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Posted by blackfifty (Member # 9023) on :
 
What is up mah doodz?

Has anyone ever leased a brand new car? If so what are some of the pros and cons?
I have an SRT8 Jeep and a cobra which I refuse to drive to my job(no parking lot and lots of shitty drivers who ding my bucket commuter). My beater is on it's last breath and I don't want to invest 6k into a used car on craigslist.
 
Posted by venomous99 (Member # 1917) on :
 
http://www.dmv.org/buy-sell/new-cars/leasing-vs-buying.php

Leasing: Pros & Cons

Pros
Lower monthly payments.
In general, lease agreements promote lower monthly payments. In addition, many car dealers will offer lease specials to help move new vehicles off their lots.
Lower down payment.
Car loans typically don't require a down payment. Drive off fees, which include your first month's payments, can be due at lease signing, but if you have excellent credit, you shouldn't have to put any additional money down.
You can drive a brand new car every few years.
When you buy a new car, if you decide you don't like it after a few years, you're stuck with it. With a lease, you can trade it in for something else when the lease term is up—no questions asked.
You're only paying for part of the vehicle cost.
When you buy a car, you're financing the entire value up front. On a lease, you're paying for the difference between the car's:
Current price.
AND
Its expected value at the end of your lease term.
Also knows as the residual value.
Based on the resale history of that vehicle, your dealer will predict what the value of your car will be at the end of your lease.
EXAMPLE:
You purchased a car for a current price of $30,000.
Its expected value is $16,500 at the end of your lease.
Your payments will be based on the remaining $13,500.
The future price of your car is set.
As part of a lease agreement, the future resale value of your vehicle is predicted and put in writing.
If the car depreciates faster than predicted, it has no effect on your lease, and could actually benefit you if you decide to purchase your car after your lease is over.
Cons
Leasing is hard with poor credit.
The better your credit the more responsible you appear on paper. Banks can raise the Annual Percentage Rate on a car loan to cover their risk, but on a lease there is not APR so banks don't have as much flexibility.
When your lease is up, you don't own the car.
If you finance (buy) a car, at the end you'll own your vehicle. Not with a lease. At the end of your lease term you'll either need to buy the car outright (you can finance it like a used car purchase) or trade it to start a new lease.
Mileage is limited.
Most leases are limited to 10,000 to 12,000 miles annually, and if you go over, you have the potential to be charged $0.15 to $0.25 per 1 mile at the end of your lease agreement, which can add up quickly.
Wear and tear is your responsibility.
At the end of your lease, you are required to turn the vehicle in a good, non-altered condition.
Leasing can be more expensive.
If you fall into the cycle of leasing one car after another, you'll end up spending more money over time.
Early termination can be costly.
If you decide you don't like your vehicle, or are unable to continue your lease agreement, you'll be forced to pay a high penalty.
 
Posted by blackfifty (Member # 9023) on :
 
Thanks Venomous99 that's good information. I have really good credit and I was reading on a few different websites it does help with the amount you pay for a lease. I wouldn't mind paying a down payment if it means my monthly payments would be less. Thanks again brother.
 
Posted by venomous99 (Member # 1917) on :
 
quote:
Originally posted by blackfifty:
Thanks Venomous99 that's good information. I have really good credit and I was reading on a few different websites it does help with the amount you pay for a lease. I wouldn't mind paying a down payment if it means my monthly payments would be less. Thanks again brother.
i recommend you put the lowest amount down and have a payment you're comfortable with to cover yourself in the event the car is totalled or stolen.
read this:
http://www.realcartips.com/leasing/0314-dont-put-down-payment-on-car-lease.shtml

when shopping for a lease where you have zero intention of ever buying you should break down the deal to how much money you're spending per mile so you're better able to do an apples to apples comparison. car dealers will alter the lease offer/terms to make it more difficult for the consumer to shop around and make a sound decision.

[ 2016-06-10, 07:17 AM: Message edited by: venomous99 ]
 
Posted by NEIGHT (Member # 8741) on :
 
I would never lease a car. When I went to court I've seen people get screwed over by dealerships and I wouldn't wanna be in that position. Plus you're basically paying for the damn car just to borrow it.
 
