OT: Need some help for vehicle leasing

One question I have is why you've been trading cars in after only putting between 40 and 52k miles on them?  Do you just prefer newer cars?  Because that's not a ton of miles on a vehicle by today's standards.  

I think leasing makes sense if you're just one of those folks who doesn't drive a ton, and who just wants to always be in newer or near-new cars.  Nevertheless, I think some depends on the type of car you're looking for - sedan or SUV let's say, and whether you're after something basic or more on the luxury side.

Then I know I could not help - I typically buy 1yr used, and drive it until it drops. My current SUV is a 2003 and has 217K miles on it. My other car is a 2011 and has ~54K on it and just paid it off last month.  We will put what we were paying monthly into separate account and buy another car next year and park the SUV for "hauling" purposes only.  

im coming up on 27 years sitting in the same seat its time for some new paint.  i have no understanding how a 40k vehicle can lease for 200 a month, it makes absolutely no sense to me

I have a 2004 liberty approaching 150k miles fast. Runs great, uses no oil between changes. I put the absolute cheapest oil i can find in it. 

Proper maintenance intervals and doing the preventative stuff will keep you on the road a long time. 

fishlessman said:

im coming up on 27 years sitting in the same seat its time for some new paint.  i have no understanding how a 40k vehicle can lease for 200 a month, it makes absolutely no sense to me

It makes sense to the company leasing it to you!  

Lit said:

fishlessman said:

im coming up on 27 years sitting in the same seat its time for some new paint.  i have no understanding how a 40k vehicle can lease for 200 a month, it makes absolutely no sense to me

How much is due at signing and how many miles a year? 

  the shop across the street leased a truck, 2 years 200 a month, 10k miles per year 1999.00 down at signing. at 18 months in they called and took it back for a 40 k truck, same 200 per month, no money down, 2 more years, 10k miles per year. both trucks 4 door, 4x4 drive, dodges half tons, free fluid changes thrown in as well. what does not make sense is you can still find trucks with lower prices at dealers, we just recently bought a f550 dump, 32k from a dealer 12k miles on it 1 year old v10 and we get the full writeoff on it, truck was used for lawn clippings, it replaces the truck i learned to drive with back in the 70's

Negotiate purchase price first.  Then be prepared to negotiate residual value and money factor.   You can generally find current information on a car buying forum particular to the car you are looking at regarding the current residual value and money factor for the model and lease term you are looking at.  Don't focus on the size of the down payment until after you have the purchase price, money factor and residual settled.  The available incentives can be different for purchases and leases, so when researching available incentives check whether they can be applied to leases (for some, like the USAA discounts that some manufacturers offer veterans and their families, the amount of the incentive is different for a lease than a purchase).  

There is lots of leasing info on the car buying forums, and you should check that out before you go into the dealership to talk numbers.  

If lease payment is a tax write off then negotiate for more annual miles.  That way you don't wind up with an over milage penalty payment.  

As noted above, a lease is a long term rental contract.  You pay monthly "rent" on the difference between selling price (equivalent to the negotiated purchase price) and the residual value at the end of the lease term (typically a percentage of MSRP) plus interest.  Negotiating points are generally the sale price (make sure to include in the agreement that all cash incentives further reduce the sale price - in other words, are for your benefit) and money factor (aka interest rate); the residual value (% of MSRP) is probably non-negotiable if you're leasing from a manufacturer or its captive financing arm.  

Understanding the numbers, and looking out for dealer profit centers like miscellaneous fees and interest rate mark ups, will result in a better deal than trying to negotiate a particular monthly payment.  There are numerous lease calculators online, make sure to double check the dealer's monthly payment amount; you will need to find out how your state handles sales tax on leases (some tax the entire value of the car up front, others apply tax to each payment, etc).    Also, for leases you are generally better off not putting money down as a "capital cost reduction" - if the leased car is totaled while driving home from the dealer, that money is typically lost (gap insurance generally only covers the leasing company); no money down does mean a higher monthly payment, but you can invest the "down payment" money and use that to offset the increased payment.  Lastly, note that some manufacturers give a discount on the interest rate for providing additional security deposits.

