What is a lease really???

[MurlinatoR]

Leasing is stupid....

Oh, wait; that's the narrow minded opinion. Get educated.

Watch this and hear me out.

[video]https://www.facebook.com/murlinator/videos/vb.100000069323416/1236717583007207/?type=2&video_source=user_video_tab[/video]

 

[Stingin' Away]

This could help some people on the fence whether or not they want to lease or buy. Good blanket review

 

[MurlinatoR]

Thanks!

Many people think that they're "renting" a car when they lease and that is 100% not the case. You are actually paying the cost of the car down and have the choice, if you want to, to finish paying for the rest!

 

[Kazz]

A lease covers the drop in value that starts out HUGE, as soon as you drive it off the lot, until the lease ends. You're usually financing about half the car's sticker as I understand it.

 

[MurlinatoR]

A lease covers the drop in value that starts out HUGE, as soon as you drive it off the lot, until the lease ends. You're usually financing about half the car's sticker as I understand it.

So, you're close. The amount financed varies greatly depending on how the manufacturer runs the program.

As for that "drop in value" that everyone perceives they are going to take on a new car, that is really a falsehood. A car's value is no different with 2 miles or 200 miles. That perceived drop in value is simply the difference between what the car sells for and what a dealer will buy it back from you for because that dealer is going to resell it for the same value as original.

This same thing happens on a 5 year old used car. If a 5 year old vehicle is sold for a value of $10,000, that dealer will never pay you $10,000 tomorrow to buy it back. They will cut that value by $3-$5,000 and will sell it again for the same $10,000 value.

New or used, only age, miles, and condition lower a cars value!

 

[CajunStinger]

Does the dealer make more money through leasing or financing?

 

[MurlinatoR]

Does the dealer make more money through leasing or financing?

Great question!!! LOL

The answer is neither.

A dealership earns the profit margin between the sales price of the vehicle and the invoice cost of the vehicle. The form of payment does not affect a dealership other than what is called a "flat pay" in the business which is a bonus from the bank for doing their loan papers for them.

Now, there is a greater "future potential profit" opportunity when leasing because dealers push aggressively the option of flipping cars regularly. More flips means more sales means more profit!

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[CajunStinger]

Great question!!! LOL

The answer is neither.

A dealership earns the profit margin between the sales price of the vehicle and the invoice cost of the vehicle. The form of payment does not affect a dealership other than what is called a "flat pay" in the business which is a bonus from the bank for doing their loan papers for them.

Now, there is a greater "future potential profit" opportunity when leasing because dealers push aggressively the option of flipping cars regularly. More flips means more sales means more profit!

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Appreciate the answer. Can you educate me on 5-10 things that are bad about leasing?

 

[MurlinatoR]

Appreciate the answer. Can you educate me on 5-10 things that are bad about leasing?

I sure can! Did you take a chance to watch my video yet? I have some of that information in there as well. It's linked in the first post.

But, to answer your question, you first have to consider what your long term plan is for the vehicle that you're considering. Your options are to pay for your first half (+/-) in your lease and then give it back OR to keep the vehicle and FINISH paying for the other half that's left.

Here's why that changes things. If you are going to cycle lease, there are restrictions on your use of the vehicle. A lease will force you to monitor your miles driven as they have a "mileage allowance" for the term of your contract. A lease will force you to monitor the condition of your vehicle as they have a "normal wear & tear allowance" for the term of your contract. Both of these allowances will incur charges to you after your lease term if you have exceeded the limits. Every manufacturer has different rates that they charge for the items that they bill for. You also need to consider that when you cycle lease, you never finish paying a vehicle off so you will always have a monthly vehicle payment.

There are many benefits of cycle leasing, though. You never run out of warranty. Your payments are less than traditional financing. Your risk of market values and your trade values are now gone. You never have long term repair costs like brakes, ball joints, struts, power feature failure, and so on.


Now, for me personally, I will be leasing my Stinger and then buying it out afterward because I like to keep my Kia's for as long as I can stand it! LOL I will take the lease money and pocket it and then finish paying it off and own the bad boy!

 

[Shaz]

The problem in Canada is that Kia hasn't negotiated a good leasing rates with the banks and so leasing in Canada is 2%-5% more than financing.

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[CajunStinger]

I did see the video, just wanted to get your take on leasing. One thing the video didn't go over is depreciation.

I sure can! Did you take a chance to watch my video yet? I have some of that information in there as well. It's linked in the first post.

But, to answer your question, you first have to consider what your long term plan is for the vehicle that you're considering. Your options are to pay for your first half (+/-) in your lease and then give it back OR to keep the vehicle and FINISH paying for the other half that's left.

