Good Grief! We're leasing a car.

[ScreamingMeemie]

Tell me I'm not stupid...tell me, tell me, tell me please. We've never leased before, so I'm sick to my stomach a bit. We got hooked in by the Pacifica 24 month lease deal they've got going right now. The minivan's been acting up. We still owe on it, bought it brand new in 2000 and the trans dropped last summer and now it's making lifter noises. Even 3,000 mile, faithful, oil changes did not help the really loud noise. So, here we are. It's $175/month for 2 years, 15,000 allowable miles a year. So please tell me I'm not stupid, and if you think I'm stupid...please don't let me know....;) :hi: :puke:

[StopTheMorans]

1. you are the most intelligent DUer I've ever seen, why aren't you working

on a cure for cancer? :shrug: :D

[ScreamingMeemie]

6. I'm doing that in my spare time.

;) :hi:

[StopTheMorans]

11. really, what can't you do?

:D :hi:

[terrya]

8. I second StoptheMorans, Mrs. G

I've never leased a car...so, sorry, I can't say from personal experience.

But you're one of the smartest people on DU. Period. :-)

:hug: :hi:

T

[ScreamingMeemie]

23. Next to you Terry! Maybe...

You are too sweet to me. :loveya: :hi:

[AlCzervik]

2. I've leased 2x before with no complaints

you don't get your down pmt back but it's a good alternative. Just watch your miles.

[ScreamingMeemie]

9. We highballed the mileage. The minivan was averaging around

13,000 a year, so we decided to buy more miles. We're using the value left in the minivan-after a pretty good tug of war over price with the dealer- as the down payment...which sort of makes me sick, but I'm trying not to think about it. ;)

[AlCzervik]

12. I think you did all right, i leased through Nissan

and i did go a bit over the miles but it wasn't much when i got done. After i finsihed that lease i turned around and leased from Toyota and that worked out fine as well. I think you made a good choice.

[GOPisEvil]

3. As long as you treat your vehicles with care, and can stay under the

mileage limit, you should be OK.

But, please, please, please, read all the fine print! I don't want to be here 24 months from now reading how you got screwed. ;-) :hi:

[ScreamingMeemie]

10. We combed through it with my father, and it looks like a good deal.

My husband babies our cars which is why I was a little tiffed off over how much they wanted to give us in trade on the mini. They tried to say it was in "fair" condition, with a new set of wheels, new shocks and no major exterior blemishes. I came armed with a copy of the Kelly blue book value, and we did a little bit better. If I get screwed I'll try to keep my mouth shut. :7 :hi:

[burythehatchet]

4. Only need to ask yourself one question

what's you max annual mileage? Also, the condition of the vehicle upon termination, check that wording very closely.

[ScreamingMeemie]

18. 15,000 is what they're giving us. I average around 13,000. We're

getting it in writing that dings and scratches don't count. Also minor interior marks will not be charged against us. :hi:

[Kingshakabobo]

27. Dings and scratches should be covered by

"normal wear and tear". To be safe, I would recommend having anything major professionally repaired prior to turn-in because some banks will send out their own representative to go over the vehicle with a fine tooth comb. They use damage as an additional profit center if you turn the car in. It happened to my boyfriend with G.E. Capital and really pissed me off because I was in the business at the time. I DID get his $800 damage bill negotiated down to $400 but it was still a rip-off.

Sometimes you will get better customer care from a manufacturer leasing company like GM, Chrysler or Ford etc. because they are more interested in keeping you as a satisfied/repeat customer versus a bank that only wants the $$$$s.

[Enraged_Ape]

5. I'm almost done with my first lease

My parents always leased at least one car at a time, and they finally talked me into it.

The only disadvantage to leasing is that you lose your down payment and have no equity in the vehicle, but this to me is offset by: 1) the fact that you get to drive a newer vehicle than you otherwise would be able to afford and 2) the fact that when it comes to using your money to create equity, cars are the worst investment you could possibly make.

