Teach me about leasing a car
10-21-13, 04:16 PM
#1
Lead Lap
Thread Starter
Teach me about leasing a car
I am not familiar with the whole leasing deals. Can some expert here explain it to me?
1. what is the money factor? how to calculate it?
2. what is the effect of having high/low money factor?
3. some are saying that there is a maximum security deposit? what is this? and how does it bring up/down the money factor?
4. any tricks and tips for finding a good deal on lease?
I'm so confused yet curious about this.
1. what is the money factor? how to calculate it?
2. what is the effect of having high/low money factor?
3. some are saying that there is a maximum security deposit? what is this? and how does it bring up/down the money factor?
4. any tricks and tips for finding a good deal on lease?
I'm so confused yet curious about this.
10-21-13, 04:30 PM
#2
Don't do it man..it's up to the individual but I was going to lease a GS 350 and purchase it in the end but you end up paying a few grand more than what you should have paid for the car...if you are one of those people that just need to be in a new car every two years and don't want to worry about the headache of trading/selling it after go for a lease...I prefer to purchase myself!
10-21-13, 04:38 PM
#3
I was about to lease a car until I did some research and quickly decided a lease is not the best thing for me to do in a situation where your hard earned money should hold value to your belongings.
10-21-13, 04:50 PM
#4
Nicely said!! Don't do it man unless you got money and don't care! Sure financing may be a little more monthly payment but you own something at the end and have value for a trade or private sale there especially with Lexus!
10-21-13, 05:01 PM
#5
Don't do it man..it's up to the individual but I was going to lease a GS 350 and purchase it in the end but you end up paying a few grand more than what you should have paid for the car...if you are one of those people that just need to be in a new car every two years and don't want to worry about the headache of trading/selling it after go for a lease...I prefer to purchase myself!
10-21-13, 05:05 PM
#6
I am not familiar with the whole leasing deals. Can some expert here explain it to me?
1. what is the money factor? how to calculate it?
2. what is the effect of having high/low money factor?
3. some are saying that there is a maximum security deposit? what is this? and how does it bring up/down the money factor?
4. any tricks and tips for finding a good deal on lease?
I'm so confused yet curious about this.
1. what is the money factor? how to calculate it?
2. what is the effect of having high/low money factor?
3. some are saying that there is a maximum security deposit? what is this? and how does it bring up/down the money factor?
4. any tricks and tips for finding a good deal on lease?
I'm so confused yet curious about this.
1) money factor is like the interest rate. multiple money factor by 2400 and that's the %
2) the lower the better as usual
3) with lexus financial, they have MSD (multiple security deposit). basically you put multiple of the money payment as security deposit, and for each month's of deposit you put down, your money factor goes down by X amount. you can do up to 9 i think (if rules haven't changed). at the end of lease, you can get the whole deposit back
4) residual values are determined by lexus financial (or whatever institute) you can't do much and it's % of the msrp. money factor depends on your credit, promotional period, etc... the lower the better. cap down is basically the price of the car, you negotiate it as low as possible (as usual). careful on the mileage allowance since any over-mileage and it can be expensive. do not put any money down on a lease, i always did only first month plus fees drive off
10-21-13, 05:27 PM
#7
Here's my method to leasing:
Email multiple dealers (the internet sales manager or fleet manager) asking for their best price for the particular vehicle you want. Do not tell them you are going to lease...just get a price out of them.
After you get a price, tell them you want to lease with the specific terms (X months/Y miles/yr, etc.). See who gives you best deal and go from there. Some dealers will just beat around the bush so just ignore them and go to the next.
I forgot the exact MSD %, but I believe it's .000089. You can't use max MSDs (9 max) if the money factor is already low (basically equating to negative %). I was able to only use 5 MSDs of $500 each on mine netting a MF of .0001.
My car (MSRP $58.7k) is below $500/mo inc. tax, 27 months, 12k year.
Email multiple dealers (the internet sales manager or fleet manager) asking for their best price for the particular vehicle you want. Do not tell them you are going to lease...just get a price out of them.
After you get a price, tell them you want to lease with the specific terms (X months/Y miles/yr, etc.). See who gives you best deal and go from there. Some dealers will just beat around the bush so just ignore them and go to the next.
I forgot the exact MSD %, but I believe it's .000089. You can't use max MSDs (9 max) if the money factor is already low (basically equating to negative %). I was able to only use 5 MSDs of $500 each on mine netting a MF of .0001.
My car (MSRP $58.7k) is below $500/mo inc. tax, 27 months, 12k year.
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10-21-13, 05:49 PM
#8
Lexus Fanatic
There are a LOT of leasing threads on this forum, do a search.
A great website to learn and read is here: http://www.leaseguide.com
They also have a great calculator.
A great website to learn and read is here: http://www.leaseguide.com
They also have a great calculator.
10-21-13, 10:32 PM
#9
Pole Position
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Here is a link to a good lease calculator that will also rate your lease and let you know how good of a deal you are getting.
http://www.ridewithg.com/calculator/index.html
As others have said, get the lowest price for the car FIRST, then talk about finance/lease options.
http://www.ridewithg.com/calculator/index.html
As others have said, get the lowest price for the car FIRST, then talk about finance/lease options.
10-22-13, 07:20 AM
#11
Thanks for all the good information.
Now to see if I do understand???
1) Multiple security deposits(MSD)...seems like you can essentially eliminate the "money factor" by depositing multiple lease payments. Current lease chart I have has what they call "One Pay Lease RATE Subtract .001 from above rates"...is that the multiple security deposit factor?? Also, my intention would be to purchase the car at the end of the lease. Assuming you purchase I assume you just get a refund of your "multiple security deposits"?
