Demistifying the lease

[Stwood]

Almost ended up in a new Genesis last night, but ran into a few last minute snags.

Anyway, can someone explain a lease calculation? They told me that the residual was 46% and the lease factor was .00019. The bottom line negotiated price for a loaded 3.8 was 36,771 (have read that you negotiate price, then back into lease). My desired lease was a 36 month with 15k/yr mileage. I have a current lease that needs to be bought out for $500. They told me they discounted the Genesis even more to pay for the lease buyout. Numbers came in at $535/mth with $2,599 at signing and I just want to know how they got there, any comments would be appreciated.

Thanks for your time,
Stwood

 

[Dimitry]

The best way to break down the numbers is ask them for specific numbers and go from there -

Selling Price?
Rebate(s)?
Fees? Dealer Fee, Acquisition fees, ect

Based on a bottom line price of 36771 with everything rolled in but tax, the base payment would be 519, with no money down. A healthy 6% tax adds 31$ to the monthly payment.

The monthly payment you provided me shows that they upped those numbers somewhere, most likely the selling cost of the vehicle. I'm thinking they put it at around 38500-39000.

 

[TJPark01]

Almost ended up in a new Genesis last night, but ran into a few last minute snags.

Anyway, can someone explain a lease calculation? They told me that the residual was 46% and the lease factor was .00019. The bottom line negotiated price for a loaded 3.8 was 36,771 (have read that you negotiate price, then back into lease). My desired lease was a 36 month with 15k/yr mileage. I have a current lease that needs to be bought out for $500. They told me they discounted the Genesis even more to pay for the lease buyout. Numbers came in at $535/mth with $2,599 at signing and I just want to know how they got there, any comments would be appreciated.

Thanks for your time,
Stwood

Leasing can be tricky if you don't know what you are doing. I have leased a car every 3 years for my business. In every case, I always put ZERO money down. Be hard headed and patient. Get educated, look on the internet, read books, understand the terminology used and the tricks that the dealers use. It's simple when you break it down, all it is is basic math. Here's a good place to start.

http://www.leaseguide.com/

 

[pelucidor]

Try this website for leasing wizard:http://www.leaseguide.com/calc.htm
and for more information:http://www.leaseguide.com/lease07.htm

The simple lease calculation looks at two things: Depreciation Fee and the Finance Fee on the bank loan. Below I have run through the calculation using your numbers (and some guesses)...


Here is the Depreciation Fee piece:
Genesis V6 loaded MSRP: $40,500 (I am guessing the MSRP)
Residual value after 36 months/45k miles: 46%

So Residual Value after lease is $40,500*.46 = $18,630

Your Net Cap Cost = Negotiated Sales Price + Closing Fees - Cap Cost Reduction

Your Negotiated Sales Price (Gross Cap Cost) = $36,771

I don't know how much of the $2,599 at signing was closing fees (1st months payment, security deposit, tags, doc fees etc - I always get an itemized list) and how much was cap cost reduction

Let's pretend there was $1200 Cap Cost Reduction and the other $1399 was closing fees...

Net Cap Cost = 36771 + 1399 - 1200 = $36,970


Total Depreciation Fee = Net Cap Cost - Residual Value = 36,970-18,630 = $18,340


Monthly Depreciation Fee = $18,340/36 months = $509.44


Now on to the Finance Fee piece (much easier):
Your quoted Money Factor (MF) for Aug: 0.00019 (seems very low...)
BTW to turn this into APR interest rate multiply by 2400 = 0.456%

Finance Fee = (Net Cap Cost + Residual Value) * MF = (36,970 + 18,630) * 0.00019 = $10.56



So TOTAL MONTHLY LEASE COST = $509.44 + $10.56 = $520.00


Of course I made some assumptions in the figures above so not exact and you probably need to add sales tax to this. But hopefully this gives you a rough idea...


I've leased my last 8 vehicles and am learning new things each time (e.g. the joys of Multiple Security Deposits to reduce Money Factor for BMW and Lexus on my last two vehicles). It is usually best not to put any money down up-front (Cap Cost Reduction should be $0) as there is no real financial benefit and some potential downsides if car is wrecked etc.