[hobbit709]

14. i don't consider "equity"

but when i pay it off, i have at least 6 years of no payments and low maintenance (maybe I'm lucky in buying Toyotas). I get about 200,000+ miles before I start spending more than what its worth.

[ScreamingMeemie]

17. This is what we were planning on doing with the minivan, but the trans

blew out and we had to pay to replace it while we were still making payments and now it's making awful sounding lifter noises. We were hoping to drive it for 10-15 years, but that doesn't look like it will happen at little or no maintenance cost to us. :hi:

[ScreamingMeemie]

15. Exactly. And I get so sick over it all. We're basically giving them

the minivan. :( But, it's a nice car on the inside.

[livinbella]

7. what is the 'down payment'?

175 a month is cheap driving
if there are no catches

[ScreamingMeemie]

13. It's the $4,000 they were "willing" to give us on our minivan. Minus

the $1900 we still owed...which works out to $2100. No catches that I can see. It's a huge deal Chrysler is doing to get rid of a non selling car. They're doing it with the Pacifica and the Durango. :hi:

[Kingshakabobo]

25. They give you these great deals by calculating the

residual value/end purchase price very high. The leasing company usually gets burned by sending the car to the "auction" unless you purchase the car at lease end.

[johnnie]

16. On my second lease

I leased an S-10 for three years and took it back with 14,000 miles..lol. It's as easy as taking back and handing them the keys when you are done.
I am leasing a Jeep Wrangler right now. As long as you watch miles it's a good thing in my opinion.

[ScreamingMeemie]

20. Thanks johnnie. I'm feeling better about it.

:hi:

[JPace]

19. There are advantages to owning and advantages to leasing,

I keep cars for a long time so prefer having those years of no
car payments over leasing. My car is ten years old and I've had 6
years now of no payments and the car has been very good so I've
had minimal problems Mechanically. Still one does not have the
confidence of reliability that one can have in a newer car and
if being seen in an old car bothers you that can be a factor.
I don't seem to have any pride when it comes to driving an old
car, just does not bother me.

[ScreamingMeemie]

22. I was hoping I would have the minvan for 10-15 years, but even

with meticulous maintenance, it doesn't seem to be happening. :( My car before that was a 1980 Cadillac, so being seen in an older car doesn't bother me. My dream car would be a mid 70's Caprice. My husband had one and it's the best car we ever owned. We just don't want a massive car payment right now and need a reliable car and this seemed like a good idea. Thanks so much for your input! :hi:

[Philostopher]

21. The only problem the Mr. had with his lease ...

was dramatic life changes that wound up with him way overmileage. He ended up paying about $21K for a $13K car, but it had absolutely nothing to do with anything but the fact that he lowballed the mileage on the lease and then ended up having to drive the car 100 miles round-trip a day for about a year. Because it was so far overmileage, he pretty much had to buy out the lease -- but he had no problems with leasing other than that, and we've discussed the possibility of doing it again now that we're pretty well settled and don't run up much mileage anymore and our other car is paid off and in decent condition. We figure even if things changed drastically, one of us would likely have fewer miles than the other to drive, so we could always trade off if we were locked in on a lease.

[Kingshakabobo]

24. Leasing is a great idea if you want to trade cars every

couple of years.

You run in to a problem if you want to get out early because the leasing company will include your remaining payments in your pay-off (residual lease end purchase price + remaining payments+ early termination fee = early pay-off). The result is, no benefit to turning it in early. Also, most people are severely "upside down" in the equity if they try to trade out early due to the fact that most people do not make a substantial down payment at lease inception.

Note on "down payments". Lease down payments a.k.a. "Capitalized cost reductions" are actually pre-payments of your monthly payment. You don't receive any discount in finance charges. A 5,000 down payment on a 24 month lease decreases your payment by 5,000 divided by 24 = 208 reduction in monthly payment.

