BEWARE! VERY low residual value (depreciation) creates HIGH lease payments!

[jamesfg]

I go through vehicles like socks and have been considering leasing myself for that reason. But my lame understanding is restore it back to original and trading it in is no different than a traditional loan. I heard you should never go to term and give it to the lease holder to avoid crazy penalties

I can only speak of CCAP leases. If you pony up for let's say.....a 36 month lease and at month 30 you want to trade it in, your going to have to pay for those 6 months you didn't fulfill the lease terms, an early term fee and the residual value. I leased one vehicle just to get my DTI down to buy my 1st house. I took it in the shorts after 1 2 months when I went to unload the vehicle.

I modify pretty much all of my vehicles so I'm not a good candidate to lease. You mentioned restoring the truck to original condition. That's great but consider your going to have to store those parts and then reinstall 'em.

Except for the fiasco with my wife's '17 Cummings we usually keep our cars for a good amount of time. In addition, I pay more than my payment each month, have paid off 3 over the last 10 years and have a good amount of equity to roll in to a new vehicle when we go that route. Add to that I'm beyond fortunate to work for Chrysler to get employee pricing.

So it all comes down to each individual situation and consider how much car you can afford, how long will you keep it, will you modify it. Yes owning a vehicle can be classified as investing in a depreciating asset but if you hold onto your car, at some point down the road the depreciation will tip to your favor. Since I'm in the auto finance industry, I always suggest to my friends/fam to refi whenever the interest rates tip to your favor but don't extend the term.

A lease is a lease, you are renting the car from the finance company. At the end of the lease, you will have no equity in the vehicle and you gotta turn it in. Now keeping that in mind, Chrysler usually has a generous rebate for returning lease customers, from what I remember off the top of my head it's like 2 or 3k (depending on your geographical location) so that does come into play.

I hope I didn't confuse the beejezus out of you.

 

[Blazn]

. If you pony up for let's say.....a 36 month lease and at month 30 you want to trade it in, your going to have to pay for those 6 months you didn't fulfill the lease terms, an early term fee and the residual value.

I hope I didn't confuse the beejezus out of you.

So the remainder owed on lease term + residual and the early termination fee = x . If you can sell or trade in to private, dealer or someone like CarMax for ( ± X ) IAW NADA or KBB, you would have a positive or negative equity (like value)...in the same fashion as a car that you're paying on with a regular loan?

If this is correct then it's a way to roll in equity to the next purchase... hopefully positive...and wouldn't doing this eliminate getting wrecked by returning the vehicle to the lessor/bank?

I think I'm following...but I'll let you judge that on how idiotic this reply is or isnt. I do appreciate you taking the time time to explain this to me

 

[alacombe]

I can't imagine why anyone would ever want to lease a vehicle for personal use.

Many reasons....

 

[alacombe]

Im confused. This is on the ram trucks site. It clearly states $3149 due at lease signing. Just for the “priveledge” of being able to lease.

You do not need to put any money down to lease a 19 Ram.

 

[jamesfg]

You are correct about "X", you hit the nail on the head.

I've been in the auto finance industry for 17 years. Working for Chase, Wells Fargo, Americredit (aka GM financial) and now CCAP, I can state that I personally have never seen a end of term lease where the car is worth more than the residual. I can be wrong, someone else would have to chime in on that.

Real world example, my daughter's BF leased a Jetta before VW's rep took a hit. He's got 16 payments left @ $300/m but his residual is $12,500 and >>>current<<< KBB for the car is in the low $9,000 range. He can't get out of that lease (unless he has a hefty down payment), even with me getting him Chrysler employee pricing. He's gotta ride it til the end and turn it in. I'm assured the value is going to still plummet over the next 16 months.

There is no idiotic statements, you are unsure of what path to take. The idiot is a person who completely ignores the advice, goes against the grain then cries wolf. Since I've been doing this pretty much my entire adult life, I enjoy helping others out so they have knowledge during the purchase process.

A vehicle purchase/lease is arguably the 2nd largest financial purchase you can make. It behooves me that 90% of people go into the purchase of a vehicle blindly and fail to make educated decisions before setting foot on the lot. Research the reliability factor of the vehicle you are considering. Next is to qualify/obtain your own financing and not relying on the dealer to do that for you. Negotiate price not payment is another big mistake. The dealership's F&I department makes points on your loan for the dealership's profit margin. I can explain that in detail if your interested. Never, never, never buy any extended warranty, GAP or maintenance plans from the dealer. Not only are they grossly inflated, your paying interest on those add on items. On our Rebel purchase, we got pre-qualified thru our credit union at 4.49%, so when the dealer hit me at 6.99% I told them that I was pre-qualified thru our credit union so they could either run it thru them at that rate or I could go down there and get the check and be back in 24 hours. You are never going to not buy a car and the dealership not turn some sort of profit I mean they got a big building to pay for along with staff, utilities, etc. The best you can do is get them as low as possible to a price point where you feel your coming out on top.

I sincerely hope this helps. Any other questions I can help ya out with?

