Forgot to mention when leasing you will be responsible for a Disposition fee (fee that is charged by the dealer to you for cleanup of the car after the car is returned, usually $300 plus depending upon the model car you lease) & the Excess wear fee which most certainly will end up costing anywhere from $100 - $500 after you've used the car for lets say 36 months. You will have some excess wear...dings, scratches, wheel & tire damage possibly no way of avoiding it unless you keep the vehicle in pristine condition and even then they will find something believe me! I say make sure you check the terms described under excess wear in your lease contract before you sign the papers. There is more to the lease than described in this vid.
Definitely true 👍🏽 and the manufacturer also have incentives that covers up to $1000 dollars in disposition fees but dealers won’t tell customers that.
I dont see how the love it option would work. Most cars lose almost half their value after 36 months. So that 30k car you drove is now worth about ~18k, why would you buy that car for $22k??
Personally, no I wouldn’t. But, the option is there. Let’s see you have a 15,000 mile per year lease but you put 50,000 miles a year on it. Well, if you don’t purchase it you will have a huge bill for the miles. That is one amongst a few other reasons why oh you might want to consider buying it afterwards
@@UA-camDestinations If you're off on your mileage by 35,000 then you really need to look at making better decisions. In terms of that many miles, it may be advantageous to buy those miles up-front. To buy 35k miles up-front will cost you about $150-$165mo depending on the lease/rate, etc. On such a deal, I would lease for 2yrs not 3. It's VERY likely anyone in that type of situation is driving for work and gets a car allowance of $400-$800mo for mileage anyway thus the costs are mitigated and not a big deal.
That's the whole point. If the car is NOT worth what they thought it would be worth up front, you drop off your keys and walk away. You owe nothing (except for excess wear and tear and mileage if you went over)
Leasing is the most lucrative method for the dealership and with that being said you can make your own judgment on what is better for you as the customer.
this was awesome. thanks so much for breaking down the lease process step-by-step so someone like myself actually has a full understanding of how it all works. i feel way more confident about the process having watched. going back to my choice dealership this afternoon to solidify my new leased car and i couldn’t be more excited and ready now
100% correct. Lease rates are just like ARP on purchases. They do change as the fed changes rates... and many times of year the manufacturer's bank will offer specials.
Gap protection conveniently explained to avoid stating that if you total your car, YOU ARE RESPONSIBLE for the residual, and the protection will only pay the difference.
Samuel Jacoby I’m not sure you understand what got protection is. In the event you total the car, your car insurance would pay the residual and anything extra, up to the actual cash value of the car. Without gap protection you would be responsible for the rest. With gap protection the gap protection pays the rest of the car. That way if you total your car, as long as you have insurance, you were not responsible for anything.
@@bennettkuwan5875 well you wouldnt be able to buy if you gave them $2100 unless the car cost $2100 so whats the point of saying that???? clearly the 2017 is worth more than $2000 lmao
Bennett Kuwan is your lose your source of income you can’t put gas in the car you own or pay for insurance sooooooooo what’s the point? I don’t think anyone would be financing a car with a job that’s volatile or at least have some money in the bank. There’s steps to financing like, have a decent job?
The banks aren't in this to lose money, folks. They win all the time, whether you lease or finance. Only difference is at the end of a finance, you'll own something of value owe no more money to drive your car. "The cost of depreciation is built into the lease payment" -- Dave Ramsey
UA-cam suggested this video after I watched a Dave Ramsey video, totally thought it was some kind of snl style spoof where at the end he would say "just kidding! Leasing is terrible idea!"
The best car lease you'll ever have is the lease you DON'T have. Don't get fleeced. Did you catch the "get the most for your payment" gimmick? He didn't say "you can pay less for the same care", but rather "you can drive more car". More car. More gap insurance. ZERO equity --- ever. That future value will never be higher than what the car is worth. If it was, they'd ding you for excess wear and tear on the lease return. Don't think the leasing system is designed to benefit YOU instead of the dealers. But, hey, if you never want to have any money, go ahead and use the most expensive method to rent a car. Ten years from now when you are on your fourth lease and can't figure out why you have no money, look in the driveway. Buy something you can afford. Work your way up.
One con of leasing is horrible dealers that try to nickel and dime people on damages to vehicle. They will push their way into your wallet any chance they can get
Good video. My only comment is when it comes to "owning" a vehicle, this isn't said regarding the lien. Rather it's regarding customizations and modifications on the vehicle as well as various damage. If I finance, I can do largely whatever I want with the vehicle. If I lease, I'm very limited. But of course, for many, this isn't a big deal. I swapped out my radio, upgraded my seats upholstery, added window tints, among a few other things. The window tint is about hte only thing likely allowed with a leased vehicle.
The residual value is almost always very close to Kelley Blue Book, every lease I have had nailed it. And that number is not coming from the dealer by the way. What that means is after the lease, you can buy the car for about what you would expect to pay for the exact same car on the used market.
Lease is a good option if you are getting the lease with "Zero down payment " Secondly,if you get the deal at 1% rule i.e. the selling price,taxes this fees and that fees all including you get at 1% of the amount For eg if the total comes out 30,000 u r getting it at $300 per month everything included with zero down Never pay any money down on a car lease coz if by chance it is totalled ur down payment will go down the drain
@Sheldon K; that may be true but not in all cases. Yes, most leases have a disposition fee but those are likely to be waived when negotiating your next deal. In many cases manufacturers and their corresponding lending agencies have programs to alleviate that. Example: Lincoln has a 33mo pull-ahead on their 36mo leases. My wife has done this with hers. At 33mo's they will allow you to exit the vehicle and lease another brand new one up to 3 months early and the cost to do so is ZERO.
