Explain leases to me

[92se-r]

How do they come up with the interest rate and how does that factor into the payments? What is the effect of putting a down payment? What is the money factor? Thanks.

[DeeZee]

Originally Posted by 92se-r

How do they come up with the interest rate and how does that factor into the payments? What is the effect of putting a down payment? What is the money factor? Thanks.

what kind of lease Operating, Capital or

What are you trying to lease?

[bikeadict]

If you are talking about a car... as I understand it... leases are a complex and confusing way for a dealership to steal your money..

[speckledtrout]

i think the interest rate varies significantly based on the manufacturer and your credit rating. Typically the rates are a little higher for a lease than if you are financing to buy your car.

I am a shallow person who gets bored with my car. I have both bought and leased cars and can see the pros and cons of each. I tend to pay off a car and immediately hop into something new so leasing is actually not a bad idea for me. If, however, you are the type of person who wants to buy a car, pay it off and then take advantage of not having a payment until the car croaks, then leasing is not for you.

A lease means lower payments, fixed mileage (typically 12,000 miles a year) and slightly higher insurance rates as the car requires a higher amount of coverage.

Does this help?

[Evil Chocula]

Typically, leasing makes the most sense if:

1) You drive <12,000 miles per year
2) Buy a new car every 2-3 years

If you're going to compare a lease to purchasing, you have to be planning on trading the car in 3 years in order for it to make financial sense. By leasing, you remove yourself from the risk/hassle of trade in. You should also factor in the historical resale value of the vehicle, and the forcasted resale.

On the flip side, leasing is alot less expensive than purchasing, so it may make the most sense for your cash flow to lease, even if you don't meet the two parameters above.

[ArrrKelly]

Yea if you think you're a good candidate to lease a car, negotiate every point and come out a winner.

Negotiate lowest down payment (makes no sense to put $$ down on a lease)
Lowest monthly payment (if they say $399 you say $299)
Mileage allowed
Residual price at the end of the lease
Am I missing anything else?

Some people hate buying cars, but I love buying cars. You gotta turn it around on the dealership and take control. Be an a$$hole. Lowball those guys on every negotiation point and stick to your guns. Don't listen to them when they say "oh we cant do that" or "that's below our invoice." If you dont get what you want walk away and see how fast they come running after you to save the deal.

Don't even think about trading in your car if you're trying to get a good deal.

[Rkoa63]

I've leased three cars over the 10 years and each time I seem to do better and better on my payments. Here are a few things to remember before you go in:

1) When they quote you a monthly payment for the car, it DOES NOT include the sales tax. For example, if they say your payment is $300, you will get a payment stub for $323.25 ($300 x 1.0775 (7.75% is the rate where I live)) So I usually tell them I want to see the payment INCLUDING the tax.

2) You can negotiate lease payments; many people think that since it's a lease there is no room for negotiation. When I bought my Accord the dealership had an advertisement saying, $279 a month (not including tax) with $2500 down. I walked out of there paying $259 (including tax) with $0 down.

3) If you have good credit you do not have to put money down. Many dealerships say you have to put money down because its a lease, which is total BS.

4) When you lease, they don't give you an interest rate. They give you something called the money factor. Which is essentially the same thing (just one more thing they throw at you to try to confuse you). To calculate the interest rate from the money factor, just mutiply by 2400. For example, a money factor of .0025 = an interest rate of about 6% (.0025 * 2400 = 6)

5) Once you negotiate a price with a dealership, try to get the quote in writing. Then go home, get on the internet, and call the internet managers from all the other dealerships in the area. Tell them what you've got and ask if they can beat it. They will always tell you they can, so once again, get it in writing by fax or email. I called one dealership about an hour from my house who said they could beat the price, so I told them I didn't want to drive an hour to get screwed so I made them fax me a letter signed by the manager saying, " This car with such and such features for a price of $XXX including tax, or a free tank of gas".

Here is a link to a site that gives some good info about leases and how to calculate payments.
http://www.edmunds.com/advice/leasin...1/article.html

It's probably easier for you to read that then a long winded response from me. Let me know if you have any other questions.

[SIK SD]

here is a sample lease formula:

Note-you can always multiply your money factor by 2400 to get your intrest rate

Example Calculation Using the Leasing Formula

Let's assume you've decided on 3-year (36 month term) lease of a Toyota Camry XLE that has a sticker price of $24,600 (MSRP).
You've managed to negotiate the price down to $23,000 (Cap Cost). You decide not to make a down payment, but you have a trade-in worth $5000. Your Net Cap Cost is therefore $23,000 - $5000 = $18,000Now, the dealer tells you (because you asked) that the Money Factor is .00375 (.00375 x 2400 = 9.0%) and the Residual Percentage is 60% of MSRP. So your Residual amount, in dollars, is .60 x $24,600 = $14,760
Now let's do the math:
Depreciation Fee = ( $18,000 – $14,760 ) ÷ 36 = $90.00
Finance Fee = ( $18,000 + $14,760 ) × .00375 = $122.85
Monthly Lease Payment = $90.00 + $122.85 = $212.85