500 to get your cap cost.

Since you're not in love with a particular vehicle, you really need to shop, shop, shop for a lease special offered by a manufacturer for a term of 36 or fewer months.

maradag

Well, actually I am in love with the Pacifica but not enough to pay almost $70 per month (give or take) more than what I pay now.

So, let me get this straight (using Pacifica example again); if I go in and they've got a vehicle with an MSRP of $31,110 and invoice of $28,588, I should offer something below that number (??). Then any incentives (and my down payment of $2k) are deducted from the agreed upon price (cap cost) to determine my monthly lease payment (in conjunction with the residual and money factor) Right?

So what if after all this figuring the monthly payment is still too high for my thrift pockets? I'm assuming that regardless of all the pencil grinding involved above, as long as I haven't signed anything I can't be held to any of those numbers.

I'm just worried that I'm gonna go back into the dealer, forget my steps and blow any chance I have of getting even a decent deal.

cccompson

You need to do some more research - there's other threads on leasing here with many posts by those who have more knowledge than I do. The problem with something like the Pacifica is that you'll pay more because of its relatively lower residual. Your goal should be zero (or close) out of pocket on a short lease term.

It sounds as though you got a great deal on your previous lease and are now spoiled. You're looking at 30K plus vehicles four years later and, IMHO, you'll likely have to pay more than you'd like.

jssmith

Ok, I'm new to the forum and my question sounds like it should go here...

Straight question... I have a leased vehicle, can I legally rent it out to a friend?

Details... I leased my vehicle, it's through a company and not a bank as far as I can tell, my payments goto the place I bought it from. I have a friend that will be coming up to where I am to work for a week or so every month for at least a year. He takes the train here and wants a car to drive around for work (it's so he can work, but it's not a business car technically). So, when he comes to town by train, and wants my car which he agreed to pay so much per day for, he gets it, pays me, etc...

Since money is involved, I assume it's considered renting or maybe even sub-leasing because I'm leasing it. Only question is, can I actually do it? Do I need to add anything to my insurance? Anything else I need to know?

I checked for my paperwork to find anything regarding sub-leasing, but wasn't able to find anything... but I may not have all the paperwork together. I would ask the place I'm leasing it from, but if it is not allowed I don't want them down my neck thinking I'm going to do it anyways.

kyfdx

Every auto lease agreement that I've seen prohibits sub-leasing. (As do most apartment leases, for that matter).

Assuming you just let your friend "borrow" your car, there is a good chance that your insurance will have to pay, if he is involved in an accident. If he is at fault, your rates could go up, or you could be canceled.

Risky... riskier if the leasing company or bank finds out there is money involved.

audia8q

Some lease sources do in fact offer subleasing..but its a little complicated. First you must contact your leasing company and see if you can have your lease assumed...then your friend must fill out a credit applications from the lease company, get approved and pay a lease transfer fee...usually they range from $0-695 depending on the company....If "approved" they essentially pick up where you left off. Here is the hook. Most lease assumptions leave you, the original leasee, on as a co-signer. If your friend fails to pay...your still responsible for the balance of the contract.

There are also some companies that handle this all for you but I don't have any first hand experience with them....

richz

When leasing are you always borrowing money from the dealer's finance arm? In other words, if I'm buying a Lexus, do I have to borrow money from Lexus Financial Services and therefore have to pay whatever interest rate they decide to charge me rather than being able to borrow from a bank like I could do if I were buying the car?

richz

Is there even a host for this thread?

tidester

Is there even a host for this thread?

Yes, we're here! Generally, the discussions are conducted by the members with minimal input by the hosts.

Regarding financing, you are under no obligation to go with the dealer's financing. Many people who finance get loans from their own bank, credit union or other source.

tidester, host
SUVs and Smart Shopper

dtownfb

Is this true for leasing?

kyfdx

You can contact a broker (leasecompare.com for example), and arrange lease financing through an independent bank.

However, your dealer also has access to independent banks. Most F&I offices have a terminal that searches up to 50 independent lenders, and they can probably get a better rate than you can (though they may mark it up for more profit).

For popular models that sell at reasonable discounts, the captive financing arm of the manufacturer probably has the best rates, as they have interests other than just what they can make on financing. But, if it is a hot car that isn't being discounted, and there are no incentives, then an independent bank will sometimes have a better deal. But, if that is the case, the dealer will probably use that bank, anyway.

Hope this helps,
kyfdx

joel0622

Most F&I offices have a terminal that searches up to 50 independent lenders,

Wow, I need to git me one of them. I still have a 3 ring binder with the rate sheets for the 4 or 5 banks I uses

Be careful leasing through a bank. Allot of times there disposal fees and lease end obligations are allot higher/stricter then a manufactures. We have never had much luck using a banks lease. When you look at all the pieces Ford is usually better 99% of the time

kyfdx

Welcome to the 21st century!!

