composite

Is the interest rate or "money factor" on leases normally cheaper than the finance lending rate? In southern California, BMWs are leased at 6.5% which is the typical bank financing rate.

If the money factor and finance rates are identical, then isn't a 4-year lease plus residual buyout the same thing as financing over a 4-year period? In fact, the lease + buyout is the same thing as a financing with a balloon payment at the end.

BTW, if anyone is really accruing 7.4% annually WITHOUT RISK, you should just buy the car at 4.5% over a 30 year period, say with a home equity loan. With the 2.9% difference or more FOR THIRTY YEARS, the NPV of the "buy" would be infinitely cheaper than the lease.

gstois

Yes, that's my point. The mechanics aren't that much different than a loan with a balloon. It essentially comes down to the junk fees, interest rate/money factor and the residual. If done correctly, it's just a matter of how much cash to put down and how long you want the car, not a lease vs buy decision.

noobs

It's great unless AMT bites you in the a$$ and takes all of your tax credits away

composite

Anyone? Bueller?

doug_999

Actually... the money factors are normally not region based (although they can be). And right now you can do a lot better than 6.5% on many of the 3-series models (not all) and most of the Z4s. So depending on the month you can go as low as 1.9% on certain models. This is what contributes to BMWs high incentive numbers - cause they certainly don't discount the cars much! (just ask someone who has bought one....)

topgun04

"Is the interest rate or "money factor" on leases normally cheaper than the finance lending rate?"

It really depend on how the car manufacturer want to market a particular model. The trend seems to be that cars with low residual (those that depreciate a lot over a short period of time, that include most of the domestic), manufacturer will subside the interest rate for purchase. Cars with strong resales, manufacturer tend to subside lease rate. My guess is that some car's residual are so bad that even if the manufacturer subsides the money factor, it won't be competitive on lease payment anyway. And towards the end of a model year, some car company would raise the residual to a much higher percentage of the MSRP than previous months (normally it go down over a model years).

There is not really a good way to track which car is a better deal at any given months (or even year). I use the Edmund's lease forum for the car that I am interested. One of their host "car_man" post the residual and money factors when people ask about them. Lexus residual and money factors for most of their cars has been in the middle of the pack for a while. They normally run special on money factor on December to Remember. Other than that it is a hit and miss situation. It make it hard to own or lease Lexus car if one is look for deal (if money is no objection then it is much easier). Right now the best deal for lease seems to be G35, TL, and Accord. For someone who want to keep the car for 6 years and above, Ford and GM have zero percent finance on some model. And it is hard to beat a zero percent finance if someone what to keep the car for a long time.

composite

I ultimately bought my GS350 in cash. I asked about the lease rates, and if I kept the car for 6-7 years as I planned, then leasing didn't make any sense.

Too much depreciation and the money factor was too high. Otherwise, I might have considered it.

Cut-Throat

I keep my cars for 8 years and this is always the conclusion that I have come to when looking at Cash/ leasing or financing. -

mikedozz

So i guess most of you guys would pay over 700 per month, I would if I could afford it. I am looking into leasing a used GS to keep the payments in the 500's, will see, I know that leasecompare does a nice job at showing the different rates and payments.

gstois

That seems too high. I pay just over $600 for an '07 GS350 that stickered at $49k. It's a 48 month, 12k mile lease. Minimal out-of-pockets as well. I have never paid over $700 for any car.

topgun04

"Here's the information that you're looking for, Bushwack. According to the latest information that I have seen, through July 9th Lexus Financial Services' buy rate lease money factor and residual value for a 36 month lease of a 2007 GS 350 2WD with 12,000 miles per year are .00195 and 51%, respectively for consumers who qualify for its "Tier 1+" credit tier and pay a security deposit at lease signing. The numbers for an otherwise identical 48 month lease are .00195 and 42%.

Car_man
Host
Prices Paid Forum "

and another one for BMW 3 series, 15K mi/yr:

"I have copied this straight off Bimmerfest :

2007 BMW 335i Sedan
24 Month – Residual 71% of MSRP – .00175 Base Rate
36 Month – Residual 61% of MSRP – .00175 Base Rate
48 Month – Residual 42% of MSRP – .00320 Base Rate
60 Month – Residual 34% of MSRP – .00320 Base Rate "

You need this kind of information to know if you want to know if you get a good deal or not (I cut these info out from other forum that I frequented. Hope the moderator don't mind..heh heh)..The money factor is 0.00195 or roughly 4.68% (which is decent) for GS this month. The residual is a problem for GS - 51% is low. G35 is about 56% (and I think G money factor is also 0.00195 range for 3 yr) and BMW is about 63% (61% + 2% for 12kmi instead of 15k mi/yr quoted above). and 0.00175. (roughly 4.2%). For a 50K MSRP car (make it easier for calculation), GS will cost 6000 over BMW 3 series and 2500 over G35 during the 3 yr lease term.. BMW has a higher sticker price and G35 doesn't even off 50K car.. So everyone has to make their own choice base on the information.

And once you have negotiated cap cost (your purchase price), you can plug into any lease calculater (make sure you have the 550-600 acquisition cost that will roll into your lease or you pay upfront) and out pop the montyly lease payment. You can determine if the lease payment is good or not at that point.. If you are set for a GS350 after looking at the cost, then make sure you know what you bottom line is and don't let the dealer take advantage of you (remember dealer can alway mark up the money factor and pocket the difference. They can also put in tons of fees in your lease or purchase. They can't do anything about the residual though.. Lexus financial fixed the residual but the number change monthly)..

mikedozz

Wow, Gstois, that is pretty good for the 350, is it navi and AWD? When you first walked into the dealer, did they offer the car at close to 700 and you worked it down or where they pretty much fair. Is it expensive to have a GS shipped from a dealer lets say in Florida to here if I didn't really want AWD to cut cost?

gstois

I never walk into a dealer until I am ready to take delivery. I also don't negotiate from the lease price. I negotiate the car price first. When I get them to invoice, I then get the lease terms for Tier 1 credit. Once I get those figures, I run the lease payment myself and compare it against what they quote for a lease price. The last couple of times they quoted a higher lease payment than I calc'd. I simply refuse untill they get to my price.

My car is rwd. Can't help you on the shipping issue.

composite

Wow. I was quoted a much higher money factor. Where can you learn what the LEXUS finance rates are instead of trusting the dealer?

Also, are the residuals always measured off MSRP? Or can they be based off the negotiated price?

composite

I've generally been a "buy" instead of "lease" person, but this analysis made me wonder whether that's been the smart approach. I think there's a point to leasing, but I also thought it's still more expensive than buying if you plan to keep the car. But if it's cheaper to lease then pay the residual, I'd obviously rather take that approach. Here's the flaws I found w/ this analysis:

1. Tax. In the U.S. it ranges from 0% to 8.25%. Much lower than 14%.
2. Interest Rate. Lease interest rates are not lower than Finance interest rates. They should be the same.
3. Residual. The residual is based off MSRP for leases. The "equivalent" buy is based off your negotiated price.
4. Net present value. For a NPV of 7.4% means you're earning taxable income at 12-14% (or cheating Uncle Sam) annually. If you know anyone that safely returns 12-14% and can verify this, please PM me.

I didn't mean to rehash the rather spirited and often-times personal debate over this issue, however.