 

[Stwood]

Thank you all for your informative comments! Just received a call from the dealer and they now say the deal is fine and come on back. Do you think this is a good deal:

Loaded 3.8
MSRP - 40,100
Negotiated price - 36,771

Putting wings on car (rear emblem & air bag)
Lease deal:
$535 for 36 months
$2,599 out of pocket
46% residual
Dealer paying to buy out my lease that has one more payment - 395 + 120 overage = $515
Free lifetime oil changes and loaner for scheduled maintenance

Appreciate your thoughts,
Stwood

 

[TJPark01]

Thank you all for your informative comments! Just received a call from the dealer and they now say the deal is fine and come on back. Do you think this is a good deal:

Loaded 3.8
MSRP - 40,100
Negotiated price - 36,771

Putting wings on car (rear emblem & air bag)
Lease deal:
$535 for 36 months
$2,599 out of pocket
46% residual
Dealer paying to buy out my lease that has one more payment - 395 + 120 overage = $515
Free lifetime oil changes and loaner for scheduled maintenance

Appreciate your thoughts,
Stwood

No. A V6 tech model should be 34k negotiated price give or take a couple hundred bucks. You should put ZERO money down. Never give away cash to reduce the cap, it's a sucker move. Do you drive a lot? because 15k miles a year is pretty high and contributing to a lower residual value. Life time oil change is crap, who cares. You're scheduled for 2 oil changes a year, which means 6 for the life of your ownership. At 30 bucks an oil change that's $180, whoopdy freakin doo!

 

[Stwood]

Based on your comments, thay should be discounting the cost about 3.4k from their cost. Based on Consumer Reports their cost is 37,363:
30,243 Base 3.8
750 Destination
2,730 Premium Plus Package
3,640 Tech Package

I think I'll continue shopping and next time work on negotiating price first then get into lease option.

Thanks,
Stwood

 

[GenesisSdnFan]

This is such a great site! I have been reading your posts for sometime as I am close to getting a Genesis. Thanks to everyone who has contributed on this subject. Can anyone venture a guess on what a fully loaded 4.6 with tech package, 15,000 miles per year would come in at per month [0 down] ? My local dealer told me that the 4.6 has a much lower residual, and would be way out of my $$ range to lease, compared to fully loaded 3.8. I can't pull the trigger until late October. Should I insist that I get at 2010? Thanks for your help!

 

[TJPark01]

This is such a great site! I have been reading your posts for sometime as I am close to getting a Genesis. Thanks to everyone who has contributed on this subject. Can anyone venture a guess on what a fully loaded 4.6 with tech package, 15,000 miles per year would come in at per month [0 down] ? My local dealer told me that the 4.6 has a much lower residual, and would be way out of my $$ range to lease, compared to fully loaded 3.8. I can't pull the trigger until late October. Should I insist that I get at 2010? Thanks for your help!

There are so many variables with leasing, which is why banks and dealers love it. There any many ways to financially engineer the leases to basically get you to part with your money. So many people are just concerned with the payments they aren't fixated on the total costs, which is what you should be looking at. Late October, wait for the 2010 model. My guess is $750 a month with tax included in that number.

 

[jjsC6]

Some of ya'll seem to be overlooking that different states tax leases differently. You cannot come up with a correct payment without understanding that.

Many states simply charge tax on the monthly payment. Some (like Texas, where I live) charge tax on the full "sales" price of the vehicles - unless you have a trade in which has it's own set of rules on a lease.

This can make a very significant difference. In my case, I won't have a trade, so for arguments sake, if I negotiate a $38,000 "sales price" for the lease, I'll have $2375 worth of taxes in my lease calculation. That is 6.25%, btw.

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[BacktoHyundaibychoice]

This is such a great site! I have been reading your posts for sometime as I am close to getting a Genesis. Thanks to everyone who has contributed on this subject. Can anyone venture a guess on what a fully loaded 4.6 with tech package, 15,000 miles per year would come in at per month [0 down] ? My local dealer told me that the 4.6 has a much lower residual, and would be way out of my $$ range to lease, compared to fully loaded 3.8. I can't pull the trigger until late October. Should I insist that I get at 2010? Thanks for your help!

Unless I'm remembering wrong, there's a 2K difference between the fully loaded 6 and 8. So why would that be "way out of your range"?

Sounds like he's trying to move 3.8 inventory.

 

[GenesisSdnFan]

That is what I am wondering too. My company leases me a car every three years and for the first time it doesn't have to be an American brand. They say, no money down, 15,000 miles per year, taxes rolled into the lease, and around $550 per month. Really a great benefit, and I have fun choosing. The dealer said we should be just find with $40,000 3.8 but not $42,000 on 4.6, and I am wondering the same thing. I live in snow country and think that the limited slip differential might be a good thing, but it is only on the 4.6. Thanks again for your input.

 

[SterlingDave]

That is what I am wondering too. My company leases me a car every three years and for the first time it doesn't have to be an American brand. They say, no money down, 15,000 miles per year, taxes rolled into the lease, and around $550 per month. Really a great benefit, and I have fun choosing. The dealer said we should be just find with $40,000 3.8 but not $42,000 on 4.6, and I am wondering the same thing. I live in snow country and think that the limited slip differential might be a good thing, but it is only on the 4.6. Thanks again for your input.

OK, SdnFan, here are some things to think about:

1. If the dealer won't give you the lease deal you want/need......go to another dealer. I think that some dealers make better overall deals on the 4.6 than the 3.8 depending on their inventory. If you have to go out of town, sobeit. When you are buying a 40K car, a plane ticket ain't no big deal.

