General Questions about Leasing Vehicles

traindriver · September 2007

Why the variations though? In your example, it would seem like Volvo would be pushing better deals in parts of the country where they (in my mind) might not be as popular. Granted, I know nothing about marketing, but using Volvo as an example it would seem that the best deals would be offered in place like Missouri, Alabama, Iowa, the Carolinas etc. as a way to entice/introduce the brand to a region that might not be as inclined to purchase or be as knowledgeable of the brand. I would think that Volvo already has a lock on the affluent yuppie-ish metro NE or West coast crowd -- therefore, the deals there might not be as generous. Am I thinking backwards?

Is there any where that provides the demographics on who typically purchases a given car? I very rarely see info like this mentioned in an article or website. For example, IIRC I read somewhere that the Chevy Trailblazer buyer was typically less affluent and less educated than the typical Ford Explorer buyer. Seemed odd to me, as I would think that these 2 vehicles would be cross-shopped by the same people and would boil down to personal preference.

im_brentwood · September 2007

Volvo tends to tailor their programs for what they see as the best fit for that region.

People in the NYC Metro area lease more than most, so leasing is crucial here. When i worked at a Volvo store in Jersey at one point we were at 80% lease penetration. In Missouri it was barely 50%.

volvomax · September 2007

Looks like that is the base car lease.
Volvo is running a lease on the 7 seater out here.

cccompson · September 2007

No, as I said in the first post on this topic, the MSRP is $44,725. I'm not intimately familiar with Volvo options but it is an XC90 with leather, all wheel drive, and 7 passenger seating. Virtually all of them around Ohio are equipped the same way with several pricey option packages.

No matter, have decided against it.

joel0622 · September 2007

Traindriver, the reason for the difference is because incentives are driven by days supply in a particular region. If Volvo has a huge days supply in say Region 1 then they will have heavier incentives then another region with a small days supply.

Karen_S · September 2007

A reporter from a national newspaper is hoping to talk to consumers who purchased a car recently instead of waiting, fearing that prices may rise as the dollar weakens. Please reply to ctalati@edmunds.com no later than Monday, October 1, 2007 with your daytime contact info.

caligirl5 · September 2007

Are money factors negotiable with dealers? I'm considering leasing a Lexus.
Thanks

delta737h · October 2007

caligirl5,

Yes, money factors (MF) are negotiable. However, your credit history will have a huge impact on your MF. Strong credit means you'll be able to qualify for the top tier rate. A weak credit position won't leave you with much room for negotiation, if any.

The cost of money follows a tiered structure. For example...

0.00150 + 0% reserves

0.00165 + 1% reserves

0.00180 + 2% reserves

etc.......

Reserves are amounts paid to the dealer by the fund provider as compensation for writing the lease at a higher cost of money (e.g., MF). The 0.00150 MF with 0% reserves is called the base rate or buy rate. ALWAYS ask for the buy rate or that rate with 0% reserves. Some dealers insist on reserves. And so, I simply deduct the dollar equivalent of the reserve level from the negotiated selling price. The dollar equivalent is computed by multiplying the reserve level (%) by the adjusted cap cost less acquisition fee. So, if your $25,000 adjusted cap INCLUDES a $500 acquisition fee and the MF reflects a reserve level of 1%, then the reserve dollar amount is 1% x $24,500 or $245. The reserve level is always embedded in the MF and so the consumer has no idea whether or not they're paying reserves.

Hope this helps.

John
Medina, Ohio

caligirl5 · October 2007

Thanks very much John. That helps a lot.

I am looking at a lease currently with a money factor of .00275 provided through Lexus Financial Services. I qualify for tier 1 + credit with a FICO above 730. With their current money factor it looks like they have a large reserve (8.5%), would that be a correct assumption? Is the buy rate the same for all dealerships? For this particular lease, the cap/sale price is 47,800 on a vehicle with a MSRP of 56,519, the residual is $29,955, term is 3 years/36K miles for $758 including tax. I sure would rather have a .00150 money factor if it would be possible.
Thanks for your help.

british_rover · October 2007

John you are just going to confuse people with all this talk of reserves.