I agree.. The captive finance companies have a vested interest in keeping you happy at lease end. Independent banks will try to maximize their investment..

richz

So would I have to go through a broker like leasecompare.com? If it were possible for me to get financing on my own through a bank I wonder how the dealership would price the vehicle. The finance fee portion of the lease would not exist it would seem.

kyfdx

I don't know of any banks that you can go to directly to lease a car. (That doesn't mean they don't exist.. I've just never heard of it).

When you lease a car, the bank buys the car from the dealer at the price you negotiate, then the bank rents it to you... Whether the dealer uses a captive finance company, an independent bank, or you go through a broker to find an independent bank, the process is the same.

The only differences would be the actual residual percentages and money factor numbers. Independents often charge higher amounts for acquisition fees, as well.

All leases have a depreciation expense and a finance expense (sometimes called a rent charge). No matter who does the lease, they all work the same way.

regards,
kyfdx

richz

What does the bank do with the car at the end of the lease? That is why I don't understand how financing directly through a bank would work. I have gone through the process plenty of times for buying a car, but not for leasing. Obviously there will be a finance charge but normally you would pay the manufacturer the depreciation fee and finance fee in one payment but if you financed directly through a bank this would obviously be different.

kyfdx

Captive finance companies have a program where they offer the car to the dealer where it is turned in for what they determine is the current wholesale market value. If the dealer declines to purchase the car, then it goes to the auction.

Independent banks generally send all of their cars to the auction.

I think your confusion lies in what happens when you lease a vehicle from the dealer. You don't rent the car from the manufacturer.. The bank (even the captive finance company) buys the car from the dealer, and then rents it to you.. They make money off the finance charges and the acquisition fee. The risk they take (other than bad debt) is that the car will not sell for the residual amount at the end of the lease. Some banks even insure themselves against this risk.

The only difference between a captive finance company and an independent bank, is that a manufacturer may subsidize your lease through their captive finance company. That subsidy is generally not available if you use an independent bank. The process is exactly the same. The bank buys the car from the dealer, and rents it to the lessee.

Hope this helps,
kyfdx

richz

Ok, now we're getting somewhere. You are right, most of my confusion arose from not understanding what happens when you lease a vehicle from the dealer. Thanks for clarifying that.

Now some further questions:

Given that the captive finance company is going to buy the vehicle from the dealer, are they the ones actually setting the residual value?

Also, wouldn't the captive finance company care what the negotiated cap. cost is since that affects how much interest they will make?

Finally, does the dealer only care about what the capitalized cost is since that is what I assume the finance company pays them? Of course the dealer could mark up the money factor too, which I heard they do, but besides that.

kyfdx

Given that the captive finance company is going to buy the vehicle from the dealer, are they the ones actually setting the residual value?

Yes.. and no.. If they set the value artificially high, then that money has to be made up somewhere.. usually in an incentive from the manufacturer.. So, it depends on where the manufacturer wants to put the incentives. An independent bank would use a company like ALG to estimate future residual values. Captive finance companies have additional agendas, which is why their rates are sometimes better.

Also, wouldn't the captive finance company care what the negotiated cap. cost is since that affects how much interest they will make?

For the bank, it is just like a car loan.. They make money off how much is being borrowed, but they don't want you borrowing more than you can afford, and they don't want to loan more money on the car than it is worth. Other than those two items, they let you and the dealer worry about negotiations. The bank really has no stake in the price paid. The difference in finance charges is minimal in relation to the big numbers.

Finally, does the dealer only care about what the capitalized cost is since that is what I assume the finance company pays them? Of course the dealer could mark up the money factor too, which I heard they do, but besides that.

Yes... to the dealer, a lease is just like any other sale. They are concerned with the price. And, just like if you bought the car, they can make money by marking up the financing and associated fees. A lot of dealers like leases because many people don't understand them, and a lot of costs can be hidden from those that can't do the calculations. That isn't a lot different from getting a loan in the finance office, though..

regards,
kyfdx

richz

Fantastic response. I think I now know a lot more about leasing than most buyers. Thanks so much for sharing your knowledge.

kyfdx

No problem... Glad we could help..

regards,
kyfdx

sbhattacharya

Following your point, about first-hand experience with lease assumption companies - I'd say be very wary:

Here's my experience.

I was looking to take over a short term lease, so I went to the websites swapalease.com and leasetrader.com. This is what I learned:

Swapalease is cheap but unreliable - most of the cars on swapalease are already sold, often several months out of date.

Leasetrader however is pricier, it charges fees for membership and creditchecks everyone so giving the impression of running a tight ship, in which every buyer and seller is properly vetted. BUT, it will happily take a transfer fee from you for cars that are simply ineligible.

This is what happened - I paid Leasetrader $150 to organise the transfer of a Ford Escape, but the financing company, US Bank, refused - they didn't permit transfers on cars that had less than 13 months left on the lease. The Ford should never have been advertised on the site, Leasetrader should never have taken my money to push through the transfer, but instead, now I have no car, Leasetrader has my $150 and they're refusing to pay it back on account of "it's not our fault, it's the seller".

