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View Full Version : Signing a lease for a new car this week



tsoden
06-12-2012, 04:03 AM
My current car is a 2009 Hyundai Elantra. It's been a great car for us, but we have found that with my wife an i having different working schedules, the need for a second car is starting to be more and more obvious. So last night we went test driving. I gotta tell you...it's not easy doing this with a toddler in check. Went in looking for a certain car and trying to decide if we needed a small runabout or a larger family car.

The idea was to start our research and do some comparisons, and in the end, after only taking two cars out, we settled on a 2012 Toyota Prius Liftback (the original model). This was one that we were not even going to consider as the "c" model (Smaller car) was one we were more interested in but sold out until 2013, and the "V" model (larger car) though nice, was not nearly as nice looking according to my wife, even though it was only $1000 more than what we chose.

So in the end we did try both the original and v model and left impressed moreso with the original. We did not sign any papers last night and wondered if we should compare more with other brands, but we both loved the car, and could not think of anything that would be comparable having the same hatch utility and amazing fuel economy, not to mention all the high tech toys. Given the prius' rock solid history, we called the dealer last night and told them to put a silver base model on hold and arranged for signing lease papers this wed. We decided to lease as the interest rate is 0.9% and the residual on the car was surprisingly low, considering used prius's sell quite well and hold their value. Also, who know where we will be in three years, so this seems to be the perfect solution for us.

-=FLEX=-
06-12-2012, 05:17 AM
We decided to lease as the interest rate is 0.9% and the residual on the car was surprisingly low, considering used prius's sell quite well and hold their value.

huh???

When leasing a higher residual is better. The lower the residual the more you are paying.

tsoden
06-12-2012, 07:09 AM
That is the funny part. In this case it isn't. Its pretty strange actually how its all working out.

-=FLEX=-
06-12-2012, 07:19 AM
That is the funny part. In this case it isn't. Its pretty strange actually how its all working out.

I don't see how that's possible.

Let's say the car costs $30,000, it's a 36 month lease with a 50% residual. Then you are financing 50% of the car, or $15,000.

Now assume same cost of car and term, but a lower residual, say 30%. Then you are financing 70% of the car, or $21,000.

So all else being equal, the lower the residual, the higher your payments.

Any sales person telling you anything different is either a moron or he is flat out lying to you.

chodan9
06-12-2012, 08:26 AM
also you may want to check insurance on the lease,
the liability insurance is sometimes extremely high since technically the leasing company owns the car, for that reason they set it high. And you cant carry high liability on just one car usually so you would have to carry it on all your cars.

BillReilly
06-12-2012, 08:52 AM
also you may want to check insurance on the lease,
the liability insurance is sometimes extremely high since technically the leasing company owns the car, for that reason they set it high. And you cant carry high liability on just one car usually so you would have to carry it on all your cars.

The other issues is the gap between the schedule value of the care and the book value. If you total a leased car, you are responsible to the leasing company for the schedule value of the vehicle. This is part of your lease contract. Let's say you have a three year lease on a $20,000 car. The residual was set at $10,000. After year one, the schedule value of the car is ~$17,000. The book value, however, is ~$14,000. When you total it, the insurance company pays the $14,000 and you are on the hook for the other $3,000.

I'm not a big fan of leasing for most people. It is pitched as a way to make 2 + 2 = 3, but that's never going to happen. Dealers would not offering a lease if they were losing money. Your costs are going to be the same when you add in all the little things not mentioned by the salesman. In many cases, you pay more than you would if you purchased the car. But, everyone has their own set of facts and their own view of those facts. I drive a vehicle until it is worth zero, so my costs are different than those who trade in every three years.

2nd_chance
06-12-2012, 09:00 AM
I don't see how that's possible.

Let's say the car costs $30,000, it's a 36 month lease with a 50% residual. Then you are financing 50% of the car, or $15,000.

Now assume same cost of car and term, but a lower residual, say 30%. Then you are financing 70% of the car, or $21,000.

So all else being equal, the lower the residual, the higher your payments.

Any sales person telling you anything different is either a moron or he is flat out lying to you.

That's why they pay you the big bucks as a controller Jim. :)

Brackneyc
06-12-2012, 09:22 AM
It's a Prius...and are we really discussing a Prius. :D

crupiea
06-12-2012, 09:26 AM
It's a Prius...and are we really discussing a Prius. :D
This.

i am dissappoint.

just kidding, enjoy the new ride.