Money factors have more to do with the programs in place for the particular vehicle you are looking at.

For the cars I sell we have money factors as low as .00070 where your credit score doesn't matter. As long as you have enough credit to get approved you pay the same rate.

On the other end of the scale I have cars with base money factors as high as .00310 and that is with perfect credit. If you have poor credit it climbs as high as .00568.

Cali go to the thread on edmunds that talks about leasing the particular vehicle you are looking at. Someone in that thread will know the base money factor which could very well be .00275 although I doubt it. Lexus tends to heavily incentivize their leases so I would think it would be less.

delta737h · October 2007

caligirl5,

I was only giving you an example for illustrative purposes only. Sorry for the confusion. Although I could be wrong, my gut tells me that the 0.00275 MF is high and may include reserves. I would ask for the buy rate. The tiered rate structure is dependent upon the fund provider. So, the buy rate depends on the fund provider and not ther dealership.

Given the info you provided, I get a base payment of $709.52 plus tax. So it appears as though your sales tax rate is around 6.75%. It also appears as though the $47,800 sell price is reasonable but check edmunds for invoice pricing in case you already haven't.

John

delta737h · October 2007

british,

I was only trying to educate her. Nothing confusing about my presentation. In fact, many people have expressed their appreciation and thanks for my brief "dissertation" on reserves. Tiered rate structures are tied to reserves. Different funder providers have different tiered rate structures. When there is a huge divergence between MF's (e.g., 0.00070 and 0.00310), you're most likely looking at different model cars as well as different terms (i.e., different levels of risk).

Everyone who buys or leases should familiarize themselves with reserves and the many different ways in which they are computed. Knowledge of reserves has saved me several hundred dollars on each of two transactions in the past.

Your suggestion that she look at the appropriate Lexus thread on edmunds is very good advice. I just didn't think of that. At any rate, she needs to find the base (buy) money factor as you've described.

John

cccompson · October 2007

Sorry, John, but I found your post to be confusing. Still don't understand the significance of reserves, how they're calculated, or what (if anything) they'd mean to (or cost) me.

delta737h · October 2007

Sorry it was so confusing for you. If you want me to take another approach, I'll be glad to do so. Or, if you're interested, email me at diffeq@zoominternet.net and I'll be happy to provide as much detail as you need so that you will understand. You have posted a lot. Are you in the car business?

volvomax · October 2007

Simply put, reserve is how much commission a dealer makes from the lender for doing a lease or finance contract.
Lenders have a buy rate, which is the cost of funds to the dealer.
If the dealer increases that rate on your contract, they get a percentage of that increase.
For example, buy rate is 6%, you are contracted at 7%, so the dealer makes a commission on the 1%.
Your payment is higher than it would have been at 6%,that is the cost to you.
Leases work the same way, although there can be alot of difference in the rates themselves.
Most Lexus dealers tend to pad their lease rates,mostly because they can.
Some dealers will not do a deal unless it has some rate adjustment built in.
Car Man can usually tell you what the buy rates are for leases.
it is important to remember that lease and finance rates are usually based on your credit score. So, the lower your score, the higher the rate.
Car Man usually only quotes the top tier rates, so if your score isn't in the range the lender thinks is top tier, your buy rate would be different anyway.
Good Luck!

cccompson · October 2007

LOL, no, not in the business. If I was, I'd have understood your post! In any event, it's always good to see a fellow Ohioian here. That's a helluva noise wall they've built on I-71 just south of SR 18.

Volvomax, thanks, you put it in terms that I can understand.

delta737h · October 2007

Yeah, I pass it almost every day. You said that you understand. Okay, how do you calculate the amount of reserves earned by the dealer using volvomax's example? If you don't know or don't care, then you risk paying more than you otherwise would. I just think it's a good idea for folks to understand how reserves are determined. It can save them money. It certainly saved me a few bucks.

bodble2 · October 2007

:confuse: I didn't know the lease rates can change according to your credit score. For example, if BMW is offering 4.9% lease rate on X3, is that not the rate everyone pays? And that's not negotiable, no? Do we need to know about reserves, commission, etc? I didn't think your credit score has any bearing on the lease deal other than the fact that they could turn you down if you're not credit-worthy.

kyfdx · October 2007

BMWFS only charges different rates for different credit scores on their "standard" lease rate. Any model that has a "special" rate is on a pass/fail system, with no tiers.