No, it’s not gone. If you notice, your buyout at the end of the lease is much much much less than the purchase price on the car. You’ve pretty much paid for that portion plus interest. Same as if you were financing it.
@Gabriel Olinger you need to review the two side by side and think through things. When you "buy" a vehicle, yes, the vehicle is yours, but all you're doing is paying more up-front to do nothing more than simply tie up your money/equity in a depreciating asset. No one wise with money would ever suggest you do that. Your equity is what is completely gone when done. The exact opposite is true on a lease. The idea of leasing is to pay-less up-front and invest the difference into something that is earning you money, whether that's a financial vehicle or property. You do so starting in month one too. Take the average SUV/car going for $35k. That's $650mo for 60mos. Dumb. Lease as nice or nicer new vehicle for $400-500mo and save the difference. They way you calc it out is to determine/look up the likely value of that $35k vehicle in 60 months. A small SUV like a Murano will likely be worth about $11k. Then simply take $11k / 60 months and that will tell you how much lower the lease payment needs to be so the amount saved/invested is equal to what the buyer would have in equity at the end of the same 60 months. The number here is $180. Thus go lease a vehicle for $470 mo and begin saving that $180mo up-front.
No one wise with money would ever lease. There is nothing smart about resigning yourself to making car payments for the rest of your life. Yes depreciation is a killer, which is why you buy a used car with cash. If you need to finance or lease a car then you cant afford it.
so with the leasing deal I am figuring the interest that is not calculated here for the lease comes out to be about $3093. You are financing 8,540 for 36 months at 323.14 per month and that cost you $11,633.. Why is taxes calculated into the financing? so with the lease you are paying 901.04 in taxes and the financing is making about $2,332 off the $8540.00 amount financed. The Gap protection should also cover the value at the end of the lease if you go over any mileage restrictions, etc.. If they finance that car again with another lease then the more money they make. Another thing is why should you pay full coverage on the vehicle if the bank is on the title because I am sure they've insured the vehicle just as well as it rightfully belongs to them until the loan is paid off.
@@michiloui9810 never look at monthly payments. Always look at what you’re paying overall for the lease period. Scenario 1. $230 for 36 month. 0 down = $8280 Scenario 2: $200 for 36 months. 2000 down = $9200
That is not how it is going to work. If you want to forego a down payment they will tack it onto the lease plus more. It would be $260 a month with 0 down at the minimum, not $230. If you think the dealership will just decide to lose a few grand you are out of your mind.
The problem with his assumption is he's using a 73% 3 yr residual, which almost no vehicle has. Leasing does make more financial sense than buying a new car If you were going to buy another new car in 2-4 years anyway. Obviously buying used and keeping a long time is cheaper in the long term
Correct.. one of many issues with this lease/finance comparison... With leasing as well as financing each case will vary. For leasing- money factor, residual value rebates offered etc... You cannot make such a comparison as a blanked statment.. it's simply false
The residual (buy out) was just an example. Different cars and different lease times, will effect the residual. Either way, the residual is like that because they are trying to forecast (as accurate as they can) what the vehicle will actually be worth when your lease term is over. Either way, the point is, it will get you a much lower monthly payment then when you purchase a car. And since most people trade their vehicle in, before they ever pay off a car, they never see a free and clear title anyhow. So why not buy more car, for less payment, more often?
It comes down to a renting or financing depreciating asset. Smart money people will research cars for reliability, cost of ownership, their needs and then save up their money and outright buy a good car that already lost the steepest decline in depreciated. Understandably dealers don't like people that are smart with their money.
You for get to tell people that they base a lease off the MSRP. So that 30k vehicle may have a purchase price of 30k but MSRP is 40k. So now there is 10k you have to pay for.
Great video - I don't really see the mileage charge as a penalty like most people do - you are getting you drive more than you agreed to for a very low per mile price! I think that one item keeps so many people from leasing just because they are thinking about the wrong way. If people thought of it as a good deal they would be willing to drive as much as they wanted.
@@sidharthchand8072 I have had more than 5 leases in my life and have never been charged for dings and dents. #1 reason? Dealers don't do the inspections, at least not for my Honda's and Chevy's. Dealer just takes the car back, end of story.
So the only negative is higher insurance cost (in England it would need fully comp and GAP insurance. However only an idiot wouldn't have fully comp as it covers damage And allows the insured to drive another insured vehicle (albeit 3rd party only) but legal never the less. The biggest thing is how much to put down ,as an example in the UK it's usually an amount of months,so maybe 3 months upfront and then 36 months at X amount. We don't pay tax on payments (well not separate ones apart from vat (20%) which a business can avoid if vat registered,but an average buyer can't,but the vat is in the quoted price. What's your thoughts on the leasing company offering fixed rate servicing for an amount per month over the duration of the lease (seems to be about £30 a month) for a £30'000 car.
