Leasing questions (Kinda long post)

[BiscuitFern]

Hey everyone, I'm looking to lease an FR-S. Before anything, I hope this thread doesn't turn into one of those lease vs own discussions, but instead something that can help me sort out my situation. Thanks

I went to a local dealership and was looking at the FR-S. Almost right away, a sales person led me to a model and took me on a test drive. Needless to say, coming from a massive SUV, this car was a great refreshment and a blast to drive around.

Now I'm looking to trade in my car, a 2005 Lexus GX 470 with 132K miles on it. They appraised it at 8.5K. After telling them a local used car dealer was willing to give me 11.8K, the sales person brought it up to 11K. Now when I use the lease payments calculator on Scion's website, I'm getting extremely low numbers (It was $22/month for 2014 and $40/month for 2015 to be exact). Without the GAP or service plans, I get a message saying that the payment exceeds how much I would need to pay.

Here it gets weird. I qualified for the top credit thing. Tier 1 plus or something (forgot exactly what it was called). Then I was quoted around $130 for my monthly payments, excluding taxes and other fees.

This was my first time doing this, and I think the sales person noticed this and was trying to play me. Not sure why I didn't realize this when I was at the actual dealership, but from what I remember, the value of the car after 3 years was around 16-17K (closer to 17 I believe). If my car is valued at 11K, how does it make sense to pay so much every month? On Scion's website, I came at around $130/month with a trade in value of 8K.

We actually went to the Scion website and configured the FR-S I wanted. Even there, I got the same low payments I was getting at home. The sales person "went to talk with people" about this and came back saying the scion website isn't accurate and their computer, is giving them a different number.

I basically said I'll let you know and left. This was because I felt the payments were too high. Now that I actually looked into it, I know they are too high, unless there is something I'm not seeing here...

This is what I came up with. Since I didn't think to actually write down the exact numbers he gave me, I'm gonna round slightly up.

Car: 29K
Car after 3 years: 16.5K
Depreciation: 12.5K
Trade-in Value: 11K
Difference: 1.5K
1500/36 = 41.67

Shouldn't 41.67 be my monthly payments?

Sorry for the long post, but I'm really trying to figure out what's going on and see how accurate Scion's payment calculation on their website is.

Thanks for the help everyone!! Hopefully I'll be driving one of these soon.

[jebuwh]

So look on scions site at the standard lease price. I want to say its 249 a month with like 1999 down. So instead of 1999 down you are doing 8k down right? Then there are taxes and fees which you can either pay up front, or calculate into the payment. With your trade I would say you pay the taxes up front and the payment should be around what he said. 130 is dirt cheap.

I know you said you didn't want to turn this into a lease vs buy.... But you should definitely buy in this situation haha. With that much down you would be looking good.

[Jrryjms07]

Do you owe $ on your trade and why would you want to lease? If you owe $ I can see wher it would make sense to lease.i work at a dealership. But if you own the car out right your better off with a purchase. Because even if you decide to trade the car in 3yrs down the road you'll still have equity. Imo

[n2oinferno]

I would advise that you don't put that much money down on a lease. Yes you can reduce your payments, but it's risky.

Let's say you trade in your car, reduce the capitalized cost a ton to something stupid cheap. You're basically pre-paying off that monthly lease payment to get the total down. That's awesome, right?

You've signed the paperwork, it's your car for the next several years, you're excited. Everything is great. You're driving home, or perhaps to a friend's house to show them the new ride and BAM! Someone hits you hard and sends your car spinning. Damn, you didn't even have the car for ten minutes! Thankfully everyone is safe, but the car is a wreck. Total loss.

Guess what happens to all of that money you put down? Insurance will pay for the rest of the lease that hadn't yet been paid, but you can wave goodbye to the rest of it.

Same thing if the car is stolen.

[phobos512]

Originally Posted by n2oinferno

I would advise that you don't put that much money down on a lease. Yes you can reduce your payments, but it's risky.

Let's say you trade in your car, reduce the capitalized cost a ton to something stupid cheap. You're basically pre-paying off that monthly lease payment to get the total down. That's awesome, right?

You've signed the paperwork, it's your car for the next several years, you're excited. Everything is great. You're driving home, or perhaps to a friend's house to show them the new ride and BAM! Someone hits you hard and sends your car spinning. Damn, you didn't even have the car for ten minutes! Thankfully everyone is safe, but the car is a wreck. Total loss.