For instance, their standard rate right now is around .0031

That is the rate you'd pay on an M5, if you were top tier. For lesser tiers, you'd pay more..

But, an '07 328i sedan has a special rate of .0014.. There are no tiers.. if you qualify, that is the buy rate.

Of course, all BMW dealers are permitted to mark-up the BMWFS buy rate by .0004, but that has nothing to do with credit-worthiness.

All of this applies only to BMWFS, and most others don't quite work in the same way. Those numbers are from September and are for illustration purposes only.. they may have changed.

regards,
kyfdx
visiting host

caligirl5 · October 2007

Thanks John, the information you have provided has helped a lot. The more info, the better! I sure wish the buy rate was the same for all dealers. The Lexus GX470 leasing forum has been slow. I put a post over there several days ago about the deal I've been considering. Thanks for all info provided here.

bodble2 · October 2007

Thanks!

jestrs · October 2007

I am working on a deal for an 08 Suburban and I would like to know the buy rate.

Also does anyone know the difference between the SmartBuy and the SmartLease? The dealer was really trying to push the SmartBuy. The SmartBuy was only about $10 more per month.

Thank You.

volvomax · October 2007

Lease rates are no different that finance rates in that regard.
As for needing to know about commisions and reserves,no you don't need to know that.
What matters is the price of the car to you,not how much the dealer is making on it, and the cost of funds to you,not how much the dealer is making on that.
Dealers are gonna make money. BMW dealers are gonna make it on the car and the rate.
That is just how it is.
Try shopping around for the best package, of price and rate.

volvomax · October 2007

BMWFS only charges different rates for different credit scores on their "standard" lease rate. Any model that has a "special" rate is on a pass/fail system, with no tiers.

VFNA operates differently.
Even their special rates have tiers.

kyfdx · October 2007

Exactly... I think BMWFS is alone in that practice...

british_rover · October 2007

LRCG is different again. Some of the special rates are the same no matter the tier and some can have a 5 percent or more spread between tier 0 and tier 5.

smalkin · October 2007

Hi. I am looking for a 36 mo 12k lease. I am comparing the Acura MDX Tech and Sport to a Lexus Rx400h AWD+FWD w/ Navigation. I am looking for the October Residuals and Money Factors. Thanks

Kirstie_H · October 2007

Hi smalkin,
For info on specific vehicles, you'll want to visit the make/model-specific discussions about leasing.

Just use the search box at the left and type in Acura Lease, and you'll get a list of related discussions... same goes for Lexus. You'll have much better luck getting feedback there.

jvos · October 2007

The deal I am currently negotiation on a 2008 TSX is as follows:
$26,631.00 for the TSX, $58.48 for the title transfer, $1,868.26 for the tax, $15.00 for the county fee and $143.00 for new plates. This totals $28,715.74 out the door.
36mo X 15K mile term of .00152 and 60%, the dealer comes up with a payment of $442 while I come up with $360. (Note this is IL, so I believe tax is included up front.)
Who is right?

kyfdx · October 2007

What is the MSRP, including destination?

You need that figure to calculate a lease.

regards,
kyfdx

jvos · October 2007

MSRP for non-NAVI TSX with auto is $28,190. Destination fee is $715. Both per Edmunds.

kyfdx · October 2007

$28905 MSRP
$29310 CAP cost (OTD + $595 acq.fee)
.00152 MF
60% Residual

$403.33 per month

Due at signing: 1st payment and security deposit

Did your dealer give you the residual and money factor? If not, it's possible they are marking up the money factor for extra profit.

Hope this helps,
kyfdx

jvos · October 2007

kyfdx -

Thanks! They claim this is the Acura lease special with money factor .00152 and residual of 60%.