-=FLEX=-
06-12-2012, 09:47 AM
It's a Prius...and are we really discussing a Prius. :D

I was discussing leasing...and being conspicuously silent on the vehicle being leased... :D

Brackneyc
06-12-2012, 09:55 AM
I was discussing leasing...and being conspicuously silent on the vehicle being leased... :D

We "could" all ignore the elephant in the room (no, I am not the elephant:)), but in this case, I could not remain quiet. :)

Normally I would not be in support of a lease either, but in this case, I chose to address the more alarming of the two issues. :D

flairon
06-12-2012, 09:59 AM
I have never been remotely interested in leasing a car long term. I've always thought the point to a car payment was to make it stop by paying it off. It seems that if you're going with leasing, you never really own it, so you're pretty much just giving someone money to drive.

I have a few friends that do this, and yes, they always have a nice new or newer car...but they are always making payments on something that technically isn't ever going to be theirs. I just need dependable transportation, i'm not interested in impressing someone with my daily driver

Phattso
06-12-2012, 10:06 AM
I have never been remotely interested in leasing a car long term. I've always thought the point to a car payment was to make it stop by paying it off. It seems that if you're going with leasing, you never really own it, so you're pretty much just giving someone money to drive.

I have a few friends that do this, and yes, they always have a nice new or newer car...but they are always making payments on something that technically isn't ever going to be theirs. I just need dependable transportation, i'm not interested in impressing someone with my daily driver

Good points. Leasing isn't for everyone. It can be an option for those who own their own business, as the payments may be deducted as an expense, as well as a portion of the miles and maintenance if used for business. True, you are only paying for the depreciating value of the car and not equity, but if you own your own business, that is just fine (no Obama). Best to talk to your accountant to see if leasing is the best option for your particular situation.

tsoden
06-12-2012, 10:30 AM
Good points. Leasing isn't for everyone. It can be an option for those who own their own business, as the payments may be deducted as an expense, as well as a portion of the miles and maintenance if used for business. True, you are only paying for the depreciating value of the car and not equity, but if you own your own business, that is just fine (no Obama). Best to talk to your accountant to see if leasing is the best option for your particular situation.

You are correct. Leasing is not for everyone. I have leased cars in the past (this will be my 4th), but have also owned 3 cars either through cash purhcase or 0% finance.

We looked at the options, our budget, what we wanted, what money we could dish out, etc etc... and this makes sense for us - especially for this class of vehicle. If I was looking at something like a Hyundai Accent or other small commuter I would have considered financing since most are offering 0% for up to 8 years.

Either way...If the financing was offering 0% or 0.9, it would be a no brainer for me. Our last car was 0% for 3 years (could have gone for 5 years too) and at the time that was a route that worked for us.

thomashenry
06-12-2012, 10:32 AM
[QUOTE=BillReilly;898210671]The other issues is the gap between the schedule value of the care and the book value. If you total a leased car, you are responsible to the leasing company for the schedule value of the vehicle. This is part of your lease contract. Let's say you have a three year lease on a $20,000 car. The residual was set at $10,000. After year one, the schedule value of the car is ~$17,000. The book value, however, is ~$14,000. When you total it, the insurance company pays the $14,000 and you are on the hook for the other $3,000.

No offense there Bill, But this is right in my wheelhouse, since I have been a salesman and Mgr in the Car Business for over 25 years, Ford not anything else though, I do know with Ford, ANY lease throughout the United States automatically comes with Gap insurance {it`s already built into any payment quote} to actually prevent the scenario you described, in fact you cannot Lease a vehicle from Ford without it, it is a Protection for Ford as well as the Customer-----Again I cannot speak to other Lenders insofar as leasing however I would be suprised if anyone left a Dealers Lot without it, thats my 2 cents and again not trying to start anything, I own a Ford, sell Fords, have stock in Ford, wouldn`t think of ever owning a Foreign Car other than a FERRARI :}-----To each his own though

tsoden
06-12-2012, 10:32 AM
We "could" all ignore the elephant in the room (no, I am not the elephant:)), but in this case, I could not remain quiet. :)

Normally I would not be in support of a lease either, but in this case, I chose to address the more alarming of the two issues. :D

Never had a need for a sports car - especially with a young toddler in tow... maybe when I hit my midlife crisis i'll look at a "real man's" car.

