Lease Specials: Dealer Or Manufacturer?

[NextExit]

First off, I don't want to start a lease vs buy debate.  This isn't about that.  I'm curious who determines lease specials... the dealer of the manufacturer?  There's a Dodge dealer in Queens, NY that has a heck of a lease deal on a 2015 Dodge Dart.... $70/month! (for 24 months)  Chrysler 200 LTD lease $100/month.  :stunned:   (Think any of the local Dodge dealers would laugh at me if I asked them to match this? :lol: )

I don't see anything like this in the Knox newspaper.  I recall about a year ago I saw an ad but it was $149/month lease.  Big difference.

So I'm thinking this is a dealer decision but wondering if someone here knows...

 

 

[Sam1]

I hate leases, they suck. but at $70/month I would be in one at the blink of an eye!

[Hozzie]

Leases can be very good options in some cases. Won't get into a big argument over it as there are merits to both.

Now to answer your question, both is the answer. To understand a lease, you need to understand some primary terms.

Net Cap Cost - price of vehicle after all incentives, discounts, taxes, etc

Money Factor - interest rate paid on the lease. This is a decimal value, not apr.

Residual - % of car value after the lease period. This is based on msrp.

Lease term, and miles. - this affects residual value

Without getting into the math and to keep it simple, generally, the MF and Residual are calculated by the Manufacturer. The Net Cap cost is based on how much the dealer wants to deal. It also includes any down payment from the buyer that decreases net cap cost. There is also something called Multiple Security Deposits (MSD's) that can lower a money factor.


Plug these numbers into a lease calculator and you can determine where the difference is coming from. Assuming the cars are the exact same, it would either be that they are having the customer pay more down, using a higher residual, or using a lower MF. Probably all three.

Dealers make money on the MF, so know what it should be by checking somewhere like Edmunds.

I am considering leasing a new Audi A6 and have done a ton of research on this. Edmunds has some good info if you really want to understand all of it.

Hope that helps.

[DaveTN]

There's a Dodge dealer in Queens, NY that has a heck of a lease deal on a 2015 Dodge Dart.... $70/month! (for 24 months)  Chrysler 200 LTD lease $100/month.

That’s impossible the math doesn’t work.

However I have heard dealers making ridiculous claims like that on the radio here. When you check you will find that payment amount is for the first three months; then it goes to the regular amount. You can also make the payment be whatever you like with enough down payment.

Leasing is simply borrowing a given amount for a given time. It could be done by the leasing division of the manufacturer, some large dealerships have their own lease departments, and some banks will also do leases. The interest rate will be much higher through banks than if you were just borrowing money because their risk is higher.

[A.J. Holst]

That’s impossible the math doesn’t work.

However I have heard dealers making ridiculous claims like that on the radio here. When you check you will find that payment amount is for the first three months; then it goes to the regular amount. You can also make the payment be whatever you like with enough down payment.

Leasing is simply borrowing a given amount for a given time. It could be done by the leasing division of the manufacturer, some large dealerships have their own lease departments, and some banks will also do leases. The interest rate will be much higher through banks than if you were just borrowing money because their risk is higher.

Leasing is a co-op between the mfg-er and lender, typically the lender is their captive finance arm.

Manufacturers don't sell/retail/lease/finance cars.

My guess on your $70 × 24 month lease is 5k miles per year, tax tag license out of pocket and a substantial down payment and/or they are calculating every possible rebate for which you can't qualify.

A little shady, but legal with the mouse print disclosures at tge bottom of your tv screen.

Leasing is regaining popularity as new vehicles are becoming ridiculously expensive and it fits the buyer's driving/trading habits.

Excessive wear and tear at the end ofthe lease term = money you pay to exit the lease, miles over = up to $.45 per mile over. 10k over in miles, be prepared to stroke that check!

[gregintenn]

Leases can be very good options in some cases.

I'd be interested in an example.

[NextExit]

Good info Hozzie, :up:  I didn't know any of that.

I read the small print: $3,000 down + tax + $595 acquisition fee.  10kmi/year then .25/mile.  Lease is closed end with purchase option.  Lessee responsible for maintenance, repair, excess wear and tear.

And I agree Sam1,  normally I wouldn't consider leasing but at $70/month for 2 years, that's better than a DirecTV agreement. :P

[runco]

If you are a business man and can use a car in your business, lease is a better way to go on taxes, vs. the depreciation route method. 

[Oh Shoot]

......  Lessee responsible for maintenance, repair, excess wear and tear.

....

 

News to me. I always thought the biggest advantages of the generally higher cost of leasing was not having to maintain or fix the dang thing.

 

- OS

[Hozzie]

I'd be interested in an example.

 

I can give you a good example, which is my own situation.  I am sure someone will want to argue that a person should keep a car forever, or pay cash up front, or one of many other reasons, but that isn't my criteria.  If that is how you like to do it, good on you, but that isn't me.  As long as everyone understands that my criteria is I prefer to have a new car every few years and this is a second car so the mileage is not an issue, then at least for me, this makes sense to lease.  I probably could use it for my business, but that isn't my main intention.

 

So to compare (the payments are based on deals I am negotiating and are pretty close to final numbers).  I am not going into Net Cap Cost, MF's or Residuals for the lease.  Lease is 36 Months/12,000 miles.

 

Lease: 2016 Audi A6 - ~MSRP 63k. - 3k down - Payment $630 month  (all Maintenance included) - Total 3 year cost:  $25,680

 

Purchase: Used 2014 BMW 535i (35k miles), ~ $40k.  7k down - Payment $606 month.  (Maintenance to 50k) - Total 3 Year cost: $28,816.  After 3 years, I would still owe $14,544.  Car would be worth ~ $16k.  

 

I could put more or less down on the BMW, but it comes out to about the same amount after 3 years.  If I am only planning to keep the car for three years, then in my case, a lease makes more sense.

Edited August 16, 2015 by Hozzie

[Hozzie]

News to me. I always thought the biggest advantages of the generally higher cost of leasing was not having to maintain or fix the dang thing.

 

- OS

 

Depends on the lease and manufacturer.  BMW's warranty covers maintenance for 4 years/50k miles.  I had Audi include it in my lease pricing, but it wasn't automatic.  Certainly, a lessee would be responsible for any damage and miles over the agreement.  

[NextExit]

News to me. I always thought the biggest advantages of the generally higher cost of leasing was not having to maintain or fix the dang thing.

 

- OS

And maybe that's why its only $70/month.  Buy it and you're covered, lease it and you're on your own. :squint: