Does car leasing make sense? Seeking car buying experts

[mr99]

Yep, see all my previous posts regarding time and effort for private sales. My “not trading” was suggesting not to roll the equity against a lease, i.e. the mechanism you use to “sell it” (including to the dealer) is irrelevant, just put that money in your pocket.

re: selling (“trading”) to a dealer: had a friend that did that very thing, converted from a traditional finance with lots of equity to a lease, covered the down, and drove out with a check ($15K) for the difference.

FYI, the same guy made an offer on the car after the lease expired, lower than the residual, but they didn’t want stock, the projected value had done down, and they took his offer (it was a pretty big difference, around $5-6K IIRC). It was all in his favor, take offer or take the keys.

Good info, I'll consider taking a check if I choose to lease. I've read that a lot of people will roll the money owed up front into the lease so $0 or only a small payment owed up front at lease signing. If I choose to lease I'd probably continue that path so I can "avoid" paying thousands up front (only if it makes any sense). Ideally for me at the moment i'd like a $350ish payment compared to my current $489 payment. I also like the fact of driving a car under warranty as I would hate paying hefty repair bills if something were to happen.

 

[puma1552]

Good info, I'll consider taking a check if I choose to lease. I've read that a lot of people will roll the money owed up front into the lease so $0 or only a small payment owed up front at lease signing. If I choose to lease I'd probably continue that path so I can "avoid" paying thousands up front (only if it makes any sense).

This is the correct way to do it - roll the taxes and everything into the payments, absolute minimum out of pocket up front.

 

[sdilley14]

If you're rolling the up front costs into the lease, wouldn't you be paying interest on that amount for the life of the lease? Probably not a large amount that you would be paying in interest, but it's money you wouldn't have to pay if you just put the money down up front. But I also realize that putting $2-$3-$4K+ down up front can be a tough pill to swallow.

 

[Weaselboy]

That ballpark number was not including the trade in. I do know that the lease deal wants a small chunk of change up front at lease signing; i'm wondering if I can use my positive equity towards those up front lease fees i.e. first months payment plus whatever else it includes.

Good point though, if I go this route and get into a new lease after 2 years, the up front lease costs of 2-3k would be out of pocket. Hmm.

I have both purchased and leased quite a few cars and settled on leasing the last couple. You sound like a good candidate for a lease. Meaning you drive low miles and want a new car every two or three years.

You did not mention what state you are in, but in some states the sales tax laws heavily favor leasing. For example where I live in California you pay 8% sales tax on the entire purchase price if you buy, where with the lease you only pay sales tax on the monthly payment amount. In my case that saves about $2,700 for a 24 month lease right there.

I have done the math and for me to buy vs. lease every two or three years, leasing is much cheaper.

Some of this depends on the lease deal also. Some manufacturers have artificially high residual percentages that lower your lease cost because they are desperate to move cars. For example my current two year lease on a BMW has a 66% residual value. There is no way in the world that car will be worth anything close to that at lease end. The manufacturer is effectively subventing lease costs to move cars. This benefits you the buyer and tilts the equation toward leasing.

Don't put any money down toward a cap cost reduction. Do a Google search for "Infiniti multiple security deposits" (MSD) and read up on it. That is where you want to put any money you have available up front. The way it works is you give Infiniti extra security deposits (up to nine) and that lowers the money factor (interest rate) on the lease and lowers your payment. Then at the end of the lease you get all that money back. For me it pencils out to about a 10% annual return on the money I gave them for MSDs. Much better deal than using the money for a cap cost reduction.

Also search around in user forums and such to find the base money factor rate for Infiniti. For example right now the base rate for most BMWs is .00130 and dealer is allowed to mark that up by four basis points of pure profit for them. I have been able to negotiate down to the base rate. I suspect Infiniti does the same.

Usually the residual % is set by the manufacturer and the dealer cannot mess with that.

This is the correct way to do it - roll the taxes and everything into the payments, absolute minimum out of pocket up front.

If you're rolling the up front costs into the lease, wouldn't you be paying interest on that amount for the life of the lease? Probably not a large amount that you would be paying in interest, but it's money you wouldn't have to pay if you just put the money down up front. But I also realize that putting $2-$3-$4K+ down up front can be a tough pill to swallow.