Posted by swedensky (Member # 12185) on :
 
Being in the car business I'll try to give an unbiased transparent response...starting with my feelings on the Pros vs Cons above...

Pros
Lower monthly payments.
This all is dependent on the situation at hand. Credit, incentives, money factor, mileage, vehicle type, state fees, etc all have an impact on both sides of the equation. Generally yes, they are lower.

Lower down payment.
100% agreed. As mentioned earlier, you want to put the least amount down to be comfortable with the payment. Leases require a drive-off. It is initial fees, a small tax, and your first months payment. A lot of leases will have enough rebate to cover drive-off meaning you can 0 down. Unlike a financing term where you want to pay interest, leases have a money factor so you aren't doing any benefit other than lowering the payment.

You get a newer car more often.
This is why a lot of people lease, and I think the article above did an "ok" job so I will go into it a little more..
Some people just want a new car every few years. New technology, our generations generally speaking want the newest and best items especially when (like cars) they can actually benefit our day to day lives.
Why can't you buy your car and get a new one every few years? You can, but you are more likely to lose money every single time in negative equity (or general depreciation for the argument of paying cash), taxes, fees etc.
When you lease a car it has the Residual Value. That is a percentage set by the manufacturer (not the dealer)and cannot change. The article above stated it as an "expected value" and while that is true - thats more the manufacturers wording. To a customer its "guaranteed future value" from the manufacturer. I'll use the same numbers.
MSRP is $30,000
Based on 24 months of driving and 12k miles per year - they expect your car to be worth $16,500 at the end of your lease. You are guaranteed that number per your contract.
For your 24 mo lease you are only paying that $13,500 difference. However what makes the payment smaller generally is all rebates, dealer discounts, down payment, etc is applied to the $13,500. That $16,500 number is guaranteed to not change. So with $2,000 in rebate, and you negotiated $2,000 off the car - now you're only financing $9,500. Way better having 30% off your loan than the same discount and rebate off of a $30,000 purchase.

Towards the end of a lease you have 3/4 options.
1. Keep it. You love the car. Your Guaranteed Value is a good price for the year/make/model/miles. Go finance the $16,500 plus tax and enjoy the vehicle.

2. Return the car. You're ready for something new. The car's value based on the market is much lower than the guaranteed value of what you can buy it for. It doesn't make sense to buy it. Pay any difference in mileage, wear/tear etc.

3. Trade the car in early. Your lease balance in trade is your Residual ($16,500) plus any remaining payments. Maybe you drove way less than expected mileage and your cars value is above the payoff - that is still your equity to use.

4. Sell it. Same as #3 but you can sell it to anyone as long as the total payoff is fulfilled. Most manufacturers have a stipulation against "trading" in the last cycle of your lease. At that point a sale would be required.

Another plus is here in CA we pay tax based on the monthly payment. You never pay tax on that $16,500 unless you buy it at lease end for that $16,500 amount. If you finance the car you're paying all the tax on all the car regardless of how long you keep it.

Another pro is the fact that most leases are under factory warranty for the entire term.

Another plus (with Ford at least) GAP insurance is free and included. Which is another reason why its a good point as stated earlier to put down the least possible. If you put 5k down and total it the next day, insurance and GAP are covering you but its highly unlikely they're going to value the car $5k over what your pay off is and you'll be out that capital.

All in all there are way more pros, the only person who doesnt fit into a lease well in my opinion is the person who drives their vehicle "until the wheels fall off"


Cons
Leasing is hard with poor credit.
Hard to agree or disagree here. It's not a con. It's life. If you made poor choices it will be hard to lease OR finance. Leasing however can be a huge way to rebuild credit. You need more down, your payment could be higher than a cheap used car from a pot-lot BUT you get more for your money, less interest, you're not smothered in negative equity from 15-25% interest AND you have a paid loan in 2-3 years as opposed to 5-6. I know Ford buys deep and with poor credit, if the car is sold at a low cost, with good rebate, good money down and a low payment - they will put someone with bad credit in a lease before a purchase. Its a quicker ROI for the financing company.