I would negotiate the purchase price of the vehicle down to invoice or below then lease at that amount with no money down. If leasing a Toyota Tacoma which has a good residual value the monthly payment should still be reasonable. If choosing a 10,000mi/yr limit and I go over by 5000mi/yr. on a 36mo lease, my mileage penalty at .10/mi would be $1500 or $3000 at .20/mi Based on the total of 15,000mi excess. This would only matter if I was turning it in and walking away. Right?? What I would do is sell it privately a couple months before the lease ends for more than the residual amount (or the Pay-off amount), if I couldn't trade it in for the residual or Pay-off amount. Then I would start a new lease with a new truck again at a discounted purchase price and with no money down. Is this a good plan?
When I lease... and yes, I lease... I first tell them what I am willing to pay for the car. Then I get their lease payment on it. Then negotiate from there as their first payment certainly will be at a higher lease factor (interest rate), just like they do on a purchase. General rule, I tell them I am willing to pay 100 over invoice and 2 points to the dealer (that means the bank pays the dealer 2% for doing the paperwork at the interest rate they sell it at. They are allowed to upsell up to 6% so 2% is fair.
Sal Pitera we were told at a dealer that the lease payment comes from the MSRP, not the price on the windshield. And that it’s set by the manufacturer. That didn’t seem right to me.
You forgot to mention that leasing is the largest revenue producer for every auto dealership in America! So yes it's very good for the dealership but NOT for you! Unless you are able to write your lease off every year than by all means lease two vehicles! That way you won't go past your allotted mileage per year! If not than buy! You may not have much but what you have belongs to you!
There is no way that a $30,000 car is worth $22,000 after three years. New cars LOSE on average 55% in the first 3 years, so the car in the example would only be worth $13,500. The finance company is guaranteeing themselves, NOT you, that it's worth $22K so they can sell it to you or someone else after the lease is over. By the way, the total of lease payments in the examples is actually $11,628, so your effective interest rate is 36%!
Im still curious as to where is the best place/dealership to lease, what insurances do I really need as a first time driver, and what dealer fees should/could I argue to be waived.
Turn back the car you pay the disposition fee. You’re giving back a car with very few miles and you might be responsible for excess wear and tear? Unless you write it off and take a business deduction it’s not a savvy arrangement. There’s also a money factor x .0024 x interest rate which you pay on the entire cost of the vehicle each month. Also, if you decide to keep the car you now have to finance the residual value of the car. The banks treat the car as a used car so you will be paying a higher interest rate than a new car with a conventional loan. Plus you miss out on manufacture rebates that would go with a new car purchase. Lastly you need at least a tier 2 credit score to lease a car under normal conditions- 680 and above. Most banks want to see at least a 700 fico score, so that eliminates a few people.
You missed one option: cash. No monthly payments, no sleezy finance manager to deal with. Leasing? Dave Ramsey calls that a fleece. $50,000+ trucks are better known as Stupid Trucks. It's great to be debt free.
How do I negotiate the price for a lease, I'm considering it. My credit score is over 800, should I find financing before going into the dealership? Any pointer would help, I never leased before
You didn't mention or write in the finance rate for the lease which is the only issue I have with leasing. You use a money factor which there is a formula to convert to interest but you don't disclose it on the contract other than to write in rental fee. Basically you can charge whatever interest you want on a lease since the Fed Res doesn't control that but they do on financing.
In the long run, leasing is always more expensive option. The only time leasing is wise is if you r smn who likes to drive the latest car out there all the time. If you're gonna buy the newest car model after 3 yrs anyway, 36 mo leasing is a better alternative. Dealers are smart-money dudes. They wouldn't even think about leasing you a car if it weren't financially wise for them.
My Channel It is just like trading your car in. Most dealers will reward reoccurring customers with a better deal. But it really depends on the dealer.
I don’t see how your payments are calculated. I get a purchase payment of 533.75 and a lease payment of 271. assuming a MF of .00023. And 8.5 tax. How did you calculate each of the payments?
I don't understand why the taxes and dearlership fees are factored into financing part. It seems to me those amounts should be paid up front and the financing should be on just the principal.
Well presented. However, this math and comparison is incomplete. In short, this only works if one intends to change cars every 3 years and is ok with always, always have a car payment. Those that buy cars can have 2 to 4yr without a car payment which ends up being better from the financial standpoint.
Great video. Can anyone explain why Leasing gets such a bad reputation? Almost everyone doesn’t keep their cars forever and end up trading in their vehicles so wouldn’t it be smart to just lease? And even once you do pay off your car it’s most likely old and outdated and maintenance fees begin to pile up. (Speaking from personal experience) I just financed a new car and already feel like I need a different car but don’t want to trade it in because it will just have been a waste of money and I owe more than What it’s worth most likely. I wish I leased.
Well, the video is well presented but I'd give it an "C-" on cutting to the chase and describing the real cost of a lease. The aspect that wasn't covered was the "money factor" which most people equate to interest, but it isn't. And an equivalent interest rate is not disclosed so you'll need to be really sharp with math to figure that out, there are places that say multiply the money factor by 2900 to get the equivalent interest rate - i'm not sure that's accurate. However, the short is in a lease, you're paying a higher cost to basically finance the time you have the car in exchange for a guaranteed value at the end of the lease. So if you buy a 30k car with a residual of 22k, the residual is guaranteed is not an economic risk to you. If you buy the car, you are at risk for the residual and the hassle of selling the car at the end. The difference in the bank interest and "finance charge" is you cost for this difference. The part about sales tax on the lease is partially true, you don't "up front" the sales tax for the full value of the car, only what you use; however, you do pay sales tax on the finance charge in most states, whereas with interest you don't.