 

[Blazn]

Real world example, my daughter's BF leased a Jetta before VW's rep took a hit. He's got 16 payments left @ $300/m but his residual is $12,500 and >>>current<<< KBB for the car is in the low $9,000 range. He can't get out of that lease (unless he has a hefty down payment), even with me getting him Chrysler employee pricing. He's gotta ride it til the end and turn it in. I'm assured the value is going to still plummet over the next 16 months.

The dealership's F&I department makes points on your loan for the dealership's profit margin. I can explain that in detail if your interested. Never, never, never buy any extended warranty, GAP or maintenance plans from the dealer. Not only are they grossly inflated, your paying interest on those add on items.

I sincerely hope this helps. Any other questions I can help ya out with?

So this young man essentially would need to sell at KBB and fork over $8,300 to walk away from the vehicle tomorrow? Or that plus what ever down going into a new vehicle. And you mentioned sometimes you can get a returning customer credit up to $3K to eat up a portion of that $8.3K short fall.

I'm very curious on your comment specifically on gap? I was under the impression that was essential.

These points for the dealership...how's that affect buyers? I feel like the difference between leasing and making a minimal payment on a traditional loan are not too different in many aspects.

Thanks for sharing I'm do appreciate your time!

 

[ponypride]

Wow... I’ve had good experiences with bothFord Motor Credit and Acura Financial Services. This makes me want to check out other finance company alternatives. Any good ideas?

If you use other finance options you will lose any rebates associated with the financing.

 

[ponypride]

"James for" is spot on. I have always bought my vehicles, primarily because of the cost to get out of the lease. Prime example is as follows. I bought a Honda sedan. I test drove it and loved it. After taking it for a few long trips, the car was very uncomfortable to the point where my back would be very sore. I am trading it for a more comfortable vehicle. Being only 2 years old I went out and was able to negotiate a good trade price. If it was a lease, I would have lost the monies paid upfront and be responsible for the lease payments unless I folded it into another lease. Thus you keep leasing for life. The key is to buy the car you can afford.

 

[Spe1996]

That is not true it depends very much on the manufacturer. BMW ie is known to heavily inflate residuals to lower payments use multiple security deposits instead of down payments if you are over miles use their discounted mileage adjustment program and lease works great. But not every manufacturer has programs like that and lease works better for some than others...

I can second that about BMW's. I leased a 328ix prior to the Jeep I have now. I looked to see the BMW had any positive equity 2 months before the end off lease. If there is positive equity in a lease you hold you can sell it and pocket the money. The buy out was 26k and change and the kbb was 19k. I looked online at some of the used car site to confirm the going rate. I happily turned that car back into BMW at the end of the lease.

 

[BostonBlueRam]

I can't imagine why anyone would ever want to lease a vehicle for personal use.

If you own a business, you get a bigger write off on the lease payments then you would with maintenance and service receipts on a owned vehicle..

 

[BostonBlueRam]

You can turn the vehicle in to any dealer you please... If your dealer is trying to rake you over the coals, then go to another one.

Oh interesting. I was told from one dealer then the lease has to come back to the same place. Are you sure you can return a lease to any dealership ?

 

[jscoc]

Oh interesting. I was told from one dealer then the lease has to come back to the same place. Are you sure you can return a lease to any dealership ?

You can return a lease to any dealer even if you purchase from a different car company, the next dealer you buy from will return the car to were it has to go, I've had only one issue and that was returning my girlfriend's Ford, that had to be returned to a Ford dealership, when she purchased her kia but when we got rid of that and traded that in for a jeep, the dealership took care of the lease return.

 

[jamesfg]

The reason I say dont buy the dealers add ons is because you can get that on your own. The dealer quoted me $14 a month for GAP on my Charger. I declined their GAP and got GAP thru Liberty Mutual (my insurance co) at $7.50 a month. It's just not good financial sense to finance add on products.

 

[Blazn]

So much good information here! Y'all are awesome

 

[Deleted member 85]

FYI guys -

Leasing was one the major contributors to Chrysler's bankruptcy, as they, and everyone else, residualized their vehicles way too high, and took a loss on every unit that came back in after the lease, As such - they are still very much wusses about putting reasonable residual values on their vehicles as a way to cover their ***. Us Canadians just got a 2nd-Party lease company (SCI) this year, and they are horrendous. I've done maybe 5 lease deals this year through them. The only reason those even existed was due to a client being coached by a lazy accountant to lease so it's easier for the accountant to write-off (yes, you can write-off finance too guys... accountants just don't like doing it). Their loss at the 6%+ lease rate and 50% residuals.

 

[habu987]

I posted on the Edmunds forum asking about the August figures in the DC area for a Longhorn at 36 months/12k miles and 36 months/15k miles, and the same for Limited:

• Longhorn: .00107 MF, 53% and 51% residuals
• Limited: .00134 MF, 55% and 53% residuals

Wasn't for my zip code, but recent posts showed a 57% residual for both a Big Horn and a Laramie at 36/12.

Kinda bummed that the Longhorn has the lowest residuals of the lineup...

 

[habu987]

The high end trucks always have a lower residual... Look at high end cars, you think that Mercedes S-Class really has the residual Mercedes says it does in a lease? It doesn't.

Oh, I know. I was just disappointed that out of the Ram lineup, the Longhorn has the lowest residual, lower than the trims below and above it.