Here's why that changes things. If you are going to cycle lease, there are restrictions on your use of the vehicle. A lease will force you to monitor your miles driven as they have a "mileage allowance" for the term of your contract. A lease will force you to monitor the condition of your vehicle as they have a "normal wear & tear allowance" for the term of your contract. Both of these allowances will incur charges to you after your lease term if you have exceeded the limits. Every manufacturer has different rates that they charge for the items that they bill for. You also need to consider that when you cycle lease, you never finish paying a vehicle off so you will always have a monthly vehicle payment.

There are many benefits of cycle leasing, though. You never run out of warranty. Your payments are less than traditional financing. Your risk of market values and your trade values are now gone. You never have long term repair costs like brakes, ball joints, struts, power feature failure, and so on.


Now, for me personally, I will be leasing my Stinger and then buying it out afterward because I like to keep my Kia's for as long as I can stand it! LOL I will take the lease money and pocket it and then finish paying it off and own the bad boy!

 

[Bubbabiker]

Personally if you flip cars every couple of years and keep low mileage maybe leasing is right for you. Otherwise pay cash or finance and pay it off quickly as possible.

 

[MurlinatoR]

I did see the video, just wanted to get your take on leasing. One thing the video didn't go over is depreciation.

You are correct! The reason???

Depreciation doesn't change anything! That's right! Many people are under the assumption that depreciation is a major factor and in fact it's not. It is all based on a residual % that is COMPLETELY in the control of the car company!

Actually, the only place that depreciation plays a part is at the end of the lease IF, and only if, you consider buying your lease out.

There are quite a few car companies that have very poor resale value that will burn you if you in fact buy out your lease at termination.

Companies like VW, Nissan, Chevy, Chrysler, Infiniti, and others that, as a company, choose to run their residual values far higher than their vehicles actual resale value. The result? That car had a really cheap lease payment in order to sell more units but you pay thousands more to buy it that you could just buyi it used in the market.

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[MurlinatoR]

Personally if you flip cars every couple of years and keep low mileage maybe leasing is right for you. Otherwise pay cash or finance and pay it off quickly as possible.

[MENTION=320]Bubbabiker[/MENTION] Sometimes it's actually cheaper to lease that same vehicle and then pay it off! LOL

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[Shaz]

The tax in Ontario is 13% - It makes a difference when you buy/Finance $50k vehicle including tax or lease the same car @40k ... so if the leasing and financing rates are the same, leasing should be your primary option... last thing to worry is the buyout option at the end of lease term...which would vary per car manufacturer...if throughout the idea was to buy / keep the car.

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[Hammer]

Good explanation. I have leased cars all my work career (over 40 years). 6 years ago I leased the Kia Optima SX and absolutely loved it. I knew that I would go way over on the 12,000 miles per year allowance but my plan was to buy out the car at the end of the 3 year lease term. After 14 months and 30,000 miles the dealer called and asked if I wanted to flip it into a new one. I did and simply started the lease over again at the same monthly payment, no money down. I drove that Optima SX for 12 months and put just 13,000 miles on it. What happened? Yup they called me again to flip it! I did and have had this Optima SX for the full term of 36 months plus 2 additional waiting for the Stinger. I have to say two things (and I know it's weird) but all three of the Optima's were EXACTLY the same features and color (Satin Silver which is just like the Stinger Silky Silver). In almost 6 years I had one....ONE issue with the Optima's, a faulty turbo waste gate that needed adjustment on the first one.

 

[Stingin' Away]

Good explanation. I have leased cars all my work career (over 40 years). 6 years ago I leased the Kia Optima SX and absolutely loved it. I knew that I would go way over on the 12,000 miles per year allowance but my plan was to buy out the car at the end of the 3 year lease term. After 14 months and 30,000 miles the dealer called and asked if I wanted to flip it into a new one. I did and simply started the lease over again at the same monthly payment, no money down. I drove that Optima SX for 12 months and put just 13,000 miles on it. What happened? Yup they called me again to flip it! I did and have had this Optima SX for the full term of 36 months plus 2 additional waiting for the Stinger. I have to say two things (and I know it's weird) but all three of the Optima's were EXACTLY the same features and color (Satin Silver which is just like the Stinger Silky Silver). In almost 6 years I had one....ONE issue with the Optima's, a faulty turbo waste gate that needed adjustment on the first one.

Welcome [MENTION=380]Hammer[/MENTION] Leasing is the way to go for some people. It sounds like you've had a great experience with it