Theory of a lease?
04-16-09, 09:24 AM
#16
DDLexus: You are forgetting about the time value of money. You have to not only pay the depreciation of the vehichle but also interest on the value of the car which the dearler has to pay to the leasing company. The dealers don't make this money, the leasing compaies do.
Money is not free...if you borrowed the 56k at 8% you would pay over 13k in interest over three years. This is not money that the dealer is making either, it's the bank, or maybe even Toyota credit, but not the dealer.
If you paid cash for the car you would be "paying" the opportunity cost of the 56k that you put down on the car. That opportunity cost is equal to the interest that YOU would have made if that $$$ was invested elsewhere over that three year period.
Bottom line is $$$ is not free.
Money is not free...if you borrowed the 56k at 8% you would pay over 13k in interest over three years. This is not money that the dealer is making either, it's the bank, or maybe even Toyota credit, but not the dealer.
If you paid cash for the car you would be "paying" the opportunity cost of the 56k that you put down on the car. That opportunity cost is equal to the interest that YOU would have made if that $$$ was invested elsewhere over that three year period.
Bottom line is $$$ is not free.
04-16-09, 02:15 PM
#18
Lexus Test Driver
DDLexus,
You need the Negotiated Purchase Price, Residual Value (what they will sell you the car for at the end of the lease), and Money Factor (typically a number such as .00248 (always multiply this number by 2400, in this case the percentage rate would be 5.952%) - These three factors give you the information you need to make an informed decision...
As someone stated earlier, the negotiated price of the vehicle is critical to your payment... You need to come to that agreed price and use the formula above to figure out what it's really going to cost you per month. Some banks may play with the residuals a bit but there are standards in place. There's less leeway on the residuals at reputable institutions than you may think. As the old saying goes, "pay me now or pay me later"... If you have a finance company quoting you a low residual, then you can bank on (no pun intended) getting charged up the yazoo for every little item/imperfection when you go to give the vehicle back at lease end.
In my opinion, If you plan on buying/leasing another Lexus at lease end, this is where the value comes in of leasing through LFS... They tend to overlook some of these things when your flipping one Lexus for your next. If your leased through a 3rd party finance company such as Wells Fargo or USB Leasing, your relationship with them is over at lease end and they couldn't care less about you... Also, if you were ever in a lemon law situation with a Lexus (heaven forbid!), I think negotiating your way out of the lemon and into a replacement Lexus is easier if LFS is holding the paper on the vehicle.
Jim
You need the Negotiated Purchase Price, Residual Value (what they will sell you the car for at the end of the lease), and Money Factor (typically a number such as .00248 (always multiply this number by 2400, in this case the percentage rate would be 5.952%) - These three factors give you the information you need to make an informed decision...
As someone stated earlier, the negotiated price of the vehicle is critical to your payment... You need to come to that agreed price and use the formula above to figure out what it's really going to cost you per month. Some banks may play with the residuals a bit but there are standards in place. There's less leeway on the residuals at reputable institutions than you may think. As the old saying goes, "pay me now or pay me later"... If you have a finance company quoting you a low residual, then you can bank on (no pun intended) getting charged up the yazoo for every little item/imperfection when you go to give the vehicle back at lease end.
In my opinion, If you plan on buying/leasing another Lexus at lease end, this is where the value comes in of leasing through LFS... They tend to overlook some of these things when your flipping one Lexus for your next. If your leased through a 3rd party finance company such as Wells Fargo or USB Leasing, your relationship with them is over at lease end and they couldn't care less about you... Also, if you were ever in a lemon law situation with a Lexus (heaven forbid!), I think negotiating your way out of the lemon and into a replacement Lexus is easier if LFS is holding the paper on the vehicle.
Jim
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