Quick question about car leases

[The DaveR]

So, thinking about car leases, it seems that the lease payments should approximately equal the depreciation of the car over the term of the lease. That is to say, all else equal, a car that depreciates less should have smaller lease payments. Yes?

[Evan]

OMG YOU'RE MOVING TO CLEVELAND?!?!

[swede123]

No. While this might seem intuitive the lease arrangements are also based on demand for said vehicle. Typically a Honda/Toyota type with higher resale value is also going to be in higher demand due to being more reliable, safer etc. and the lease payments will if anything be higher than those of an American clunker.

Swede

[bobman0330]

Sounds right to me. Theoretically speaking,

Current cost of car (plus profit margin and other expenses) = Present value of lease payments + present value of residual value of car

So, increasing the second term should decrease your lease payments.

[The DaveR]

[ QUOTE ]
No. While this might seem intuitive the lease arrangements are also based on demand for said vehicle. Typically a Honda/Toyota type with higher resale value is also going to be in higher demand due to being more reliable, safer etc. and the lease payments will if anything be higher than those of an American clunker.

Swede

[/ QUOTE ]

Right. Brings me to Part II. Are Hondas popular in Ohio?

[BWebb]

Surprisingly, while doing my research on getting a new car I found the following site at Costco that has been very helpful:

Link


I have a question about leasing and don't think it requires a new thread so I will throw it in here:

When leases say $x,xxx due at signing, can this amount be in the form of a trade-in or is cash required?

[RacersEdge]

Yes, but there is another component - you are paying interesting on the value of the car. So a slower depreciating car has a higher average value over the lease and therefore a higher carrying cost.

Basically, there are 2 componets in the lease - one gets largr the other smaller as depreciation is less. Overall, a slower depreciating car is cheaper to lease all else being the same.

[MtSmalls]

For a lease you are buying (and financing) a portion of the cost of the car. Take the purchase price (something you should actually set, based on negotiations before even talking about leasing) less the "residual value". This is the part you are paying for financing. Take the purchase price, monthly payment, residual value and number of months in the lease, and you can figure out the "interest rate" you are being charged. It should not be outrageous, but many are, as car dealers are slimy that way.

Make sure you understand and negotiate the following points:
Number of miles per year: Many low payment leases are for just 10k to 12k miles per year, and many people put way more miles on them than that (15K is on the low end of average, depending on the area you live in). The overage is something like 10-15 cents per mile. So if your lease was for 24K over two years and you actually put 30K, they would charge you another $600 at the end of the lease.

Insurance: Insurance for leased vehicles is higher in many states, as you don't own the car, the auto financing company does (moreso than just a loan). They will typically force you to carry higher limits (300K accidental death) than state minimums.

End of lease: This is where many of the dealers will try to SCREW you. They will look for every ding and dent and every worn tire to charge you for "excessive wear". Make sure you are there for the final inspection and photo/document the condition of the car. Trust me on this one (and yes, I'm very bitter about it).

Due at Signing: This can be in the form of cash or trade, at least theoretically. Check with the individual dealer. Limit your principal buy down amount, if at all possible. This will usually result in higher monthly payments, but if you are going to buy down the purchase price, buy don't lease.

[The DaveR]

[ QUOTE ]
Yes, but there is another component - you are paying interesting on the value of the car. So a slower depreciating car has a higher average value over the lease and therefore a higher carrying cost.

Basically, there are 2 componets in the lease - one gets largr the other smaller as depreciation is less. Overall, a slower depreciating car is cheaper to lease all else being the same.

[/ QUOTE ]
Excellent point. Thanks.

[MaxPower]

Whatever you do, never answer the question, "What are you wiling to pay per month?"

When they ask you whether you want to buy or lease say that you don't know yet.

Negotiate the price of the car first and then talk about the lease terms.

Use your poker skills, you don't want to give away any information that they can use against you. Also if they give you a hard time and are tyring to screw you, just take their offer to another dealer. Even if you go back to the same dealer again, they will not turn you away. You really have all of the power.

I recommend Edmunds.com. They have a lot of good info.