I seen other videos of people being charged for things after their lease was up. Besides damages what could those be. Is it true dealers will bully you into another car to avoid paying $ in fees.
Wait... so you're saying that for three years you just pay the monthly payment and after those three years you don't have to pay anymore unless you got a new car? Just want to have that clarified
I would never put a down payment on a lease. Sign and drive or forget it. And there are four options, not three. You can sell the end-of-lease car to the highest bidder. Since the lease agreement gives the first-right to buy our end-of-lease car, “flip” it for an instant profit. There is nothing the car dealer or the leasing company can do about it.
Has been that way for YEARS. The dealer actually WANTS you to walk away. Not only do they get to sell you a new car (usually), but the leasing company usually sells the car to the dealer much cheaper then your buyout. So the dealer gets a nice, newer used car to sell. Remember, while the dealer does the paperwork, they have no skin in the game as your not leasing from the dealer, your leasing from a leasing company (Ford Credit, GM, Bank One, etc).
Some people, like me perfer having a newer vehicle. I've bought and paid off cars in the past but did not save much because of the maintenance and repair expenses. I never want to replace a motor or transmission again! Never!
I watched 10 videos that where over 15 plus min you answered and simplify all my question in 7 thank you great vid 🙏
Forgot to mention when leasing you will be responsible for a Disposition fee (fee that is charged by the dealer to you for cleanup of the car after the car is returned, usually $300 plus depending upon the model car you lease) & the Excess wear fee which most certainly will end up costing anywhere from $100 - $500 after you've used the car for lets say 36 months. You will have some excess wear...dings, scratches, wheel & tire damage possibly no way of avoiding it unless you keep the vehicle in pristine condition and even then they will find something believe me! I say make sure you check the terms described under excess wear in your lease contract before you sign the papers. There is more to the lease than described in this vid.
Definitely true 👍🏽 and the manufacturer also have incentives that covers up to $1000 dollars in disposition fees but dealers won’t tell customers that.
Damn...that was put in simplest form. I've seen videos and it was drawn out in 15 min and it was confusing. Excellent video.👌
My favorite cruise guy does car videos too. It put a smile on my face to look a leasing video up and see an old friend lol
This guy covered a lot of info at the end.
no he didnt, he didnt tell you anything about the actual lease terms, he made it sound like NOTHING is negotiable in the lease
Love how easy you explained the leasing process. Thank you!
If you live in the rust belt it’s a great option no worries about salt damage get a fresh car every few years
I dont see how the love it option would work.
Most cars lose almost half their value after 36 months. So that 30k car you drove is now worth about ~18k, why would you buy that car for $22k??
Personally, no I wouldn’t. But, the option is there. Let’s see you have a 15,000 mile per year lease but you put 50,000 miles a year on it. Well, if you don’t purchase it you will have a huge bill for the miles. That is one amongst a few other reasons why oh you might want to consider buying it afterwards
@@UA-camDestinations If you're off on your mileage by 35,000 then you really need to look at making better decisions. In terms of that many miles, it may be advantageous to buy those miles up-front. To buy 35k miles up-front will cost you about $150-$165mo depending on the lease/rate, etc. On such a deal, I would lease for 2yrs not 3. It's VERY likely anyone in that type of situation is driving for work and gets a car allowance of $400-$800mo for mileage anyway thus the costs are mitigated and not a big deal.
What would happen if you drive less miles than on the contract? How it favors the person leasing?
@@osl77 I think when the lease is up, the value of the vehicle will be a bit more because it was used less than expected.
That's the whole point. If the car is NOT worth what they thought it would be worth up front, you drop off your keys and walk away. You owe nothing (except for excess wear and tear and mileage if you went over)
Best video and explanation I’ve seen or read yet! Thanks, Sal!!!
Thank you for taking the time to post this! Incredibly informative!
Leasing is the most lucrative method for the dealership and with that being said you can make your own judgment on what is better for you as the customer.
Totally recommend this video to understand the difference between a lease and buying a car
this was awesome. thanks so much for breaking down the lease process step-by-step so someone like myself actually has a full understanding of how it all works. i feel way more confident about the process having watched. going back to my choice dealership this afternoon to solidify my new leased car and i couldn’t be more excited and ready now
Hey everything okay with the lease? Better than buying?
No mention of lease rates. Important! You can shop lease rates with competitors.
Know what lease rates they are charging.
100% correct. Lease rates are just like ARP on purchases. They do change as the fed changes rates... and many times of year the manufacturer's bank will offer specials.
Thank you for this video and explaining it in such a simple way!!!
Gap protection conveniently explained to avoid stating that if you total your car, YOU ARE RESPONSIBLE for the residual, and the protection will only pay the difference.
Samuel Jacoby I’m not sure you understand what got protection is. In the event you total the car, your car insurance would pay the residual and anything extra, up to the actual cash value of the car. Without gap protection you would be responsible for the rest. With gap protection the gap protection pays the rest of the car. That way if you total your car, as long as you have insurance, you were not responsible for anything.
Thanks I love how u got right too it some of these utubers ramble on and on with boring talk on and on!