It sounds like you had some equity in the car you traded and/or you put a substantial down payment in to the transaction to get to $175/mo x 24 mos.

The only drawback I see is that you wont have any equity on your next go-round and you may be in for some payment shock when you go to re-lease since you wont have a trade-in.

I usually don't recommend purchasing your lease car at lease end because the residual purchase price is usually above market and you can do better purchasing the same car off the used car lot. Also, most states double tax you. You pay taxes in your lease payment and then when you purchase it used from the leasing Co. Often, people do not follow this advice because they would rather purchase the car they have been driving and taking care of for the last 2 or three years and are willing to pay a premium.

In short, leases are great to drive for a couple years and dump but if you want to own it for the long run do a buy in the first place and save money.

Note: Leases ARE negotiable. Dealers will sometimes try to bamboozle a customer in to believing that the lease charge is set by the manufacturer. They used to get away with more shenanigans prior to the new "regulation Z" laws requiring the "purchase" price to be disclosed on the contract. Prior to the new laws, all you got to see was the monthly payment. A lot of kinky shit went on and still does to a lesser extent.

I spent 11 years in the business before I left the dark side. Feel free to ask me any questions.

[Sparkle]

26. I have never leased a car. Never looked into it.

What are the procedures?

[Kingshakabobo]

28. Similar to a purchase in that you negotiate you best deal on the car

before getting confused with the financing aspect of the transaction.
Leasing is a little tricky and foreign to most people so it is important that you try to separate the two aspects SO YOU DON'T GET HOSED.

Some mechanics of the transaction:

A lease payment is determined by how much the leasing co. determines you will depreciate their car while in your possession. The longer you lease and the more miles you use, the more depreciation. Also, they add their carry charges of owning the car for the term to your payments since they will purchase the car from the dealer at lease inception and lease it back to you.

For instance. Using round numbers:

You look at a car with a sticker of $25k. You negotiate a purchase price of $20k with discount and rebates. To that you add tax, title lic. registration, AND LEASE COMPANY "acquisition fee" of lets say $500. For a total of $22,500 this number is your bottom line on a regular finance deal. Normally, you would add your finance charges of say $4000 (i don't have my calculator so I'm using round numbers) for a total of $26,500 and divide by 60 mos. for conventional purchase payment of $441.

In a lease, they remove the "residual value" or the amount you DON"T depreciate the car from the total. Let's say the residual value/lease end purchase price of the $25k MSRP car is 50% or $12,500 in a 3 year lease. Take your $26,500 bottom line/capitalized cost number and remove $12,500 depreciation and you get your payment of $388 for 36 mos. Ford Motor used to have a slick advertising campaign called "Half a Car" or buy only what you use.

It is a lot like a balloon payment without the requirement of paying off the balloon. You have the option of walking away. Some companies offer balloon deals under the same parameters of the lease so that you can feel comfortable "owning the car". In a balloon, the title is in your name versus in the name of the leasing company. Owning it has sales tax advantages if you decide to purchase the car at term end (no double sales taxation).

The residual value is an important aspect of the deal. The higher the residual value the lower the lease payment. Cars that have higher residual values are better deals. Sometimes a manufacturer will inflate the residual to move the car and take the hit on the back end at the auction or hope they get lucky and you purchase the car versus turn it in.

The shady part is that you do not get to see the "rate" of finance charge on the contract like you do in a purchase transaction. Everything else is broken down.

Capitalized cost=Total bottom line with tax, title, fees and acquisition cost.

Lease charges are the same as finance charges. You will see the gross amount disclosed on the contract but not the rate at which they are calculated since it is not disclosed on the contract (I don't know why). You can ask the finance guy and he may tell you a straight answer or give you some bull: well we don't have a rate, it's a "money Factor"

[Sparkle]

29. Thanks for the explanation.

Sounds too difficult for me. I won't be leasing a car.:-)