2. I have the $42K list 4.6 and the dealer started his negotiations at $38,500. I don't lease but I believe that you can see where I'm headed.

3. Make certain that the dealer with whom you are now talking KNOWS you will go to another dealer. Most of them really want your business.

Stand your ground.....negotiate tough! Gennie is worth it.

 

[GenesisSdnFan]

Good ideas!

I have already started looking for other dealers. [My nearest dealer is 75 miles away, and the next closest is 110 miles, but I agree that my best deal will be when they know I am checking elsewhere.]

Have any of you leased a 4.6 tech with 3year/15,000 miles per year, no cap reduction, taxes rolled in, and have payments around $550?

 

[pelucidor]

I am thinking about getting the exact same vehicle and lease deal: 2010 V8 with Tech (really want the touchscreen Nav), 3 year lease, 15k miles per year, nothing down. My rough guess at a monthly payment is around $600 including the 9% tax on leases in my state.

Of course it's tough to predict as Money Factor changes every month, and residuals on the 2010 may be higher than the 2009, but perhaps with higher purchase price and harder negotiation on the new model.

 

[pelucidor]

BTW I bought (leased) my last 4 cars over the phone - I am a weak negotiator face-to-face as I get too emotionally attached to the car and will pay whatever the dealer wants, but I am a pretty good on the phone (negotiating deals is my day job).

Naturally I test-drive my shortlist locally (typically 10 different makes/models) months in advance and narrow it down to my top two choices. Then I call 5-10 dealers within 200 miles and ask for the internet salesguy or head of sales (head of sales rarely works the deal but will put on a salesguy on the job that skips the normal BS). I always have a price in mind and tell the dealer what I want to pay. Typically I get to the price I want in a few hours of phone calls spread across 2-3 days.

For example my 2006 Lexus GX470 (fully loaded with things like NAV/ML, Rear Entertainment and the extremely rare Sport Package) had an MSRP of $56k - I told the dealers I wanted to pay under $700 per month (having done all the lease calcs up-front with MF and residual numbers from Edmunds Townhall etc) and knowing this was almost impossible - below invoice price for starters. The first three guys quoted me $900-$950 per month, the next chap came in at $695 after 20 minutes negotiation on the phone for 15k miles, 3 years, no cap cost reduction, including 9% sales tax, on my exact spec vehicle including cost for getting it from a dealer in another state. I had him deliver it to my office as he was about 100 miles from my house - also avoided the Finance BS where they try to sell you last minute stuff.

Simlarly I am paying $525 per month on my $44k (MSRP) 2007 Lexus IS350 (fully loaded) for 3 years/15k miles and zero down including 9% tax. Sadly these kinds of deals are no longer possible as residuals have tanked in the last few years.

 

[GenesisSdnFan]

I am just having a terrible time waiting for October to get here! I have been shopping around, for comparable monthly $$ - looking at some really nice cars, G37x, A4, 328, Avalon - but none of them have the interior space, or in my opinion, the quality of interior materials as the Genesis.

When the time arrives, I will try your techniques, as I am too fired up about the car when I am at the dealership.

 

[tjc78]

I am just having a terrible time waiting for October to get here! I have been shopping around, for comparable monthly $$ - looking at some really nice cars, G37x, A4, 328, Avalon - but none of them have the interior space, or in my opinion, the quality of interior materials as the Genesis.

When the time arrives, I will try your techniques, as I am too fired up about the car when I am at the dealership.

I don't know about the others, but the Avalon is huge inside. I had an '06 before the Genesis and can tell you if interior room is a big priority give the Avalon another look. Very large inside with a huge reclining rear seat.

 

[mghaynes]

I just finished talking to a dealer. They are offering a lease special, 4.6 with tech package for $520+tax for 36 months with $2999 down. Cap cost - $40342, Residual - 19000. I worked out APR to be about .48% which is pretty low. They say they can't negotiate any aspect of the deal cause this is what they are getting from KIA itself. Any thoughts? I know I could buy the car for $38642 through USAA and get 3.99% financing for 60 months through my credit union. Any thought on which is the better deal?

 

[Vlad92]

That cap cost seems very high. My understanding was the "special lease deal" is based on MSRP (minus lease rebate and cap cost reduction). It is NOT a good deal. I would negotiate the cap cost down (as if you were buying the car) and then apply the lease rebate (if there still is one) and see what the payments are. If it is too high can can always put down additional money to reduce the cap cost futher if you wish. I'm not sure how USAA works, but can you use the $38642 as your cap cost (before lease rebate)? Last I heard the lease rebate was $750 on the 3.8 and $1500 on the 4.6, but that was earlier this year. I'm not sure what the residuals and money factors are looking like this month.