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Lease basics

Discussion in 'Buy, Lease, Finance & Insurance' started by tbdbitl, Apr 14, 2013.

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    I am looking to possibly do my first lease on a car; I am a senior citizen, and have purchased new for all of my purchases since I got a used lemon 67 cougar many moons ago. I have a few questions, to say the least.

    First, can you deal with a leased car the way you can a new one? The car I am thinking about is currently in stock.

    Second, how is a trade in handled? I assume that I can apply the trade in to what I want to put Down on the lease, will they cut me a check for the difference? Or am I better off to sell it myself, or to Carmax?

    Finally, in looking at the BMW web site, they quote a price for a 'nicely equipped' car (328i convertible, with the premium package and a couple of other add ins such as heated seats) at 399 plus 4k down. The car I am looking at adds Navigation, keyless entry, and cold weather package, and I have been quoted 529 with 4k down. Since with a lease, I have been told you are financing the depreciation, is this a reasonable price? It seems in my search of used cars that cars with nav still run about 2k more.

    Lots of questions, I know. Thanks in advance to anyone who can be of assistance.
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    It has been a few years since I have done a lease. We had them through my wife's business. We did a trade in on the initial car we got, and applied it to the lease, and the monthly payment was adjusted. We were able to negotiate somewhat on the price as you would on purchasing one. The problem we ran into was the price was also based on the mileage to be driven, we went over on miles and had to pay a penalty.
    Not too much help, sorry
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    I have to refer you to google results (leasing is never in the cards for me), the first page includes results from smartmoney, cnn, kiplinger, edmunds, cars.com, etc., all credible sources.


    For me, the question would be if it's remotely possible you might decide to buy the vehicle at the end of the lease period - I'd think it's likely that, except for the perceived value in you knowing your own history with the vehicle, come the end of lease time, you'd likely find another comparable model available on the used market at a better price. If you're considering buying after the lease term is up, perhaps you come out ahead buying rather than leasing. Hardly that simple though, other factors to consider as well - if you get a lease payment for less than what the payment would be just buying it, it may be that when at the end of the lease and financing the purchase at that time, your total payments for the vehicle might average out less than if buying initially.

    I have no clue whether what you're being quoted are fair prices, no experience or insight there.

    Also not sure what negotiating tactics to pursue - I'd think you'd want to negotiate the purchase price down as much as possible, I'm not sure for the dealer if it matters whether it's a lease or a outright purchase as far as price negotiating goes. Trade-in I'd assume is about the same as on a purchase - you see if you like what they offer and whether the hassle of selling it yourself, although possibly for a better price (no guarantees there) outweighs the convenience factor of trading it in.
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    I have leased a car every three years since my 98 M3. Basically, leasing allows you get more car for less monthly payment. This is because you are financing the difference between the purchase price and the residual price. However, before you think that's a great deal, the bank always gets its interest which is calculated on the purchased price not the difference. The main points to consider are 1. agreed upon purchase price (including whatever you get for your trade in), 2. residual cost(higher the better given as a percentage divided by 100) and 3. the cost factor(essentially the interest rate, lower the better), 4. term of lease. All leases are now closed end and full disclosure so you are fairly safe. Most dealers will provide you with easy straight forward lease contracts. You are never ahead with a lease. Use the car for the term of the lease then dump it. Do not ever lease for more than 48 months, preferably 36 months or less. Manufacturers always have specials on lease deals that include a sweet spot. This is the optimum length and rate. You would think the longer the lease the cheaper the monthly payment. Not always. Manufacturers at times want to pull customers into specific time points so that when they receive the car back, they are in optimum position to unload into a fleet overseas or at auction. In general, avoid putting much down on a lease as you will not get it back at the end. Mileage penalties are not as bad as some make it out to be. If you can buy the car with an interest rate of 2.99 or less, BUY do not lease. You will be ahead even with a 60 month note versus a lease. In short, to lease 1. purchase price 2. residual >.60 3. cost factor <.0050(approx. 4-5% interest equivalence) 4. term 30-48. To get a good purchase price, go to Edmunds.com and look up "what people are paying" section for the vehicle. Try to get the car for as close to or below dealer invoice. Don't worry about the dealer not getting any profit, he will get it back ten times on customers who are uniformed and do not know what they are doing. In addition, the dealers receive incentive paybacks for various models even if they lose money on the deal. In other words, the dealer will never lose money. A lot of info but you had a lot of questions. Hope this helps. Good luck.
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    Sorry for the delay in getting back to everyone; I have been out of town.

    Thanks to all of you who have responded to my questions, the responses have been most helpful. Each answer covered different points and contained good insight!

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