When your lease is up, you don't own the car.
A lot of people make the argument that leasing is like renting because you never own it. I hate to break it to you but if you finance your vehicle its the exact same thing except that a lease can protect you from market fluctuation, a changed mind, etc. You never own anything until its paid off. You can begin a 2 year lease and then purchase it on a 4 yr term if you love it. Its the same as doing a 6 yr finance to begin with. (Total cost will differ, sometimes in favor of the purchase, sometimes in favor of the lease)


Mileage is limited.
Mileage is not limited but predetermined. Most companies will lease much higher than 10-12k also. All it does is change your residual, obviously a car is worth less later with more miles on it. Same as if you purchase a car. If you purchase a $30k car and try to trade in 2 years with excessive miles, you will be upside down. At 0.15 per mile or even 0.25 per mile, you could be looking at a LOT less than trading your car in with negative equity if you financed and drove high miles.


Wear and tear is your responsibility.
Also not a con. Wear and tear devalues a vehicle regardless of whether you lease, finance, or purchase outright. If you lease, you are subject to charge with excessive wear and tear. If you finance, your cars value is generally lower causing possibility for less equity. If you purchase cash and sell on craiglist down the road - well thats why KBB has Excellent, Good and Fair. Because people will pay you less with more wear and tear.

Leasing can be more expensive.
If you fall into the cycle of leasing one car after another, you'll end up spending more money over time.
Correct, like I mentioned earlier very few people these days buy cars and keep them. If you finance and trade every year or two however I believe leasing to be a better route.

Early termination can be costly.
If you decide you don't like your vehicle, or are unable to continue your lease agreement, you'll be forced to pay a high penalty.
I know with Ford, we have no penalty. It's still your car, do what you want. Like previously said: your residual plus remaining payments is your payoff. Terminate anytime.


I may have missed some things and said a few things 2-3 times but over all leasing can be great. I'm on my second plus my ex-fiances 2 I did for her.
 
Posted by blackfifty (Member # 9023) on :
 
quote:
Originally posted by swedensky:
Being in the car business I'll try to give an unbiased transparent response...starting with my feelings on the Pros vs Cons above...

Pros
Lower monthly payments.
This all is dependent on the situation at hand. Credit, incentives, money factor, mileage, vehicle type, state fees, etc all have an impact on both sides of the equation. Generally yes, they are lower.

Lower down payment.
100% agreed. As mentioned earlier, you want to put the least amount down to be comfortable with the payment. Leases require a drive-off. It is initial fees, a small tax, and your first months payment. A lot of leases will have enough rebate to cover drive-off meaning you can 0 down. Unlike a financing term where you want to pay interest, leases have a money factor so you aren't doing any benefit other than lowering the payment.

You get a newer car more often.
This is why a lot of people lease, and I think the article above did an "ok" job so I will go into it a little more..
Some people just want a new car every few years. New technology, our generations generally speaking want the newest and best items especially when (like cars) they can actually benefit our day to day lives.
Why can't you buy your car and get a new one every few years? You can, but you are more likely to lose money every single time in negative equity (or general depreciation for the argument of paying cash), taxes, fees etc.
When you lease a car it has the Residual Value. That is a percentage set by the manufacturer (not the dealer)and cannot change. The article above stated it as an "expected value" and while that is true - thats more the manufacturers wording. To a customer its "guaranteed future value" from the manufacturer. I'll use the same numbers.
MSRP is $30,000
Based on 24 months of driving and 12k miles per year - they expect your car to be worth $16,500 at the end of your lease. You are guaranteed that number per your contract.
For your 24 mo lease you are only paying that $13,500 difference. However what makes the payment smaller generally is all rebates, dealer discounts, down payment, etc is applied to the $13,500. That $16,500 number is guaranteed to not change. So with $2,000 in rebate, and you negotiated $2,000 off the car - now you're only financing $9,500. Way better having 30% off your loan than the same discount and rebate off of a $30,000 purchase.

Towards the end of a lease you have 3/4 options.
1. Keep it. You love the car. Your Guaranteed Value is a good price for the year/make/model/miles. Go finance the $16,500 plus tax and enjoy the vehicle.

2. Return the car. You're ready for something new. The car's value based on the market is much lower than the guaranteed value of what you can buy it for. It doesn't make sense to buy it. Pay any difference in mileage, wear/tear etc.

3. Trade the car in early. Your lease balance in trade is your Residual ($16,500) plus any remaining payments. Maybe you drove way less than expected mileage and your cars value is above the payoff - that is still your equity to use.

