Absolutely incorrect specifically because of the latter points of focus you discuss. You use the MSRP (which is usually higher) to multiply the residual value by. This way you get the residual value higher and then the depreciation will be lower. Yes, the net capitalized cost will show the hidden fees the dealership put back into the deal. Net cap cost should not exceed the agreed sale price of the car.
No. A very good friend. And he knew that was the risk going in ---- just didnt think either of the 2 would happen (car totalled).
Nope, you got it wrong. Residual value is based on the actual selling price; it is determined by a percentage set by the lender. To make things easy assume a 50% residual - if based on an MSRP of $32,000 you finance $16,000. If the actual selling price is $30,000 you only finance 50%. And your last two sentences contradict each other. I have a couple of decades of experience at an auto manufacturer, most of it seeing dealers daily.
My question is, being that you have to have full coverage on insurance, did your friend not get any money from the insurance company for the value of the car?
Went to the Rockies last January and ended up with a Mitsubishi Outlander Sport. I'm accustomed to real 4x4s, but I was really impressed with the AWD and Mitsubishi's traction control platform both in deep snow (particularly) and on some very washed out fire roads. Whatever you get, tires ALMOST ALWAYS make a bigger difference than you think. I recommend doing some serious research and choose the tires you want, and making the dealer switch them out as part of the deal. I do it on every vehicle I buy.
Small update: my wife's friend is the Jeep GM's cousin. Can't wait to meet him and let him know how his employees treat customers.
The sale price is an arbitrary number, MSRP is a "universal" number. The last two lines of the previous post do not contradict each other. If your net cap cost is higher than the sale price, you know some shenanigans is going on.
They don't care, Jeeps have a very loyal customer base, those dealers are getting close to MSRP on every vehicle they sell. Honestly, most people lease their vehicles anyway, very few buy for life anymore. They probably cringe when they see us, the ones who hold on to their cars for a long time and would rather not deal with those who like to haggle on price.
If your goal is to get the lowest monthly payment possible and you are swapping into new vehicles every couple to four years, would any of that matter? As long as you don't go over your mileage allotment, you're just handing the keys back anyway. It's been over twenty years since I worked in the industry, but the conventional wisdom then was that the smart play was to have the RV as high as possible so as to keep the monthly rental payment as low as possible. At lease term, you could always offer something other than the RV and if the financing company didn't agree, walk. That was awhile ago, though.
Yes. This is precisely my point. If you use the MSRP to generate the residual value, the residual value will be higher than if you use the sale price to generate it. With no intentions to buy out the car, you want the residual value to be as high as possible to mitigate the depreciation!
That's what I thought. What's your experience with low balling them at lease term to see if they want to avoid taking inventory back? I tried it once and they seemed more interested in getting me back into the dealership to look at something new they could move.
I don't lease cars but if I know what a Toyota Camry is going to be worth in 3 years as a used car when I turn it in, why would I want the MSRP to be higher? The MSRP can be an inflated number. Let's say the car is going to be worth $17,000 whether you pay depreciation on an MSRP of $25,000 or an MSRP of $32,000. The car is still going to be worth only $17,000 Why would you want to pay more depreciation on the car than you need to? I'm just trying to understand this correctly.
Did you not have a buyout price in your lease contract or were you trying to get it below the buyout price? Just curious if lease contracts have changed since it's been many years since I leased a car.
No there definitely was a buyout price (residual value) but it was basically artificially inflated to keep the monthly payments low. At least term I walked in and offered a couple grand less to see if I could get it for what it was really worth at that point
Edmunds is an excellent source for the residual values and money factors on vehicles. Check out their manual lease calculator, they can explain it way better than myself: http://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html "1. Sticker Price of the car + options $23,000 2. Times the residual value percentage X 0.57% 3. Equals the residual value = $13,110 4. Invoice price of car minus incentives (net capitalized cost) $20,000 5. Minus the residual (from line 3) - $13,110 6. Equals the depreciation over 36 months = $6,890 7. Depreciation (line 6) divided by term in months ÷ 36 8. Equals the monthly depreciation payment = $191 9. Net capitalized cost (From line 4) $20,000 10. Plus the residual (From line 3) + $13,110 11. Equals = $33,110 12. Times the money factor X 0.00125 (3 percent) 13. Equals money factor (interest) payment portion = $41 14. Monthly depreciation payment (from line 8) $191 15. Plus money factor payment portion (from line 12) + $41 16. Equals bottom-line monthly lease payment = $232 Don't forget that you haven't paid sales tax yet. To account for tax, multiply the monthly lease payment by the state sales tax. For this example, in California the sales tax is approximately 9.25 percent. (For a more precise preview of your payments, you can also factor in any local sales taxes at this stage.) $232.78 X 0.0925 = $20.95. This increases your monthly payment to $253.73" I'm also not trying to get into a pissing match with people about the best way to calculate a lease. I have a 42k car at 425/month with 0$ down using my method (tax paid up front outside of lease). Doubt there are any deals significantly better out there. But if there are...awesome for them!