AVOID LEASETRADER.COM!

lgiovinazzo

We have leased Mazada 6 that is due to be turned in 4/21/2007. We want to buy our next vehicle, so can we treat the Mazada as a trade in and negoiate the best trade value? If so, does the dealer we're working with pay the purchase price to the holder of the lease? Then any additional amount we negoiated a could go as down payment?

Kirstie_H

I'm not an expert, but I believe that in order to treat it as a trade-in, you'd need to purchase it from the leasing company first. If it is worth more than the residual (buyout) value, this could be a good route for you.

Otherwise, you just have to turn it in - you can't sell a vehicle that's not yours.

carnaught

lease mileage vs. time calculator to see how many miles you should have on a leased car, based on your lease contract terms?

Kirstie_H

Well, I'm no math whiz (that would be my co-host) but here's a simple calculation:

Total number of miles in contract
   /
Total number of months leased
   x
Number of months into the contract

Is that what you mean?
e.g., 48,000 total miles / 36 month lease = 1333 miles per month x 17 months into the lease = 22,666 miles (the number of miles you should be close to at this point in the lease to avoid over-mileage charge)

tidester

Correct!

However, a 16,000 mile per year lease would be somewhat hard to come by. Most are 12,000 which is on the low side for a typical passenger or commuter. The mileage penalty adds up fast at 20 cents per mile or so.

tidester, host
SUVs and Smart Shopper

joel0622

Most are 12,000 which is on the low side for a typical passenger or commuter. The mileage penalty adds up fast at 20 cents per mile or so.

Thats just what most are advertised as. But you can do any mileage you want. The payment will just fluctuate. It makes it higher but it is still cheaper then paying the overage

tidester

It makes it higher but it is still cheaper then paying the overage

I'll bet it's pretty close!

tidester, host
SUVs and Smart Shopper

paisan

I think it works out much cheaper if you buy it upfront, at least it did for me back in the day in the late 90s.

-mike

joel0622

I'll bet it's pretty close!

Depends on how far you go over. For instance on a Fusion the difference between a 12K py and 15 K py lease is about $14 per month. So basic math tells me that over 36 months I will pay a total of $504 more for the benefit of 15K py. If I stuck with the 12K but drove 15K my mileage charge would be $1350. A difference of $846. I believe I would pay the extra $14 a month if it was me.

Kirstie_H

Um... I just wanted to know if I did the math right. :confuse:

I shoulda picked a better lease term!

carnaught

Thanks, but what I meant is a tool to plug in the lease terms and it calculates for you based on the date, the no. of mi. you should have at that point in the lease. Make sense?

tidester

Make sense?

Yes, it makes perfect sense and the answer is, apparently, that none of us know of such a tool. But then the calculation is simple enough, as Kirstie clearly demonstrated, that there is really little need for such a tool. To find out where you should be, simply multiply the miles you're allowed by the fraction of time you have used up.

However, if you need help in calculating the number of days from one date to another, you can use an online date calculator such as this one.

tidester, host
SUVs and Smart Shopper

jnorris765

I'm in the market to lease 2 vehicles and I have narrowed it down to a couple of choices.

My main question is this, given that I am making the deal for a lease on 2 vehicles will my bargaining position be better or worse.

Does it help me to do 2, or should I try to get the best deal on 2 different transactions?

Thanks,
Jerry

Kirstie_H

Are both vehicles the same brand? e.g., two Nissans, vs. a Honda & a Nissan?

Second, do you consider yourself easy to finance? That is, do you have good credit?

jnorris765

741 on the credit score -- so not worried about that.

I'm still doing some homework, but I'm looking at possibly

2 Toyota's - highlander and camry
2 Honda's - pilot and accord
2 Mazda's - mazda3 and mazda5

I like the Mitsuibishi Outlander also, but not sold on it yet.

The mazda portion could become a mazda3 and cx9 -

One car needs to be 15k miles the other 12k, the 15k is basically a commuter vehicle.

The SUV is a little more flexible.

Kirstie_H

I'm not an expert, so wait for other opinions - but you sound like a salesperson's dream customer. If you go to, say, the Mazda dealership knowing what you want and have researched and established a reasonable purchase price (on which the lease payment is based), you're easy to get financed and you're an easy sale. My thought is that a dealer would be HAPPY to work with a customer like you on two vehicles, and you should get a good deal.

Just remember to make your offer(s) reasonable and you can wrap the deal up quickly.

brickfrenzy

The vehicle I want to lease is at a dealership that's 25 miles away. There are other dealerships that are closer that I'd much rather take the car to for service. Is there any requirement to do your service at the dealership from which you obtained the lease?

joel0622

Is there any requirement to do your service at the dealership from which you obtained the lease?

No

glevitt

I am curious if anyone knows the in/outs of used car leasing. I have gotten very good at figuring lease payments for new cars. But it seems different for used ones and I am curious if any of you have had an experience with it.

I would like to know how you set depreciation percentage and whether you use the original MSRP and the new purchase price for the payments or the suggested purchase price and the new agreed upon price.

This is an becoming a more popular way to lease especially expensive vehicles and SUVs and I think its worth shedding some light on.

Thanks
Greg in CO