I love how you wrote things down. You are a great teacher 👍🏽
Thank you I spent many years in the car business running a major new car dealership chain’s finance department.
Or you can save your money by living in your means and then buy a car with cash. No debt... works every time.
Beautiful video! Short, to point, & w/ images! Please keep making more!
I bought a 2000$ 2007 Honda Civic man I love this car,regular maintenance runs like new
With $2000 you own the car. Some other person will lease a 2017 model at $350 and after 6 months will have paid $2100 and still own no car.
@@bennettkuwan5875 well you wouldnt be able to buy if you gave them $2100 unless the car cost $2100 so whats the point of saying that???? clearly the 2017 is worth more than $2000 lmao
what was the mileage when you bought it?
@@Theycallmekenney My problem is, if you suddenly loose your source of income, you loose your car and are left with nothing.
Bennett Kuwan is your lose your source of income you can’t put gas in the car you own or pay for insurance sooooooooo what’s the point? I don’t think anyone would be financing a car with a job that’s volatile or at least have some money in the bank. There’s steps to financing like, have a decent job?
The banks aren't in this to lose money, folks. They win all the time, whether you lease or finance. Only difference is at the end of a finance, you'll own something of value owe no more money to drive your car. "The cost of depreciation is built into the lease payment" -- Dave Ramsey
Dave Ramsey is an entertainer. He has no financial wisdom. He is broke himself.
UA-cam suggested this video after I watched a Dave Ramsey video, totally thought it was some kind of snl style spoof where at the end he would say "just kidding! Leasing is terrible idea!"
The best car lease you'll ever have is the lease you DON'T have. Don't get fleeced. Did you catch the "get the most for your payment" gimmick? He didn't say "you can pay less for the same care", but rather "you can drive more car". More car. More gap insurance. ZERO equity --- ever. That future value will never be higher than what the car is worth. If it was, they'd ding you for excess wear and tear on the lease return. Don't think the leasing system is designed to benefit YOU instead of the dealers. But, hey, if you never want to have any money, go ahead and use the most expensive method to rent a car. Ten years from now when you are on your fourth lease and can't figure out why you have no money, look in the driveway. Buy something you can afford. Work your way up.
First time for me to lease. First vid as well. Holy smokes. I need to lease
One con of leasing is horrible dealers that try to nickel and dime people on damages to vehicle. They will push their way into your wallet any chance they can get
One thing you didn’t include was the apr on top of the lease price
Yep and he forgot to mention that tax on the down payment will be based off the city you live in.
"...you walk away owning nothing..." Yeah, and you HAVE nothing. Gotta Uber your silly way home.
I've purchased 5 new vehicles in my life, the first at .9% financing the rest at 0% financing.
Here in Miami fl, they want to charge like $2000 plus taxes. Plus tag and transfer, plus electronic fee?like wtf
Good video. My only comment is when it comes to "owning" a vehicle, this isn't said regarding the lien. Rather it's regarding customizations and modifications on the vehicle as well as various damage. If I finance, I can do largely whatever I want with the vehicle. If I lease, I'm very limited. But of course, for many, this isn't a big deal. I swapped out my radio, upgraded my seats upholstery, added window tints, among a few other things. The window tint is about hte only thing likely allowed with a leased vehicle.
Nothing said about money factor. He conveniently left that out of the equation
car dealerships don't give give that much residual value. comparing 5 year financing with 3 year lease isn't a valid comparison
Harpreet Kaler I disagree. The average finance is 5 years... the average lease is 3.
The residual value is almost always very close to Kelley Blue Book, every lease I have had nailed it. And that number is not coming from the dealer by the way. What that means is after the lease, you can buy the car for about what you would expect to pay for the exact same car on the used market.
Great explanation of leasing thank you.
Lease is a good option if you are getting the lease with "Zero down payment "
Secondly,if you get the deal at 1% rule i.e. the selling price,taxes this fees and that fees all including you get at 1% of the amount
For eg if the total comes out 30,000 u r getting it at $300 per month everything included with zero down
Never pay any money down on a car lease coz if by chance it is totalled ur down payment will go down the drain
In a lease, should you negotiate price and trade-in value before adding in incentives? Or at what point should incentives be brought up?
Usually if you turn in lease car you have to have it inspected and pay a fee around $400-$500
That’s not true. Your paying that up front in the lease as part of the lease fees. It’s built into your payment
@Sheldon K; that may be true but not in all cases. Yes, most leases have a disposition fee but those are likely to be waived when negotiating your next deal. In many cases manufacturers and their corresponding lending agencies have programs to alleviate that. Example: Lincoln has a 33mo pull-ahead on their 36mo leases. My wife has done this with hers. At 33mo's they will allow you to exit the vehicle and lease another brand new one up to 3 months early and the cost to do so is ZERO.
Seems like you forgot one key item. What about interest charges on the cap cost plus the residual?
And the rent charge, oh mylanta!
yea, that's like leaving out the punch line for sure.
So simple to understand 🤯
You forgot monthly money rent fee charged and that what you paid on the lease is completely gone when done. When you buy the vehicle is yours.