IMO puma1552 is on target here. You are correct sdilley14 that it bumps up the payment a bit, but lease money factors are often so low that the payment bump is small, and the bump can more than be paid per month out of the cash you would have but toward a cap cost reduction. Also, see my comment above on MSDs.

 

[mr99]

I have both purchased and leased quite a few cars and settled on leasing the last couple. You sound like a good candidate for a lease. Meaning you drive low miles and want a new car every two or three years.

You did not mention what state you are in, but in some states the sales tax laws heavily favor leasing. For example where I live in California you pay 8% sales tax on the entire purchase price if you buy, where with the lease you only pay sales tax on the monthly payment amount. In my case that saves about $2,700 for a 24 month lease right there.

I have done the math and for me to buy vs. lease every two or three years, leasing is much cheaper.

Some of this depends on the lease deal also. Some manufacturers have artificially high residual percentages that lower your lease cost because they are desperate to move cars. For example my current two year lease on a BMW has a 66% residual value. There is no way in the world that car will be worth anything close to that at lease end. The manufacturer is effectively subventing lease costs to move cars. This benefits you the buyer and tilts the equation toward leasing.

Don't put any money down toward a cap cost reduction. Do a Google search for "Infiniti multiple security deposits" (MSD) and read up on it. That is where you want to put any money you have available up front. The way it works is you give Infiniti extra security deposits (up to nine) and that lowers the money factor (interest rate) on the lease and lowers your payment. Then at the end of the lease you get all that money back. For me it pencils out to about a 10% annual return on the money I gave them for MSDs. Much better deal than using the money for a cap cost reduction.

Also search around in user forums and such to find the base money factor rate for Infiniti. For example right now the base rate for most BMWs is .00130 and dealer is allowed to mark that up by four basis points of pure profit for them. I have been able to negotiate down to the base rate. I suspect Infiniti does the same.

Usually the residual % is set by the manufacturer and the dealer cannot mess with that.





IMO puma1552 is on target here. You are correct sdilley14 that it bumps up the payment a bit, but lease money factors are often so low that the payment bump is small, and the bump can more than be paid per month out of the cash you would have but toward a cap cost reduction. Also, see my comment above on MSDs.

Great post. I live in Indiana. Can I apply positive equity from my vehicle at trade in towards MSD's (as many as I can get with my equity)? This REALLY intrigues me.

About how much below invoice can a vehicle be leased for on average (percentage)? I am not quite sure what I should be targeting if I choose to lease a $45k-ish MSRP Infiniti Q50 Premium AWD.

 

[Weaselboy]

Great post. I live in Indiana. Can I apply positive equity from my vehicle at trade in towards MSD's (as many as I can get with my equity)? This REALLY intrigues me.

Exactly.

About how much below invoice can a vehicle be leased for on average (percentage)? I am not quite sure what I should be targeting if I choose to lease a $45k-ish MSRP Infiniti Q50 Premium AWD.

https://www.truecar.com/

I used a couple 45-46k Q50 examples on Truecar and it looks like people are paying right at invoice for those, including incentives etc.

 

[mr99]

Exactly.







https://www.truecar.com/



I used a couple 45-46k Q50 examples on Truecar and it looks like people are paying right at invoice for those, including incentives etc.

I did see that on truecar as well. From what I remember seeing on an Infiniti user forum, people seemed to be posting many thousands below invoice, I'm not sure how that could be pulled off. Anyway I think I'll look into the lease option with MSD options.

 

[mr99]

Exactly.



https://www.truecar.com/

I used a couple 45-46k Q50 examples on Truecar and it looks like people are paying right at invoice for those, including incentives etc.

Check out the current lease deal on their website (http://www.infinitiusa.com/offers). Let me know what you think about the Q50 Premium AWD. I would be interested in rolling the $3199 into the 39mo lease, do you know roughly how much that would add to the $309? Do you think this is a great deal?

 

[D.T.]

You have quite a bit of knowledge in leasing it seems, can you elaborate to help me make an educated decision? If you want to post or PM or email, that's fine. Maybe public posting here will help people in the future too.

I’m not really an expert, just did my usual due diligence before going with a lease (beyond the surface comparisons of just payments, etc).