Does it matter that its Illinois? I've read that tax affects payments differently.

british_rover · October 2007

IL is a screwy place to lease so that could be effecting things.

kyfdx · October 2007

Well.. Illinois does tax the entire purchase price, but it looks like your figures account for that..

I know Chicago has a monster tax rate on leases.. but, unless the amount of tax is wrong, I don't see where they can find an extra $40/mo..

jvos · October 2007

kyfdx -

Thanks. BTW, residual is 59%.
Could you possibly point me to the lease calculator you are using? I was going to go into the dealer tonight and try to get this on paper. Definitely feeling I should be around $400/month.

kyfdx · October 2007

No calculator.. just a spreadsheet..

1% lower residual results in an increase of about $7.60/month... taking you up to around $410/mo.

jvos · October 2007

spreadsheet! even better. What would it take to get that?

kyfdx · October 2007

Let me work on it..

rhonda40 · October 2007

Hello, I've always let the dealer get financing for me on my leased vehicles in the past. This time I'd like to secure my own financing for a vehicle I'm trying to lease. Can you recommend any good leasing companies to go through ? Thank you

jvos · October 2007

My thanks to this forum and in particular kyfdx.

We got our TSX for $409/mo due completely to the power of knowledge and information.

What's more, it was exactly the type of transaction I like - all negotiation was done before I ever set foot in the dealer. When we got there, the car was being detailed, the paperwork was drawn up, we just had to complete the credit app (which was approved during the time the salesman went thru the Acura manuals) and sign the lease. About an hour. Smooth as silk.

Thanks again.

joel0622 · October 2007

I don't know of any that are better then the manufacture.

volvomax · October 2007

Leassing is different from financing, in that you cannot go to a bank that does leases and get pre-approved, get a check and take it to the dealer.
The big banks that do leasing all have the dealers act as their agents.
So, you have to have the dealer do the lease.

there are auto brokers that do leasing. However, they buy the car from the dealer,mark it up,and send the lease to a bank same as the dealer.

kyfdx · October 2007

They are a broker.. They get most of their markup from the bank that is doing the lease.

However, none of that matters if the lease is cheaper than what the dealer will give you...

They are a reputable company, based in Cincinnati. Started by a dealership group, but they'll arrange lease financing on any car from any dealer.

regards,
kyfdx

reufim · October 2007

At the end of 2004, I leased a 2005 X3 2.5
I have decided to buy it at the end of my lease (coming up end of Nov 2007). It has 23,000 miles and is in perfect shape.
Can anyone give me advice on how to prepare well to buy this car - what I can do to get the best deal and avoid any over payments?
I have never bought a car after leasing it so am unsure on how it goes and how much negotiating room I have.
Any assistance is appreciated.

cccompson · October 2007

If I'm not mistaken there should be a buy-out price right in your contract. If not, call whoever you're leasing from for the number. They'll be no negotiation.

Once you have the number, compare it with what the vehicle is worth. If it's worth more, buy it without a second thought. If it's worth less, well, only you can decide if you're willing to pay over market for it.

vacata · October 2007

I've always been of the opinion that if something is too good to be true, it usually is. That's why I'm suspicious of a leasing company I found on swap-a-lease. It sounds like I can get the Mercedes R350, P1, for $349/mo with $2750 cap reduction. Term is 33 mo with 10K miles. The way it was explained to me was that this lease company gets large discounts from Mercedes if the buyer is affiliated with a large company. They purchase the car from MB (dropping that large company's name), lease it to me, and set up the leasing through MB financial.

It just doesn't feel right to me. But if the leasing is truly through MB financial should that be all that matters (assuming the vehicle I get is the one I want)?

Have you ever heard of such a company? Or is this some scam? Any help/guidance is appreciated.

micosilver · October 2007

Sounds very fishy. Special lease on MB website is $499 for 33 months with $4,044 down, the spread is too big to be true. Try to get all the detailes - cap cost, residual, money factor, terms...

bodble2 · October 2007

If you do a single-payment lease, is it possible to apply a trade against the lump sum single payment and save on the sales tax?

volvomax · October 2007

Depends on the State, but in most cases yes.

General Questions about Leasing Vehicles

Comments

Helpful Tools

Most popular vehicles