4. Sell it. Same as #3 but you can sell it to anyone as long as the total payoff is fulfilled. Most manufacturers have a stipulation against "trading" in the last cycle of your lease. At that point a sale would be required.

Another plus is here in CA we pay tax based on the monthly payment. You never pay tax on that $16,500 unless you buy it at lease end for that $16,500 amount. If you finance the car you're paying all the tax on all the car regardless of how long you keep it.

Another pro is the fact that most leases are under factory warranty for the entire term.

Another plus (with Ford at least) GAP insurance is free and included. Which is another reason why its a good point as stated earlier to put down the least possible. If you put 5k down and total it the next day, insurance and GAP are covering you but its highly unlikely they're going to value the car $5k over what your pay off is and you'll be out that capital.

All in all there are way more pros, the only person who doesnt fit into a lease well in my opinion is the person who drives their vehicle "until the wheels fall off"


Cons
Leasing is hard with poor credit.
Hard to agree or disagree here. It's not a con. It's life. If you made poor choices it will be hard to lease OR finance. Leasing however can be a huge way to rebuild credit. You need more down, your payment could be higher than a cheap used car from a pot-lot BUT you get more for your money, less interest, you're not smothered in negative equity from 15-25% interest AND you have a paid loan in 2-3 years as opposed to 5-6. I know Ford buys deep and with poor credit, if the car is sold at a low cost, with good rebate, good money down and a low payment - they will put someone with bad credit in a lease before a purchase. Its a quicker ROI for the financing company.

When your lease is up, you don't own the car.
A lot of people make the argument that leasing is like renting because you never own it. I hate to break it to you but if you finance your vehicle its the exact same thing except that a lease can protect you from market fluctuation, a changed mind, etc. You never own anything until its paid off. You can begin a 2 year lease and then purchase it on a 4 yr term if you love it. Its the same as doing a 6 yr finance to begin with. (Total cost will differ, sometimes in favor of the purchase, sometimes in favor of the lease)


Mileage is limited.
Mileage is not limited but predetermined. Most companies will lease much higher than 10-12k also. All it does is change your residual, obviously a car is worth less later with more miles on it. Same as if you purchase a car. If you purchase a $30k car and try to trade in 2 years with excessive miles, you will be upside down. At 0.15 per mile or even 0.25 per mile, you could be looking at a LOT less than trading your car in with negative equity if you financed and drove high miles.


Wear and tear is your responsibility.
Also not a con. Wear and tear devalues a vehicle regardless of whether you lease, finance, or purchase outright. If you lease, you are subject to charge with excessive wear and tear. If you finance, your cars value is generally lower causing possibility for less equity. If you purchase cash and sell on craiglist down the road - well thats why KBB has Excellent, Good and Fair. Because people will pay you less with more wear and tear.

Leasing can be more expensive.
If you fall into the cycle of leasing one car after another, you'll end up spending more money over time.
Correct, like I mentioned earlier very few people these days buy cars and keep them. If you finance and trade every year or two however I believe leasing to be a better route.

Early termination can be costly.
If you decide you don't like your vehicle, or are unable to continue your lease agreement, you'll be forced to pay a high penalty.
I know with Ford, we have no penalty. It's still your car, do what you want. Like previously said: your residual plus remaining payments is your payoff. Terminate anytime.


I may have missed some things and said a few things 2-3 times but over all leasing can be great. I'm on my second plus my ex-fiances 2 I did for her.
Thanks so much. I've heard stories of people having nightmarish issues when returning it at the end of the lease because they find any little issue with the car. This happened to people returning it and no renewing a lease with that particular dealer. That's the only worry I have. I have good credit so I'm not really worried about that. I drive 21 miles to and from work so I'm not going to really rack up miles so that's neither a concern. I guess i'll just have to go in and see for myself what the options are. I just hate going to dealers because of the salesman and how much they try and pressure you.
 
Posted by losbadgts (Member # 4394) on :
 
I would love to lease but I can't. Since I drive 110 miles round trip 5 days a week. A lot of people lease because most cars devalue and also u don't worry about warranty running out.
 