For us, it was an easy decision with our BMWs (Z3, 330Ci, X5 4.4i): good rate, high residual, a manufacturer you want to own out of warranty, maintenance as part of the deal, etc.

FWIW, when I wanted to get a solid off road ride, with reasonably stout towing capacity (track car and boat) we went with a 4Runner Ltd V8 and because of the expected reliability, and an offer of 0% financing, went that direction, still have it, about 16 months without a payment

I have both purchased and leased quite a few cars and settled on leasing the last couple.

[...]

Fantastic post, with some really clarifying details. Paying down the money factor, tax considerations vs. your home state, dealing on the price, etc., some pretty straight forward tactics that many people ignore in the leasing process.

Check out the current lease deal on their website (http://www.infinitiusa.com/offers). Let me know what you think about the Q50 Premium AWD. I would be interested in rolling the $3199 into the 39mo lease, do you know roughly how much that would add to the $309? Do you think this is a great deal?

FYI, that’s the lease I posted above, and it was 39 months, I believe you originally said you were shopping a 24 month lease.

 

[mr99]

FYI, that’s the lease I posted above, and it was 39 months, I believe you originally said you were shopping a 24 month lease.

I'd consider going 39mo.

 

[lowendlinux]

If I were in your shoes trading as often as you do I'd lease. My wife and I are both allergic to payments so it's not for us.

 

[Weaselboy]

Check out the current lease deal on their website (http://www.infinitiusa.com/offers). Let me know what you think about the Q50 Premium AWD. I would be interested in rolling the $3199 into the 39mo lease, do you know roughly how much that would add to the $309? Do you think this is a great deal?

I think the $3199 is from the non-AWD model. Looks like the AWD they want $3399 (3090 cap cost reduction and 309 first payment).

First thing is they are using a 42705 MSRP and that is a base model with no Premium package etc. I suspect is a unicorn and does not exist on the lot. More realistically they will have the Premium or better on the lot for around $45000 MSRP.

But for comparison I used their numbers in my spreadsheets. They don't give residual or MF, but I was able to back into them from the numbers they provided.

Looks like they are selling you the car for 38,000, so a couple thousand under invoice. I got there by the net cap cost they list of 35,699 - 700 acq fee + 3,090 cap cost reduction = 38,000. I separated out the 700 acq fee that they rolled into cap cost. Same end result, but it makes the numbers clearer.

Based on the value of the car they show at end of lease I calculated a 56% residual. Then plugged in what we know and played with MF to get a $309 payment. To get that requires a .00012 MF which is very very good. They are almost loaning you money for free (unless I am missing something here).

The issue there is that takes MSDs off the table. MSDs cannot pull the rate below .00001. You are already so low that the two MSD minimum would put it below that.

I would roll the 700 acq fee into the lease and make the first payment and license payment myself and nothing else. If you do not make the 3,090 down the lease goes up by $79 a month. 39*79=3081, so why give them your money for three years for no benefit.

To summarize... great sale price about 2k below invoice. Great residual of 56% and a great MF of .00012. Seems clear to me Infiniti corporate wants to move cars off the lot and they are subsidizing this to make it happen.

I'm ignoring taxes here because I don't know how that is handled in your state. The have not included taxes in their numbers either.

 

[sdilley14]

I think the $3199 is from the non-AWD model. Looks like the AWD they want $3399 (3090 cap cost reduction and 309 first payment).

First thing is they are using a 42705 MSRP and that is a base model with no Premium package etc. I suspect is a unicorn and does not exist on the lot. More realistically they will have the Premium or better on the lot for around $45000 MSRP.

But for comparison I used their numbers in my spreadsheets. They don't give residual or MF, but I was able to back into them from the numbers they provided.

Looks like they are selling you the car for 38,000, so a couple thousand under invoice. I got there by the net cap cost they list of 35,699 - 700 acq fee + 3,090 cap cost reduction = 38,000. I separated out the 700 acq fee that they rolled into cap cost. Same end result, but it makes the numbers clearer.

Based on the value of the car they show at end of lease I calculated a 56% residual. Then plugged in what we know and played with MF to get a $309 payment. To get that requires a .00012 MF which is very very good. They are almost loaning you money for free (unless I am missing something here).

The issue there is that takes MSDs off the table. MSDs cannot pull the rate below .00001. You are already so low that the two MSD minimum would put it below that.