Guess what happens to all of that money you put down? Insurance will pay for the rest of the lease that hadn't yet been paid, but you can wave goodbye to the rest of it.

Same thing if the car is stolen.

That's a risk whether or not you're leasing or buying. If you buy and you're financed, you have to give the money to the bank to pay the loan off. The only time it's not a risk is if you pay for the car in cash. In that case you get a check from the insurance company to do with as you like.

[Shady195]

Originally Posted by phobos512

That's a risk whether or not you're leasing or buying. If you buy and you're financed, you have to give the money to the bank to pay the loan off. The only time it's not a risk is if you pay for the car in cash. In that case you get a check from the insurance company to do with as you like.

However with a good trade in like that, he would have money coming to him if he was financed vs leased.

If he were to lease, they would be paying that to the dealer and he would get nothing from it. It would be one thing if it was a few grand trade in. However putting down enough to basically cover half of the MSRP of the car carries a big risk in this case

[MokSpeed]

Originally Posted by Shady195

However with a good trade in like that, he would have money coming to him if he was financed vs leased.

If he were to lease, they would be paying that to the dealer and he would get nothing from it. It would be one thing if it was a few grand trade in. However putting down enough to basically cover half of the MSRP of the car carries a big risk in this case

Exactly.

More specifically in this situation because if you're basically putting down almost half of what the actual car is already worth you're better off buying it.

[blackhawkdown]

You trade one car for the frs. After the lease, you have no car. Where is the logic in this. Keep your car, save some money, put a down payment and buy a 2016 frs.

[mav1178]

I would advise you to:

1) use a loan amortization spreadsheet. Your numbers aren't correct and you need an interest rate on there.
2) If you're leasing..... why are you using the entire sum of your trade-in for the lease down payment? The whole point of a lease is that after 3 years you're not saddled with the cost(s) of owning/selling a car if you choose to change things up.

Highly recommend you to do more research on how a lease vs a loan works. At best I'd pay whatever the required down payment is on the lease, and put the rest in some investments so you can use it after 3 years to buy the car or lease another one.

-alex

[Shady195]

I'm afraid that many people lease expecting to just move to a new car every 3 years, like its a one time payment and then you just keep going.

When your lease is up you no longer have a vehicle. You don't get anything for the lease except good standing and "credit" of sorts with the dealer. Meaning you get more incentives to lease another car with them.

Putting that much down on a lease means your screwing yourself. If you want low payments and a good return buy the car.

Otherwsie sell your current car private party, put a few thousand down and use the rest for something else as stated.

This isnt a lease vs own discussion overall, its a how to lease without screwing yourself, and if your really set on trading in your car than it would be a wise choice to buy.

[Braces]

I lease cars if they are for my business. I buy cars if they are for my personal use.

[eikond]

As stated above, you forgot the interest rate on your lease calculation. They don't actually call it an interest rate.. they use money factor most often. Typically it's going to work out to about 3-4% in today's market unless Scion in running a special on that right now.

So you were mostly right.. Take the sale price minus the residual value to figure out your "rent". Don't forget to account for fees (dealership doc fee, lease initiation fee from toyota financial services or other banks if charged, tax, title, license, gap if not included, etc..). Most people pay these fees and first month payment with a check at closing.. but you could add it into the lease payment as well. Then add interest.. I'd use 3% or 4% per year as an estimate right now. That should get you pretty close to the payment amount with no capital reduction (down payment).


Now to the other good point brought up already. It's not a good idea to make a large down-payment on a lease. If the car is wrecked, you are out that down payment. Also, putting down a bunch of money doesn't give you any interest rate deduction (unless you have terrible credit.. then it might be needed). But, you're better off putting a big chunk of money toward other debt that carries higher interest rates.. or if none, invest it somewhere so that you at least get some benefit out of the money.

edit.. to explain this further. If you make a big downpayment on a purchase, that money goes toward principle reduction.. or your "balance". If you make a down-payment on a lease, you are not reducing your principle, because you have no principle. You are simply making a large pre-payment on your rent. They reduce the total rent by the amount pre-paid and recalculate the new payment. If you wreck a leased car, they don't have to give you back any pre-payments you've made. If you wreck a purchased car, they basically buy the car from you for the value of the car.. if you've made a big down-payment, then you get to keep the difference between the insurance check and what you owe the bank.