Phattso
06-12-2012, 10:36 AM
You are correct. Leasing is not for everyone. I have leased cars in the past (this will be my 4th), but have also owned 3 cars either through cash purhcase or 0% finance.

We looked at the options, our budget, what we wanted, what money we could dish out, etc etc... and this makes sense for us - especially for this class of vehicle. If I was looking at something like a Hyundai Accent or other small commuter I would have considered financing since most are offering 0% for up to 8 years.

Either way...If the financing was offering 0% or 0.9, it would be a no brainer for me. Our last car was 0% for 3 years (could have gone for 5 years too) and at the time that was a route that worked for us.

That is another good point. If the dealer or manufacturer is offering a promotional deal, then it is usually better for the consumer than otherwise.

BillReilly
06-12-2012, 10:38 AM
No offense there Bill, But this is right in my wheelhouse, since I have been a salesman and Mgr in the Car Business for over 25 years, Ford not anything else though, I do know with Ford, ANY lease throughout the United States automatically comes with Gap insurance {it`s already built into any payment quote} to actually prevent the scenario you described, in fact you cannot Lease a vehicle from Ford without it, it is a Protection for Ford as well as the Customer-----Again I cannot speak to other Lenders insofar as leasing however I would be suprised if anyone left a Dealers Lot without it, thats my 2 cents and again not trying to start anything, I own a Ford, sell Fords, have stock in Ford, wouldn`t think of ever owning a Foreign Car other than a FERRARI :}-----To each his own though

It has been forever since I looked at a lease. As I was typing I wondered if it was still true. All it would take is one sad sack to get stuck with a big bill for the regulators to come rushing in. It probably makes sense for the car companies to supervise it. I bet they all do it now, if your folks do it. Thanks for setting me straight.

flairon
06-12-2012, 10:41 AM
Good points. Leasing isn't for everyone. It can be an option for those who own their own business, as the payments may be deducted as an expense, as well as a portion of the miles and maintenance if used for business. True, you are only paying for the depreciating value of the car and not equity, but if you own your own business, that is just fine (no Obama). Best to talk to your accountant to see if leasing is the best option for your particular situation.

Yes, I could see it being something for a business owner who needs to maintain an image or needs a certain type of vehicle and they want a vehicle with a rock solid maint. plan for the times when it does break down and the like and could treat it like a business asset for tax purposes to offset the costs. But for me..nah. I've got a truck I just paid off, it runs fine, looks half decent and most important (to me anyway) All I have to pay for is insurance. The other half talked about getting a new truck to replace it, but why would I want to take on payments i just got out from under to replace a vehicle that runs just fine. I've already told her I'm driving this thing until there's nothing but seats and a steering wheel left :)

thomashenry
06-12-2012, 10:47 AM
It has been forever since I looked at a lease. As I was typing I wondered if it was still true. All it would take is one sad sack to get stuck with a big bill for the regulators to come rushing in. It probably makes sense for the car companies to supervise it. I bet they all do it now, if your folks do it. Thanks for setting me straight. NO Problem

tsoden
06-12-2012, 10:53 AM
Yes, I could see it being something for a business owner who needs to maintain an image or needs a certain type of vehicle and they want a vehicle with a rock solid maint. plan for the times when it does break down and the like and could treat it like a business asset for tax purposes to offset the costs. But for me..nah. I've got a truck I just paid off, it runs fine, looks half decent and most important (to me anyway) All I have to pay for is insurance. The other half talked about getting a new truck to replace it, but why would I want to take on payments i just got out from under to replace a vehicle that runs just fine. I've already told her I'm driving this thing until there's nothing but seats and a steering wheel left :)

we plan to do that with our other car. It is paid off too.

tsoden
06-12-2012, 10:57 AM
That is another good point. If the dealer or manufacturer is offering a promotional deal, then it is usually better for the consumer than otherwise.