I would roll the 700 acq fee into the lease and make the first payment and license payment myself and nothing else. If you do not make the 3,090 down the lease goes up by $79 a month. 39*79=3081, so why give them your money for three years for no benefit.

To summarize... great sale price about 2k below invoice. Great residual of 56% and a great MF of .00012. Seems clear to me Infiniti corporate wants to move cars off the lot and they are subsidizing this to make it happen.

I'm ignoring taxes here because I don't know how that is handled in your state. The have not included taxes in their numbers either.

So you end up paying $22,407, and at the end of the lease you have nothing to show for it. Meanwhile the dealer still has a nice pre-owned vehicle with low mileage that they can sell and turn a profit on again.

I understand this isn't an issue for some, but I just find this to be a tough pill to swallow. To each their own though!

 

[Weaselboy]

So you end up paying $22,407, and at the end of the lease you have nothing to show for it. Meanwhile the dealer still has a nice pre-owned vehicle with low mileage that they can sell and turn a profit on again.

I understand this isn't an issue for some, but I just find this to be a tough pill to swallow. To each their own though!

Yeah, I get that mentally some people don't accept the whole premise. But depending on the deal, leasing can be much cheaper. I can tell you for myself and my buying pattern, leasing is quite a bit cheaper. I have crunched the numbers hard both ways.

You are misreading the spreadsheet. The total of payments is $16,381.

 

[sdilley14]

Yeah, I get that mentally some people don't accept the whole premise. But depending on the deal, leasing can be much cheaper. I can tell you for myself and my buying pattern, leasing is quite a bit cheaper. I have crunched the numbers hard both ways.

I can appreciate that. I'm on more of a 3-4 year buying cycle so I think I have a harder time wrapping my head around leasing the the benefits.

I also don't buy new/luxury vehicles. I typically look for a Camry, Accord, that type of vehicle - something with a higher end option package, that is 3-4 years old but only has 30-40k miles on it. I can usually find these types of vehicles for 10-15% below NADA value. Drive it for 3-4 years until it has 60-70k miles then sell it while it still has low mileage and a fair amount of value, and right before it gets to the point where major repairs issues might come in to play.

 

[Weaselboy]

I can appreciate that. I'm on more of a 3-4 year buying cycle so I think I have a harder time wrapping my head around leasing the the benefits.

I also don't buy new/luxury vehicles. I typically look for a Camry, Accord, that type of vehicle - something with a higher end option package, that is 3-4 years old but only has 30-40k miles on it. I can usually find these types of vehicles for 10-15% below NADA value. Drive it for 3-4 years until it has 60-70k miles then sell it while it still has low mileage and a fair amount of value, and right before it gets to the point where major repairs issues might come in to play.

I get where you are coming from for sure. Leasing is probably not for you. OP and myself and are starting from the premise we want (enjoy?) a new car every two or three years and want it to always be under warranty so we don't have to mess with it.

 

[sdilley14]

I get where you are coming from for sure. Leasing is probably not for you. OP and myself and are starting from the premise we want (enjoy?) a new car every two or three years and want it to always be under warranty so we don't have to mess with it.

That makes sense. It's a luxury and a piece of mind that you don't mind paying for. If you have the means to go that route, I can't really blame you!

 

[pvmacguy]

If you are looking to lease, check out swapalease or leasetrader. You can usually get a lease with a low payment and miles and all you pay is the manufacturer a lease change over. Usually $500. A lot of sellers don't even want their 3-4k back so you get a nice lease with hardly any skin in the game.

There are also some that will take those leases after it ends sell it to carmax and pay off the at lease buy out and make 3-4k.

Here is a great example! This person is even giving $5300 to take over the lease!
http://www.swapalease.com/lease/details/2014-Infiniti-Q50.aspx?salid=897112

 

[mr99]

I think the $3199 is from the non-AWD model. Looks like the AWD they want $3399 (3090 cap cost reduction and 309 first payment).



First thing is they are using a 42705 MSRP and that is a base model with no Premium package etc. I suspect is a unicorn and does not exist on the lot. More realistically they will have the Premium or better on the lot for around $45000 MSRP.



But for comparison I used their numbers in my spreadsheets. They don't give residual or MF, but I was able to back into them from the numbers they provided.