"How you pay for a car" is a financial tool, and the only way a tool can be bad is if you use it to do a job for which it is not intended. We actually lease mine (trade every 3 years), finance my wife's (she likes to keep it as long as she can), and we paid cash for the older fun car.

I finance cars for a living. PM me what you want and I'll see if I can find a contact in Eastern NC, someone who you can trust.

I run a car Dealership.  I can answer any question you have about leasing, or anything anyone wants the REAL INSIDE SCOOP on when it comes to cars, sales, service dept, anything!

Leasing is NOT renting for one.  People like to THINK that way, but it is just not true.   You are paying for the car that you use.  Period. 

Here is a simple way to look at it...........Leasing is basically an alternative form of financing with a walk option.  In three years (most are now doing 39 months), you check multiple things.....is the car working for the family?  What is it worth in relation to your buy out price?  Do you still want the car? Etc etc etc.  I am not saying one should lease a car with the intention to buy it out at the end, but I can tell you, it is  smarter to do it that way, then to sign up for some 84 month contract!  With the lease, you can walk away at lease end.  My wife and I were in a Land Rover Lease when gas hit $6 a gallon out here in California.  Based on what our residual was, which is what we paid down to in the lease, our car was worth $15,000 less because there was no value for the gas guzzlers at all.  We walked away from it all and the bank ate the loss.  Everyone that was in a purchase that had to get out of those types of rigs because they could not afford to pay for gas, lost that $15,000, because the car is worth what it is worth.  Another example of leasing being a good thing...we have a model that the residuals 3 years ago were all set u p at about $27,000.  The market on the car weakened a ton with new models coming out, and all  those cars had a value of about $22,000...with most of them being sold as Certified Used Cars for around $25K.  So everyone that leased, only paid down to $27K, but everyone that purchased, owns a car worth $22K...see how the leasing folks win?

leasing is the BEST WAY to buy a car, If you have a habit of changing cars like the majority of America does, which is every 3-5 years.  If a car is just a car, and you keep them for 10 years or until they blow up and die, then leasing is NOT for you!  You will hate it!

Set your mileage up right.  Be very realistic to your annual mileage you drive a year, and do NOT sign up for less to save on the payment.  if you drive 12K, do a 15K lease..this gives you cushion and will prevent you from staring at the odometer freaking out about mileage.  MOST leases are .25 per mile, with the lower priced cars usually coming in at .15-.20 per mile over.  This will be answered on your lease contract.

As far as working a purchase and then switching to lease, be careful with that strategy, as manufactrer's DO have different incentives for lease vs purchase. SOmetimes the lease is a better incentive and sometimes it is the purchase.  Example...we have a $3000 Incentive on a purchase for one model, and no incentive for a lease, so the selling price will differ $3000 to the higher price.  We have another model that has a $2500 incentive for a purchase, but a $4800 incentive for a lease, so you can get a lower selling price on the lease!  make sense?

Best thing you can do is just submit some online inquiries.  You will have acouple dealers throwing offers at you and within a couple days, you will know what is a good deal and what is not.  Stay away from the dealer that does not want to give you a price until you come to the store.  Go figure out the car you want, how you want it packaged, leave the store, and then go get your pricing in order.   There are good dealers out there, and there are still some really shady ones.  Your gut will instantly tell you which dealer you are dealing with after some brief email exchange or phone calls.

A dealer prefers you to lease because it puts you back in the market in 3 years for a new car.   Plus, your lease return is the used car everyone looks for, so it helps our used car inventory as well if we are able to buy the car from the bank.   And if they guess LOW on the residual and the car is worth MORE at the end of the lease, you TRADE your lease in, don't TURN it in, and then you get the equity still just like you would on a purchase.

