Good information. Thanks for taking the time to post.-:smileup:
Leasing a vehicle - the basics
So we are entering the complex world of leasing.
Its a bit difficult to put in words the entire process, but I'll do my best.
Initially, negotiating a lease is very much like buying a car. The price you pay per month is based on a number of factors, the main factors are listed below.
1.) Price of the vehicle, this can be negotiated much the same as you can when buying.
2.) The vehicle residual value at the end of the lease.
3.) Taxes and fees included or paid upfront.
4.) Incentives/Rebates.
5.) Mileage
So if you were to lease a JCDR product, a Wrangler would be a good example of a vehicle with a high residual value, these vehicles are excellent at holding value.
What to do First
You should establish the price of the vehicle, this would be the initial hurdle. After that you want to look at the taxes and fees.
An example of taxes and fees would be: 1st Month payment, Dealer Fees, Bank Fee (if applicable), DMV Fees and taxes. an average amount would be around the $3,000-$3,500 mark.
Personally, I would recommend paying taxes and fees upfront, this way you aren't paying interest on tax, if you choose to roll it into the payment.
It may be a large initial cost, but it is cheaper in the long term.
Capital Cost Reduction
Another thing you can do to reduce a monthly payment, is to add more money as a down payment, this is called capital cost reduction.
When leasing a vehicle, I would recommend putting little or no capital cost reduction down. The reason for this, is that if you total the vehicle, you will not get that money back.
Mileage also plays a big factor in your monthly lease cost, the higher the mileage, the less valuable the vehicle will be at the end of the lease term.
Rebates/Incentives
Rebates/incentives are always better when leasing a vehicle, again this helps shave down the price of the vehicle. A recent example would be a Durango, the rebates on a 14 Durango lease were $9,000.
If you have a JCDR lease in the household or a competition lease in the household, Chrysler offer a $1,000 loyalty or conquest rebate.
Lease programs change on a monthly basis, so make sure you look at the
expiry dates on the rebates you are given.
Equity in a current lease
Another thing which should be done by the dealer is appraising your current lease vehicle, it doesn't matter what the make or model is.
The reason for this is that there may be equity in the vehicle you are leasing. If a dealer appraises your vehicle for $30,000 and the bank offers them to buy it for $28,000, guess who has just got an extra $2,000 to go towards your new lease!!
This isn't always the case though, Nissan is an example of a vehicle with very low residual value, it is very difficult to get positive equity on a Nissan product.
Lease quotes are always based on a tier 1 credit rating, if your credit is bad, expect the price to change when the finance guy runs your credit.
Returning a lease
If only returning a lease was as simple as handing in a set of keys.
Many factors can affect your final payment when you finally hand in your lease.
Mileage: Mileage can cause you all sorts of headaches if you go over your contracted allowance. In most cases the excess mileage fee is $0.25 per mile, that's $250 for every 1,000 miles over, it soon adds up. If you are way over on mileage, it would certainly be in your interest for the dealer to purchase the vehicle. It may cost you a little more, but it is almost certainly better than paying a large excess mileage fee. The largest I have seen is $7020 for a Hyundai Veracruz, which we bought for the customer. We ended up rolling in $1350 into her payments, so she was way better off switching.
Disposition Fee: This is a fee that the bank requires you to pay when you finish a lease, it is usually written into your contract and is typically $350-400. The fee can be waived if you use the same bank for your next lease or again, if the dealership buys the vehicle.
Excess wear & tear: minor scratches etc. are viewed as normal, an unofficial rule is that if a credit card can cover it, it is usually ok. tires which are down to the cord are classed as excessive, so are dents. The banks estimated cost to repair these is always way over inflated.
Modifications: Mods are not allowed when you lease a vehicle. If you do modify your car, it must be put back to OEM standard prior to handing it in. Unfortunately, you wouldn't be doing anyone any favors by letting them keep your expensive mods, a dealership cannot certify a pre-owned car that have been modified.
An important bit to remember: When you sign for your car, you usually sign a warranty disclosure, which states that you will maintain the car in accordance to the manufacturers specification in order to maintain the warranty. Many people do not have the car serviced when they lease, they just have the oil changes done. I have seen more than a few cases where the bank has sent a customer a huge bill for excessive wear and tear for not having the vehicle serviced at the suggested intervals.
That is the basics of leasing really. It all makes sense in my mind, because I do it all the time. If you have any questions, please feel free to ask.
On a side note, always ask to see the dealer disclosure for your lease, this will show the mark up on the vehicle. That way you will know if you got a good deal or not.
Its a bit difficult to put in words the entire process, but I'll do my best.