Looks like they are selling you the car for 38,000, so a couple thousand under invoice. I got there by the net cap cost they list of 35,699 - 700 acq fee + 3,090 cap cost reduction = 38,000. I separated out the 700 acq fee that they rolled into cap cost. Same end result, but it makes the numbers clearer.



Based on the value of the car they show at end of lease I calculated a 56% residual. Then plugged in what we know and played with MF to get a $309 payment. To get that requires a .00012 MF which is very very good. They are almost loaning you money for free (unless I am missing something here).



The issue there is that takes MSDs off the table. MSDs cannot pull the rate below .00001. You are already so low that the two MSD minimum would put it below that.



I would roll the 700 acq fee into the lease and make the first payment and license payment myself and nothing else. If you do not make the 3,090 down the lease goes up by $79 a month. 39*79=3081, so why give them your money for three years for no benefit.



To summarize... great sale price about 2k below invoice. Great residual of 56% and a great MF of .00012. Seems clear to me Infiniti corporate wants to move cars off the lot and they are subsidizing this to make it happen.



I'm ignoring taxes here because I don't know how that is handled in your state. The have not included taxes in their numbers either.

Thanks for the research, that helps a lot. I looked at your screenshots - ideally I want to stay under $400. My current payments are $489 on my financed Acura and I want to ideally save about $100 if I pick to go the lease route. $350-$400 would be my sweet spot for leasing while $500 or under for finance. I might be asking too much for a $45k car or, no? The used Q50's I've seen are around $31k and rolling in my $1500 positive equity leaves me with around a $500 payment if financed. Lots to think about right now. Thoughts? The reason I am looking into a new vehicle is because my Acura has surpassed 50,000 miles and is out of warranty. The only expense so far is a new battery but new tires are up next for replacement and I'm sure things will start popping up anytime soon.

 

[Weaselboy]

Thanks for the research, that helps a lot. I looked at your screenshots - ideally I want to stay under $400. My current payments are $489 on my financed Acura and I want to ideally save about $100 if I pick to go the lease route. $350-$400 would be my sweet spot for leasing while $500 or under for finance. I might be asking too much for a $45k car or, no? The used Q50's I've seen are around $31k and rolling in my $1500 positive equity leaves me with around a $500 payment if financed. Lots to think about right now. Thoughts? The reason I am looking into a new vehicle is because my Acura has surpassed 50,000 miles and is out of warranty. The only expense so far is a new battery but new tires are up next for replacement and I'm sure things will start popping up anytime soon.

How about this scenario. I added 3,000 to MSRP and cap cost both because I think that is more realistically the model configuration you will find on dealer lots. Then throw in your 1,500 as a cap cost reduction and it gets you in the ballpark.

 

[mr99]

How about this scenario. I added 3,000 to MSRP and cap cost both because I think that is more realistically the model configuration you will find on dealer lots. Then throw in your 1,500 as a cap cost reduction and it gets you in the ballpark.

That's not bad, but aren't you in the agreement that there's no way in heck I should pay my trade against a cap reduction?

If you forget this current lease promo and set up a standard lease with $1500 in MSD's, does it get me around $400 or under?

 

[Weaselboy]

That's not bad, but aren't you in the agreement that there's no way in heck I should pay my trade against a cap reduction?

I generally don't like to give them cap cost reductions as there is little benefit for you. Look at the difference in my earlier example. The cap cost money covers the added payment amount if you keep that money. I only mentioned it because it sounded like mentally you wanted to get below a certain payment threshold.

Sometimes the WAF comes into play here. If you were talking about a $5,000 cap cost reduction, I would be trying to talk you out of it, but this small amount is kind of a wash either way. It is not like you are going to put that $1,500 in the bank and make any money on it anyway with rates as they are.

If you forget this current lease promo and set up a standard lease with $1500 in MSD's, does it get me around $400 or under?

MSDs looks off the table here since the rate is so low to begin with (again unless I am missing something). Read this. In this case it looks like MSDs would put the rate below the allowed floor of .00001, so it is a no go.

 

[mr99]

How about this scenario. I added 3,000 to MSRP and cap cost both because I think that is more realistically the model configuration you will find on dealer lots. Then throw in your 1,500 as a cap cost reduction and it gets you in the ballpark.