No, it’s not gone. If you notice, your buyout at the end of the lease is much much much less than the purchase price on the car. You’ve pretty much paid for that portion plus interest. Same as if you were financing it.
so many uneducated people with no basic knowledge of finance. sigh. Your monthly "rent fee" is always lower than the depreciation of your car
@Gabriel Olinger you need to review the two side by side and think through things. When you "buy" a vehicle, yes, the vehicle is yours, but all you're doing is paying more up-front to do nothing more than simply tie up your money/equity in a depreciating asset. No one wise with money would ever suggest you do that. Your equity is what is completely gone when done. The exact opposite is true on a lease.
The idea of leasing is to pay-less up-front and invest the difference into something that is earning you money, whether that's a financial vehicle or property. You do so starting in month one too.
Take the average SUV/car going for $35k. That's $650mo for 60mos. Dumb. Lease as nice or nicer new vehicle for $400-500mo and save the difference. They way you calc it out is to determine/look up the likely value of that $35k vehicle in 60 months. A small SUV like a Murano will likely be worth about $11k. Then simply take $11k / 60 months and that will tell you how much lower the lease payment needs to be so the amount saved/invested is equal to what the buyer would have in equity at the end of the same 60 months. The number here is $180. Thus go lease a vehicle for $470 mo and begin saving that $180mo up-front.
No one wise with money would ever lease. There is nothing smart about resigning yourself to making car payments for the rest of your life. Yes depreciation is a killer, which is why you buy a used car with cash. If you need to finance or lease a car then you cant afford it.
@@ms3er396 if you were smart about finance.. you'll buy a used car with cash. not lease.
so with the leasing deal I am figuring the interest that is not calculated here for the lease comes out to be about $3093. You are financing 8,540 for 36 months at 323.14 per month and that cost you $11,633.. Why is taxes calculated into the financing? so with the lease you are paying 901.04 in taxes and the financing is making about $2,332 off the $8540.00 amount financed. The Gap protection should also cover the value at the end of the lease if you go over any mileage restrictions, etc.. If they finance that car again with another lease then the more money they make. Another thing is why should you pay full coverage on the vehicle if the bank is on the title because I am sure they've insured the vehicle just as well as it rightfully belongs to them until the loan is paid off.
Never do down payment on a lease.
may i ask why?.. everyone says making a down payment helps lowering your monthly costs.
@@michiloui9810
never look at monthly payments. Always look at what you’re paying overall for the lease period.
Scenario 1.
$230 for 36 month. 0 down = $8280
Scenario 2:
$200 for 36 months. 2000 down = $9200
That is not how it is going to work. If you want to forego a down payment they will tack it onto the lease plus more. It would be $260 a month with 0 down at the minimum, not $230. If you think the dealership will just decide to lose a few grand you are out of your mind.
The problem with his assumption is he's using a 73% 3 yr residual, which almost no vehicle has. Leasing does make more financial sense than buying a new car If you were going to buy another new car in 2-4 years anyway. Obviously buying used and keeping a long time is cheaper in the long term
Correct.. one of many issues with this lease/finance comparison... With leasing as well as financing each case will vary. For leasing- money factor, residual value rebates offered etc... You cannot make such a comparison as a blanked statment.. it's simply false
The residual (buy out) was just an example. Different cars and different lease times, will effect the residual. Either way, the residual is like that because they are trying to forecast (as accurate as they can) what the vehicle will actually be worth when your lease term is over. Either way, the point is, it will get you a much lower monthly payment then when you purchase a car. And since most people trade their vehicle in, before they ever pay off a car, they never see a free and clear title anyhow. So why not buy more car, for less payment, more often?
Not common but definitely out there. For example a 2019 Tacoma TRD Sport has a 78% residual
This video is excellent
Thank you for this video. Very informative.
Thank you for watching :)
It comes down to a renting or financing depreciating asset. Smart money people will research cars for reliability, cost of ownership, their needs and then save up their money and outright buy a good car that already lost the steepest decline in depreciated. Understandably dealers don't like people that are smart with their money.
You for get to tell people that they base a lease off the MSRP. So that 30k vehicle may have a purchase price of 30k but MSRP is 40k. So now there is 10k you have to pay for.
Don't get gap from the dealer get it from your insurance company
Gap insurance is free on most leases. No need to buy it from your dealer or from your insurance company.
I will ask thanks
Great video - I don't really see the mileage charge as a penalty like most people do - you are getting you drive more than you agreed to for a very low per mile price! I think that one item keeps so many people from leasing just because they are thinking about the wrong way. If people thought of it as a good deal they would be willing to drive as much as they wanted.
Excellent video !!! Thank you !
Great advice thanks
Vehicle Fleecing.
Meant to say all that happens when you don’t release with the same car manufacturer
He just started screaming lmaoooo
Never put a down payment on a lease good bye folks
Key is who to trade it with.
I own my car and never what to make another car payment again. Leasing is definitely not for me.
In the leasing example, what was the math on the $302 sub total?
Right? Perhaps the money factor or aka the interest rate?
You never talked about the interest they charge you aka money factor. That’s how the dealerships make money. Critical omission
I was compatriot apples to apples. Dealers also get a commission based on the interest rate on a purchase too.
Sal Pitera Or how the dealership nickel and dime you for every scratch and dent when you return on a lease
@@sidharthchand8072 I have had more than 5 leases in my life and have never been charged for dings and dents. #1 reason? Dealers don't do the inspections, at least not for my Honda's and Chevy's. Dealer just takes the car back, end of story.
Awesome video that simply broke down what I needed to know thank you so much man
I love you man !..... You did not seek to sound like an expert...