Initially, negotiating a lease is very much like buying a car. The price you pay per month is based on a number of factors, the main factors are listed below.
1.) Price of the vehicle, this can be negotiated much the same as you can when buying.
2.) The vehicle residual value at the end of the lease.
3.) Taxes and fees included or paid upfront.
4.) Incentives/Rebates.
5.) Mileage
So if you were to lease a JCDR product, a Wrangler would be a good example of a vehicle with a high residual value, these vehicles are excellent at holding value.
What to do First
You should establish the price of the vehicle, this would be the initial hurdle. After that you want to look at the taxes and fees.
An example of taxes and fees would be: 1st Month payment, Dealer Fees, Bank Fee (if applicable), DMV Fees and taxes. an average amount would be around the $3,000-$3,500 mark.
Personally, I would recommend paying taxes and fees upfront, this way you aren't paying interest on tax, if you choose to roll it into the payment.
It may be a large initial cost, but it is cheaper in the long term.
Capital Cost Reduction
Another thing you can do to reduce a monthly payment, is to add more money as a down payment, this is called capital cost reduction.
When leasing a vehicle, I would recommend putting little or no capital cost reduction down. The reason for this, is that if you total the vehicle, you will not get that money back.
Mileage also plays a big factor in your monthly lease cost, the higher the mileage, the less valuable the vehicle will be at the end of the lease term.
Rebates/Incentives
Rebates/incentives are always better when leasing a vehicle, again this helps shave down the price of the vehicle. A recent example would be a Durango, the rebates on a 14 Durango lease were $9,000.
If you have a JCDR lease in the household or a competition lease in the household, Chrysler offer a $1,000 loyalty or conquest rebate.
Lease programs change on a monthly basis, so make sure you look at the
expiry dates on the rebates you are given.
Equity in a current lease
Another thing which should be done by the dealer is appraising your current lease vehicle, it doesn't matter what the make or model is.
The reason for this is that there may be equity in the vehicle you are leasing. If a dealer appraises your vehicle for $30,000 and the bank offers them to buy it for $28,000, guess who has just got an extra $2,000 to go towards your new lease!!
This isn't always the case though, Nissan is an example of a vehicle with very low residual value, it is very difficult to get positive equity on a Nissan product.
Lease quotes are always based on a tier 1 credit rating, if your credit is bad, expect the price to change when the finance guy runs your credit.
Returning a lease
If only returning a lease was as simple as handing in a set of keys.
Many factors can affect your final payment when you finally hand in your lease.
Mileage: Mileage can cause you all sorts of headaches if you go over your contracted allowance. In most cases the excess mileage fee is $0.25 per mile, that's $250 for every 1,000 miles over, it soon adds up. If you are way over on mileage, it would certainly be in your interest for the dealer to purchase the vehicle. It may cost you a little more, but it is almost certainly better than paying a large excess mileage fee. The largest I have seen is $7020 for a Hyundai Veracruz, which we bought for the customer. We ended up rolling in $1350 into her payments, so she was way better off switching.
Disposition Fee: This is a fee that the bank requires you to pay when you finish a lease, it is usually written into your contract and is typically $350-400. The fee can be waived if you use the same bank for your next lease or again, if the dealership buys the vehicle.
Excess wear & tear: minor scratches etc. are viewed as normal, an unofficial rule is that if a credit card can cover it, it is usually ok. tires which are down to the cord are classed as excessive, so are dents. The banks estimated cost to repair these is always way over inflated.
Modifications: Mods are not allowed when you lease a vehicle. If you do modify your car, it must be put back to OEM standard prior to handing it in. Unfortunately, you wouldn't be doing anyone any favors by letting them keep your expensive mods, a dealership cannot certify a pre-owned car that have been modified.
An important bit to remember: When you sign for your car, you usually sign a warranty disclosure, which states that you will maintain the car in accordance to the manufacturers specification in order to maintain the warranty. Many people do not have the car serviced when they lease, they just have the oil changes done. I have seen more than a few cases where the bank has sent a customer a huge bill for excessive wear and tear for not having the vehicle serviced at the suggested intervals.
That is the basics of leasing really. It all makes sense in my mind, because I do it all the time. If you have any questions, please feel free to ask.
On a side note, always ask to see the dealer disclosure for your lease, this will show the mark up on the vehicle. That way you will know if you got a good deal or not.
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I'm surprised with the Lexus, some of them have residuals in the 60+%
I did a Wrangler the other day and managed to scrape $147.24 for a customer. Every bit counts eh?
That's a great idea on the lease returns, I've edited the original post and put it in there. Thanks for the great input, it only makes these guides better for us all.
I certainly owe you some rep point for that!
1 - 5 of 5 Posts