You are NOT required to maintain your car at the dealership either.  Do I recommend it being on the inside...absolutely.  We fix more stuff that a Jiffy LUbe Tech screws up than you would probably believe, but if you know how to work on a car yourself, or have a trusted mechanic, then that is fine.  The only way that would cause a issue, is if you needed to file a warranty claim, and for some reason, there was doubt that you were taking care of your car correctly.  The only maintenance records manufacturer's will honor are from the dealer.  this is extremely rare, as the dealer is paid more for  warranty repair than for customer pay items, so we actively look for warranty coverage.  (Warranty pays our full labor door rate--$180 an hour out here in California!)  Manufacturer's, contrary to popular public opinion, do not look for ways to NOT pay for a repair.  They actually look for ways to cover items, as it creates amazing loyalty.  The issues usually come up when someone obviously is not taking car eof their car (you would be amazed at what we see), or they have something that is just not a covered part and they can't understand why it isn't.  Yes...some people think brake pads wearing out should be covered under  a warranty.

I will PM you my phone number.  Happy to explain anything, as  this post is way too long, and will not  only confuse some I imagine, it will probably spark debate.   By the way..type of store I run....totally transparent, customer focused.  I hate the car buying games just as much as anyone or any consumer, and the process is soooo much more enjoyable for everyone involved when you provide info, do things transparent, and genuinely have an outlook that getting a new car should be a fun and exciting time, and not something someone should dread  having to do.  We also find in our service drive, that when we only sell repairs that are actually needed, people continue to come back over and over again, so when the more profitable repairs are actually needed, we get to do them, as we have earned the trust in a deserving manner.   4.5 star yelp rating for my store..which is unheard of in this industry...and as y ou can tell, I have not said the brand or store, as I am not trying to pitch anything here....I will give you or ANYONE any car buying advice they need.  It's  the least I can do for all the incredible cooking advice I have gotten since joining this board!

things to watch for for an old school car dealership:

Mark Up over and above MSRP

Packages pre installed on all their cars (wheel locks, door edge guards etc)

Selling HYDROGEN AIR for tires to create a lighter tire and better gas mileage(this one just busts me up)

Sells transmission flushes.  this really is not even anything most people ever need to do and most manufacturer's do not recommend it.

Avoidance in giving price out in email format.

shucker said:

@tikigriller thanks a ton for all the information.  it is very helpful!  you mention "And if they guess LOW on the residual and the car is worth MORE at the end of the lease, you TRADE your lease in, don't TURN it in, and then you get the equity still just like you would on a purchase".  What if they guess high and the car is worth LESS?? do I get screwed?  Just trying to piece this whole thing together.

No you don't!  That is the best thing about leasing!  You just need to turn it back in.  You do need to take care of your car, as they do have wear and tear charges if you beat it up.  Basically, a Manufacturer tries to figure out what the car is going to be worth in 3 years, with 36,000 miles on it (assuming a 12K per year lease), and be as accurate as possible.   They will run a higher residual to create a lower monthly payment to be competitive with other makes, and when they lose on those, that is basically a different form of an incentive, as your payment is made up of the difference from your SELLING price of the car to the residual, which the residual is a % of MSRP.

MSRP=$40,000

Resdiual is 55%=$22000

You get a selling price of 37000...there is your price gap--$15K plus interest, that creates your payment.   Residuals are NOT negotiable, but the selling price IS.

Most of the car companies do not nickel and dime you to death on the wear and tear.  If you take care of your stuff, you will be fine.  It is when you lease with Wells Fargo or Bank of America (actually, not many of those banks even lease anymore) that will nickel and dime you to death, because they are just a bank and have no invested interest in what vehicle you own.  A manufacturer wants you to lease another one of their cars, so they are easy on the wear and tear, throw loyalty money at you to create a new lease a competitor can't do, and as someone else mentioned, a lot of times, do a pull ahead program where they will waive remaining payments to get you out of your lease early!  My brand has a two payment waiver right now. So moral of the story..if you lease  a Honda, make sure it is Honda financial, Toyota, TMCC, Nissan/Infiniti--NMAC etc.

The ONLY item I recommend you buy (add on to lease) is GAP Insurance. Nothing other. You don't need it.