QuestionHi Roger,
We are thinking about leasing for the first time instead of purchasing and have a couple of questions.
If, at the end of our lease term, we decide to buy the vehicle, does any portion of our lease payments go toward the purchase price of the vehicle? Can we negotiate that at the time of our lease? Would we be given a better "purchase" price offer since we previously leased the vehicle?
Also, we have noticed that taxes are part of, and included, in a lease. What taxes are we paying since it's a lease?
Thank you in advance for your help.
Helen
AnswerHi Helen and thanks for the great questions.
Here are the answers on leasing and just know that every part of any lease deal is absolutely negotiable and if you do a good job and negotiate smartly , you can save money by leasing... but if you don't then you can get laid away. The good news is that at the end of the lease term whether you did a good job or not ...you won't have any negative equity.
Here are the answers to your questions which I anticipate may generate a few more. If they do then please feel free to ask away I am with you on this until you understand auto leasing completely and can return the survey you will receive with all 10's and maximum bonus points!
1. If, at the end of our lease term, we decide to buy the vehicle, does any portion of our lease payments go toward the purchase price of the vehicle?
ANSWER: No ...None your monthly lease payments go towards 3 things ...
1) The vehicles expected depreciation
2) Interest on the entire cap cost of the car
3) Taxes (except in Oregon)
This differs from a purchase where your payment goes toward both principle and interest and taxes and ends with you paying off the car and getting the title. At the end of a lease you get to decide if you want to give it back ...or buy it for its lease end value.
2. Can we negotiate that at the time of our lease?
ANSWER: Not really ... often times what you can do is negotiate the buy out towards the end of the lease if market conditions have changed and you can show that the LEV is substantially over the cars current market value. Alot of whether this will result in a reduction depends upon which bank the lease is run through. My brother leased a Ford Expedition through Key Bank and at the end of the lease the LEV was about 5000 over its actual cash value ...since Key Bank isn't in the car remarketing business and doesn't want to be they were anxious to negotiate a lower buy option (including their offer to finance it) Had he gone through Ford Motor Credit Co. they may have negotiated but not as aggressively because they are in the vehicle remarketing business and they exist only to help prop up new vehicle sales. Hope that makes sense. What will drive the LEV will be the residual factor and it's a fixed number that I've never seen negotiated beyond whether its a low mileage lease or a high mile lease or something in between. A low mile lease willgenerally give you a couple extra residual points (like from 70% to 72% on a short term lease) and make the end of lease buy out more expensive.
3. Would we be given a better "purchase" price offer since we previously leased the vehicle?
ANSWER: I think I covered this in #2 above..short answer...Maybe.
4. we have noticed that taxes are part of, and included, in a lease. What taxes are we paying since it's a lease?
ANSWER: Yes sales taxes are included in your monthly payment but only as a % ofyour payment and not on the entire purchase price of the car. You save money with this option. The reason is that the various state legislators wanted to get their hands on more money and a piece of these lease deals. When you consider that about 30% of all new car sales are leases you can understand why. Soooo on a purchase of a 30,000 car with a tax rate of 8% you would usually finance the additional 2400 and pay interest ion it etc. That same 30,000 car on a 36 month lease with a payment of $399.00 per month would only cost you $29.60 per month (on the base payment of $370.00) and you would only pay a total of $1,065.60 over the course of the lease.
Ask as many follow ups as you want and remember NEVER trade a vehicle (paid for or not)in on a lease
Roger