2) In addition to the money factor I assume you take the capitalizes cost and subtract the residual cost...and then divide by the number of months of the lease? Thus "depreciation" is spread on an equal monthly basis and to that amount you add the "money factor"??
Sooooo...if I am confident I will purchase the car seems like I should deposit enough MSDs to essentially zero out the money factor...us the maximum number of months lease (appears 48 months on Lexus chart) and keep mileage per year low assuming I am willing and able to purchase at the higher residual...thus having low or lowest monthly lease payment with a higher residual buyout...since I am buying anyway??? I guess I could pay a little higher lease payment (higher miles per year assumption) and give my self the option of walking away if I wish...and also lowering the cash I need at the end of lease to buy out assuming I still want to.
Seems like you can essentially equate to a four year zero interest loan with a "balloon" at the end of lease...very similar to a four year loan with zero interest and a balloon at end???
Comments? Thanks Tom
Now to see if I do understand???
1) Multiple security deposits(MSD)...seems like you can essentially eliminate the "money factor" by depositing multiple lease payments. Current lease chart I have has what they call "One Pay Lease RATE Subtract .001 from above rates"...is that the multiple security deposit factor?? Also, my intention would be to purchase the car at the end of the lease. Assuming you purchase I assume you just get a refund of your "multiple security deposits"?
2) In addition to the money factor I assume you take the capitalizes cost and subtract the residual cost...and then divide by the number of months of the lease? Thus "depreciation" is spread on an equal monthly basis and to that amount you add the "money factor"??
Sooooo...if I am confident I will purchase the car seems like I should deposit enough MSDs to essentially zero out the money factor...us the maximum number of months lease (appears 48 months on Lexus chart) and keep mileage per year low assuming I am willing and able to purchase at the higher residual...thus having low or lowest monthly lease payment with a higher residual buyout...since I am buying anyway??? I guess I could pay a little higher lease payment (higher miles per year assumption) and give my self the option of walking away if I wish...and also lowering the cash I need at the end of lease to buy out assuming I still want to.
Seems like you can essentially equate to a four year zero interest loan with a "balloon" at the end of lease...very similar to a four year loan with zero interest and a balloon at end???
Comments? Thanks Tom
10-22-13, 07:44 AM
#12
Here's Dave Ramseys take on leasing. Some agree with him, some do not.
"Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car."
"Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car."
10-22-13, 08:43 AM
#13
Lexus Test Driver
Here's Dave Ramseys take on leasing. Some agree with him, some do not.
"Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car."
"Explain How A Car Lease Works
QUESTION: Listener asks Dave to break down the mathematical flaws in a car lease.
ANSWER: A car fleece is basically renting a car. You pay $400 a month and at the end of the new car lease, you turn it back in. If you want to buy it, you are buying it for what they estimate at the beginning of the fleece to be the market value. At the end of the lease, it’s called the residual value. If you pay $400 a month for 60 months, you pay $24,000 before turning it in. The car will not have gone down in value more than that, because the car companies would lose money if it did. When they get the car back, you will have paid them more than the car has depreciated during that time.
During that time, you’re maintaining the car as if you owned it. You’ll get charged for excessive wear and tear, or if you put too many miles on it. If you rent it for $24,000 and it went down $15,000 in value, then it cost me $9,000 to rent this car for this period of time. That is their profit during that time.
Another thing is that the interest rates on a vehicle lease are not disclosed because the Federal Trade Commission has determined that this is not a debt, so there is no federal disclosure involved. Therefore, you have no truth in lending disclosure sheet. The interest rates you get charged are unbelievably high. That’s where you’ll realize you got screwed over.
People get sold automobile leases because they are told that it’s what sophisticated people do. But as it turns out, the car companies make more money on leasing you the car than if you bought the car with cash, according to the National Auto Dealers Association. Broke people think ‘how much down and how much a month’. Rich people think ‘how much’. If you can’t pay cash for a car, then ride a bicycle. But don’t lease a car."
10-22-13, 08:58 AM
#14
Also, sometimes a manufacturer will have a special promotion on a lease program to sell a lot of vehicles...again if you have a full understanding of lease agreements so you do not enter into something you don't understand there may be occasion where a true lease (where you turn the car in at end of lease) still makes good sense.
BUT it is buyer beware...AND buyer be knowledgeable! Tom
10-22-13, 09:18 AM
#15
hopefully you're not one of the many individuals who will be leasing a vehicle only because the payments are lower for a car (usually luxury brand) you normally could not afford...I see this happening time and time again, only for the leasee to be frustrated come time to return the car and having no financial capability to get back into another descent vehicle.
as others noted, leasing is great for someone who intends to switch the vehcile every few years...one that doesn't care much about maintenance and just rather be headache free throughout the lease terms they're committing to, and intend to do it again once the terms are over. DO NOT put any money down, it's pointless and again you'd only being doing so to lower payments out of your range,...instead pocket the money, save it and use it towards an investment or something that will yield you some sort of benefit.
one key factor I like to ensure of when leasing is that I'm comitting to a vehicle that I could normally buy if leasing wasn't an option...if you can say yes to this, then you'll be ok with leasing the car as an option.
best of luck!
as others noted, leasing is great for someone who intends to switch the vehcile every few years...one that doesn't care much about maintenance and just rather be headache free throughout the lease terms they're committing to, and intend to do it again once the terms are over. DO NOT put any money down, it's pointless and again you'd only being doing so to lower payments out of your range,...instead pocket the money, save it and use it towards an investment or something that will yield you some sort of benefit.
one key factor I like to ensure of when leasing is that I'm comitting to a vehicle that I could normally buy if leasing wasn't an option...if you can say yes to this, then you'll be ok with leasing the car as an option.
best of luck!