So the only negative is higher insurance cost (in England it would need fully comp and GAP insurance.
However only an idiot wouldn't have fully comp as it covers damage And allows the insured to drive another insured vehicle (albeit 3rd party only) but legal never the less.
The biggest thing is how much to put down ,as an example in the UK it's usually an amount of months,so maybe 3 months upfront and then 36 months at X amount.
We don't pay tax on payments (well not separate ones apart from vat (20%) which a business can avoid if vat registered,but an average buyer can't,but the vat is in the quoted price.
What's your thoughts on the leasing company offering fixed rate servicing for an amount per month over the duration of the lease (seems to be about £30 a month) for a £30'000 car.
I would negotiate the purchase price of the vehicle down to invoice or below then lease at that amount with no money down.
If leasing a Toyota Tacoma which has a good residual value the monthly payment should still be reasonable.
If choosing a 10,000mi/yr limit and I go over by 5000mi/yr. on a 36mo lease, my mileage penalty at .10/mi would be $1500 or $3000 at .20/mi Based on the total of 15,000mi excess. This would only matter if I was turning it in and walking away. Right??
What I would do is sell it privately a couple months before the lease ends for more than the residual amount (or the Pay-off amount), if I couldn't trade it in for the residual or Pay-off amount.
Then I would start a new lease with a new truck again at a discounted purchase price and with no money down.
Is this a good plan?
GrandPines323 one thing people forget you can still negotiate in a lease
When I lease... and yes, I lease... I first tell them what I am willing to pay for the car. Then I get their lease payment on it. Then negotiate from there as their first payment certainly will be at a higher lease factor (interest rate), just like they do on a purchase. General rule, I tell them I am willing to pay 100 over invoice and 2 points to the dealer (that means the bank pays the dealer 2% for doing the paperwork at the interest rate they sell it at. They are allowed to upsell up to 6% so 2% is fair.
Sal Pitera we were told at a dealer that the lease payment comes from the MSRP, not the price on the windshield. And that it’s set by the manufacturer. That didn’t seem right to me.
You forgot to mention that leasing is the largest revenue producer for every auto dealership in America! So yes it's very good for the dealership but NOT for you!
Unless you are able to write your lease off every year than by all means lease two vehicles! That way you won't go past your allotted mileage per year! If not than buy! You may not have much but what you have belongs to you!
There is no way that a $30,000 car is worth $22,000 after three years. New cars LOSE on average 55% in the first 3 years, so the car in the example would only be worth $13,500. The finance company is guaranteeing themselves, NOT you, that it's worth $22K so they can sell it to you or someone else after the lease is over. By the way, the total of lease payments in the examples is actually $11,628, so your effective interest rate is 36%!
what am I missing here... when you put 2k down on the lease.. wouldn't that lower your total financed amount???
It’s crazy crazy for a car that costs 32k with 2k down they want close to 600 a month crv ex 2022
2500 over sticker 34k walked away
Im still curious as to where is the best place/dealership to lease, what insurances do I really need as a first time driver, and what dealer fees should/could I argue to be waived.
Great video, thanks.
Turn back the car you pay the disposition fee. You’re giving back a car with very few miles and you might be responsible for excess wear and tear? Unless you write it off and take a business deduction it’s not a savvy arrangement. There’s also a money factor x .0024 x interest rate which you pay on the entire cost of the vehicle each month. Also, if you decide to keep the car you now have to finance the residual value of the car. The banks treat the car as a used car so you will be paying a higher interest rate than a new car with a conventional loan. Plus you miss out on manufacture rebates that would go with a new car purchase. Lastly you need at least a tier 2 credit score to lease a car under normal conditions- 680 and above. Most banks want to see at least a 700 fico score, so that eliminates a few people.
Is my math off...
$8540\36=$237 not $302. Where are you getting $302 from?
Very informative video. I wish I would have leased My new Camaro last year instead of a 72 month loan. Still love you Cruise reviews.
Thanks Joe!
I think leasing will be good for me because my mom is planning on handing me down her car and buying a new car in 3-5 years.
If your mom is handing you down her car, why do you need another???
Raymond Cadoret she’s not doing it until 3-5 years from now. So I need a car for the next 3 or so years until that happens.
@@willcee4966
👍👍
Gotcha
You missed one option: cash. No monthly payments, no sleezy finance manager to deal with.
Leasing? Dave Ramsey calls that a fleece.
$50,000+ trucks are better known as Stupid Trucks.
It's great to be debt free.
Dave Ramsey is in show business. He has no financial wisdom. And he wants you to drive junk like Honda or KIA.
How do I negotiate the price for a lease, I'm considering it. My credit score is over 800, should I find financing before going into the dealership? Any pointer would help, I never leased before
If I'm using a vehicle for work but not putting a lot of miles on it and plan on getting a new car every 3 or 4 years is leasing my best option?
You didn't mention or write in the finance rate for the lease which is the only issue I have with leasing. You use a money factor which there is a formula to convert to interest but you don't disclose it on the contract other than to write in rental fee. Basically you can charge whatever interest you want on a lease since the Fed Res doesn't control that but they do on financing.
In the long run, leasing is always more expensive option. The only time leasing is wise is if you r smn who likes to drive the latest car out there all the time. If you're gonna buy the newest car model after 3 yrs anyway, 36 mo leasing is a better alternative. Dealers are smart-money dudes. They wouldn't even think about leasing you a car if it weren't financially wise for them.