Posted by swedensky (Member # 12185) on :
 
quote:
Originally posted by blackfifty:
Thanks so much. I've heard stories of people having nightmarish issues when returning it at the end of the lease because they find any little issue with the car. This happened to people returning it and no renewing a lease with that particular dealer. That's the only worry I have. I have good credit so I'm not really worried about that. I drive 21 miles to and from work so I'm not going to really rack up miles so that's neither a concern. I guess i'll just have to go in and see for myself what the options are. I just hate going to dealers because of the salesman and how much they try and pressure you.
Man I know someone that turned in a lease with bad damage. Some visible some not. $240 bill for a scratched rim. It's like insurance. It depends on who assesses the car and how Bette feeling to give the quote. Ford has a third party company so we as a dealer don't have any way to try and gouge you for anything. We have no say. I would assume it's the same all over since the dealer doesn't get the car back, the manufacturer does. Ford allows a dent or scratch smaller than a credit card PER body panel standard, and Ford also has something called WearCare that covers up to $4k in damage (up to $1k per incident) for lease return.


What cars are you looking at? If you're considering a ford I can shoot you something aggressive for comparison.
Mustang GT, Shelby, and SuperDuty do not lease.
 
Posted by Blind (Member # 3052) on :
 
a few years ago a guy I worked with at the time leased a ~2011 toyota tacoma extended cab 2wd, manual, base model truck. It was $99/mo.

He put nothing down, drove it for 3 years, then at the end of the lease it ended up being worth ~$6k more than the residual value. He sold it privately. He ended up pocketing $1500 more than he spent in the monthly payments.

Don't lease something that has terrible resale, like a fiesta, kia/hyundai, etc. I saw a deal for a base model jetta for $79/mo today, and another for a civic for $99/mo. Hard to go wrong with something like that IMO.
 
Posted by SLOWBACK 67 (Member # 6348) on :
 
The only time I would suggest a lease is if you're running the expense through your own company. Your WORK truck/car, heavy equipment ( Forkllifts, Electric jacks...Big Rigs ) Those types of things might be a better choice to think about a lease agreement.

I am a big fan of Dave Ramsey and his financial advice. I don't mean to start a huge political debate with this. But here's food for thought when it comes to car payments.

If you took 600.00 a month and invested it into a good mutual fund for 30 years. IF you averaged a 12% return durring that time, you would have hust over 2 million dollars in your account. If you made zero return...... You would still have saved 216,000.00 in car payments.
 
Posted by 90GT510 (Member # 9199) on :
 
[b]Early termination can be costly.
I know with Ford, we have no penalty. It's still your car, do what you want. Like previously said: your residual plus remaining payments is your payoff. Terminate anytime.


. [/QB][/QUOTE]
I've been trying to learn about leasing as well recently.

I'm having a little trouble understanding this part. What is residual?

Also to clarify if I lease a ford and 7 months down the road I decide fuck this I can return it at no cost??
 
Posted by swedensky (Member # 12185) on :
 
quote:
Originally posted by 90GT510:

I've been trying to learn about leasing as well recently.

I'm having a little trouble understanding this part. What is residual?

Also to clarify if I lease a ford and 7 months down the road I decide fuck this I can return it at no cost??
Residual is the amount your car is worth at the end of the lease period. A percentage of MSRP is decided on based on how long your lease is and how many miles you drive.
Ex:
30,000 Vehicle
In 2 years and 24,000 miles (24 mo and 12k mile lease) Manufacturer says they think the vehicle will be worth 55% of its current value. So at the end of the lease your car has a residual or "guaranteed future value" of $16,500. You only pay the difference of $13,500 in your 24 months.
Obviously a longer lease or higher miles makes your residual less because the car will be older, and have higher miles. The residual percentages are all predetermined by the manufacturer NOT by dealerships, and cannot be altered.

At any point in your lease you can sell it, trade it, return it, etc.
Your balance on the vehicle is the residual (of which you are made aware from day one) plus any remaining payments. You say walk away at no cost, there is no penalty except that you may owe more than the vehicle is worth leaving early (same as negative equity on a financing term).

As opposed to the end of your lease the car has a guaranteed value of $16,500. If you drop the car off in 2 years with 24k miles or less and it is worth only 10k due to market value dropping, you are not responsible for the difference. You can walk away.
 




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