Since most people are paying invoice for Q50's as truecar indicates, I think the MSRP number on the calculation should be reduced.

I generally don't like to give them cap cost reductions as there is little benefit for you. Look at the difference in my earlier example. The cap cost money covers the added payment amount if you keep that money. I only mentioned it because it sounded like mentally you wanted to get below a certain payment threshold.

Sometimes the WAF comes into play here. If you were talking about a $5,000 cap cost reduction, I would be trying to talk you out of it, but this small amount is kind of a wash either way. It is not like you are going to put that $1,500 in the bank and make any money on it anyway with rates as they are.

I agree, I'd use the money as a cap cost reduction, hell I could probably even add another $1k of my own money to help further if it makes any financial sense. Can you send me a PM with a dropbox link to your spreadsheet? I'd like to have that for my personal research as well.

----------

@Weaselboy -

On another note, my place of employment, Subaru, offers what they call a "Special Lease Program". Read below, this is a breakdown of numbers from the New car manager, explaining the terms of the lease with numbers. What do you think, is it a killer deal, something "REALLY" worth doing? It isn't my first choice in a vehicle but if the deal is that good, maybe my wife and I could consider it.


First, lets assume the 3.6R Limited Legacy you are looking to lease has a MSRP of $33,250. We will use this number for residual purposes later. This same car has a dealer invoice of $30,973, or from my end this would also be considered the sale price.
When we add the sale price ($30,793), title fee ($50), Acquision fee ($595), Maintenance Plan ($938) and the Driver Care Protection ($895), this will equal $33,271. This is also called the Gross Capitalized Cost.

Now lets hone in on the money SIA gives as money down for a moment. Here is how it works.
Out of the $4118 down, or "Due at Signing"..., on the contract paperwork, 1st payment is taken out of this money. Payment per month is $353.62, so
4118 - 353.62 = $3,764.38. Taxes on money down are also due at signing, so after the math is done, $3,518.11 is the money down and $246.27 is tax on the money down. $3,764.38 - 246.27 = 3,518.11 which is also called the Capitalized Cost Reduction.

So :
$33,271 : (Gross Cap Cost)
- 3,518.11 : (Cap Cost Reduction) / Money Down
= $29,752.89 : (Adjusted Cap Cost) / Sale Price

(We remember that the MSRP is $33,250. Well, the residual on a 3.6R Limited for the month of February is 55%. On this vehicle your residual will be $18,287.50.

= $29,752.89 : (adjusted cap cost)
- 18,287.50 : (Residual)
= $11,465.39 : This is the amount charged (from JP Morgan Chase) for the vehicles decline in value through normal use and for items paid over the lease term (like the Maitnenance Plan)

The money factor on a 3.6R Limited, for tier one credit (FICO score of 700 or above) is .00025, so the total amount or interest you will pay over the next 36 months will be $432.25

= $11,465.39
+ 432.25
= $11,897.64

From here forward the math is pretty easy. The term of lease is 36 months

= $11,897.64
/ 36 (Term of the lease)
= 330.49 (Base monthly payment)
* 7% (Sales tax)
= 353.62 (Total monthly payment)

 

[mr99]

If you are looking to lease, check out swapalease or leasetrader. You can usually get a lease with a low payment and miles and all you pay is the manufacturer a lease change over. Usually $500. A lot of sellers don't even want their 3-4k back so you get a nice lease with hardly any skin in the game.

There are also some that will take those leases after it ends sell it to carmax and pay off the at lease buy out and make 3-4k.

Here is a great example! This person is even giving $5300 to take over the lease!
http://www.swapalease.com/lease/details/2014-Infiniti-Q50.aspx?salid=897112

This is extremely interesting.....thoughts @weaselboy?

 

[puma1552]

definitely max the security deposits if possible since as mentioned it lowers your money factor and at the end of the lease you get them back and can apply them to MSDs on the next lease or if you walk away and decide you want to buy your next car, you already have some cash for the downpayment.

I'd also avoid 39 month leases, because you get stuck paying a years registration for a car you'll turn in after three months.

id avoid swapalease. you can look, but people are usually unloading terrible lease deals, that's why they usually are trying to get out of the lease - bad deals to begin with (not always though)