That is the thing... this is a promotion, as I have never seen this for leasing before:

0.9% for 36 months on a lease (Normally toyota is a 4 year lease)

Finance would have to be 5 years to get the payments around the same at 4.9%

The finance promotion is 1.9% but only for 36 months too... and at such a small term the payments are really high.

flairon
06-12-2012, 11:25 AM
we plan to do that with our other car. It is paid off too.

My vehicle is a pickup. I don't know how it is up where you are, but down here if you have a truck that runs and has a bed that will haul stuff, unless that truck is completely beat up getting $2k even on something like craigslist doesnt even require effort

Frnkd
06-12-2012, 11:36 AM
[QUOTE=BillReilly;898210671]The other issues is the gap between the schedule value of the care and the book value. If you total a leased car, you are responsible to the leasing company for the schedule value of the vehicle. This is part of your lease contract. Let's say you have a three year lease on a $20,000 car. The residual was set at $10,000. After year one, the schedule value of the car is ~$17,000. The book value, however, is ~$14,000. When you total it, the insurance company pays the $14,000 and you are on the hook for the other $3,000.

No offense there Bill, But this is right in my wheelhouse, since I have been a salesman and Mgr in the Car Business for over 25 years, Ford not anything else though, I do know with Ford, ANY lease throughout the United States automatically comes with Gap insurance {it`s already built into any payment quote} to actually prevent the scenario you described, in fact you cannot Lease a vehicle from Ford without it, it is a Protection for Ford as well as the Customer-----Again I cannot speak to other Lenders insofar as leasing however I would be suprised if anyone left a Dealers Lot without it, thats my 2 cents and again not trying to start anything, I own a Ford, sell Fords, have stock in Ford, wouldn`t think of ever owning a Foreign Car other than a FERRARI :}-----To each his own though

Yup, gap insurance, that was the only way I was okay with the lease i had with my accord a few years ago. As I had the same question that was being posed, the difference in cost if the car was totaled, would I have to make it up.

too, it was part of the lease, of coures, not a choice on our part to make.

Brackneyc
06-12-2012, 12:03 PM
Never had a need for a sports car - especially with a young toddler in tow... maybe when I hit my midlife crisis i'll look at a "real man's" car.


LOL.You know I'm just busting chops. FWIW, I now have the car I have wanted since I was about 8 years old. Midlife crisis...no. Finally have the money..Yes. :)

thomashenry
06-12-2012, 12:12 PM
Just an FYI for ANYONE who needs info & or help,, NADA,KBB, Black Book, trade or retail Realistic Prices, carfax, Payment info on anything, also lease info or incentives on any Ford Product regardless of State or service issues------- I may be able to help so Feel free to PM me and ask away

BillReilly
06-12-2012, 12:48 PM
My vehicle is a pickup. I don't know how it is up where you are, but down here if you have a truck that runs and has a bed that will haul stuff, unless that truck is completely beat up getting $2k even on something like craigslist doesnt even require effort

This. I bought a Mazda pickup in 2001. It was the classic impulse buy. I needed a ride and it looked cool sitting on ramps. It is 4x4 and was decked out to look like it was climbing the ramps. The dealer had a million of them and it was the end of the month. I got a great deal, which sealed it. My plan was to ride it until I got bored and trade it in before I beat it up.

Here I am 11 years later and the thing has a street value of $4500, maybe more. That's what I was offered by a dealer if I traded in for something new. I'm stunned by it, but that's the rule for pickup trucks. As long as you take care of them and it is a respected model, they are never worth zero.

2nd_chance
06-12-2012, 12:51 PM
It's a Prius...and are we really discussing a Prius. :DIt's a question mark not a period :D

WoofieNugget
06-12-2012, 01:29 PM
It's a Prius...and are we really discussing a Prius. :D

Teen misc: What's a Prius?

Regular Misc: Bahahaha you beta. Negged.

Female Misc: Did you get it in silver?

Over 35 Misc: COOL!

Brackneyc
06-12-2012, 01:32 PM
It's a question mark not a period :D

Well, maybe I don't use my question marks as haphazardly as you do.


:D

mtpockets
06-12-2012, 02:00 PM
Good luck with your new lease, toyota makes a good vehicle.

tsoden
06-13-2012, 05:44 AM
Good luck with your new lease, toyota makes a good vehicle.

Thanks Brutha... We had a few Toyota's in the past and they have always been highly dependable... the only issue was when parts were needed, they were typically pretty costly.