I’m looking to lease a Dodge Charger !
Life With LB same, used 2015 sxt, hope it’s worth it! $19,999
Do you get a special deal when you return your leased car and then lease another one from the same company. Like a loyalty program or something.
My Channel It is just like trading your car in. Most dealers will reward reoccurring customers with a better deal. But it really depends on the dealer.
This was great thank you!
Money factor???
I don’t see how your payments are calculated. I get a purchase payment of 533.75 and a lease payment of 271. assuming a MF of .00023. And 8.5 tax. How did you calculate each of the payments?
I don't see how monthly charges is $312.14 for 3 years total financed at $8540. I calculated it to be around $250.00
I don't understand why the taxes and dearlership fees are factored into financing part. It seems to me those amounts should be paid up front and the financing should be on just the principal.
You forgot to mention that at the end of the lease that there is typically a fee if you walk away
Obed Diaz No theres not
@@jrc2976 yes there is. I worked at 3 different car dealerships from different owners and brands. There is a fee.
@@jrc2976 I have a 350 fee if I walk away from Toyota. This is normal man...
What about if I go to Honda and lease from them and return my mazda, will they take the mazda?
Well presented. However, this math and comparison is incomplete. In short, this only works if one intends to change cars every 3 years and is ok with always, always have a car payment. Those that buy cars can have 2 to 4yr without a car payment which ends up being better from the financial standpoint.
Great video. Can anyone explain why Leasing gets such a bad reputation? Almost everyone doesn’t keep their cars forever and end up trading in their vehicles so wouldn’t it be smart to just lease? And even once you do pay off your car it’s most likely old and outdated and maintenance fees begin to pile up. (Speaking from personal experience) I just financed a new car and already feel like I need a different car but don’t want to trade it in because it will just have been a waste of money and I owe more than What it’s worth most likely. I wish I leased.
Well, the video is well presented but I'd give it an "C-" on cutting to the chase and describing the real cost of a lease. The aspect that wasn't covered was the "money factor" which most people equate to interest, but it isn't. And an equivalent interest rate is not disclosed so you'll need to be really sharp with math to figure that out, there are places that say multiply the money factor by 2900 to get the equivalent interest rate - i'm not sure that's accurate. However, the short is in a lease, you're paying a higher cost to basically finance the time you have the car in exchange for a guaranteed value at the end of the lease. So if you buy a 30k car with a residual of 22k, the residual is guaranteed is not an economic risk to you. If you buy the car, you are at risk for the residual and the hassle of selling the car at the end. The difference in the bank interest and "finance charge" is you cost for this difference. The part about sales tax on the lease is partially true, you don't "up front" the sales tax for the full value of the car, only what you use; however, you do pay sales tax on the finance charge in most states, whereas with interest you don't.
A lion trying to sell a gazelle a new pair of sneakers to help outrun the other lions...lamo
Actually, I have not sold cars in years. I have no reason to push anyone into leasing. Its not for everyone. But I want to help people understand it.
Lol yep
@@UA-camDestinations Don't let a hater make you feel bad for having the heart to even go out there and educate people.
I seen other videos of people being charged for things after their lease was up. Besides damages what could those be. Is it true dealers will bully you into another car to avoid paying $ in fees.
So leasing isn't paying over time to own? It's just like renting a car?
Here in canada if you lease gap insurance is included.
Thank you for sharing.
If the car is selling for 25000 what costs should you pay up front as far as your down payment I live in New Jersey thanks
Wait... so you're saying that for three years you just pay the monthly payment and after those three years you don't have to pay anymore unless you got a new car? Just want to have that clarified
It was my understanding that a down payment is kinda like insurance. A garunteed 2k before they let you drive it away.
Not really. You can lease with no down payment. Like a purchase, a down payment will just lower your monthly payment.
Terrific video and easy to understand! Thanks...
Yvw. :)
I would never put a down payment on a lease. Sign and drive or forget it. And there are four options, not three. You can sell the end-of-lease car to the highest bidder. Since the lease agreement gives the first-right to buy our end-of-lease car, “flip” it for an instant profit. There is nothing the car dealer or the leasing company can do about it.
If you don't mind me asking. Why won't you put a down payment on a lease.
I agree with you. But I wanted to compare apples to apples.
This is guy is a lease simplicity Yoda.
Option 3 (Leave It) is not that simple. Usually the dealer dings you with a disposition fee if you walk away
Has been that way for YEARS. The dealer actually WANTS you to walk away. Not only do they get to sell you a new car (usually), but the leasing company usually sells the car to the dealer much cheaper then your buyout. So the dealer gets a nice, newer used car to sell. Remember, while the dealer does the paperwork, they have no skin in the game as your not leasing from the dealer, your leasing from a leasing company (Ford Credit, GM, Bank One, etc).
Or, you own a car after five years and don't have to continue with monthly payments. Even crazier, pay cash for a car that you can afford.
That is true. But statistics say that 90% of new car buyers trade long before their car is ever paid off. This is for those people.
Some people, like me perfer having a newer vehicle. I've bought and paid off cars in the past but did not save much because of the maintenance and repair expenses. I never want to replace a motor or transmission again! Never!
Greek Sun this is exactly why I am searching reviews on leasing!