Cara753

First time Lexus owner, about to sign a lease in south Florida... on my new ES350 Premium Package ($36,242) I've been given the option of $2,000 down and $480pm plus tax (36 months 36,000 miles), or, by another guy, nothing down and monthly payments of $599 plus tax. Any advice? Opinions?

ES350Bob

Cara,

Well you could save the 2,000 and view it as paying it at 119 per month for the next 16 months with diff in monthly payment.

I wish i could be of more help with a lease but that's the best I could offer.

Do leases start assuming full sticker price? Maybe someone more familiar with that will add their knowledge.

MD350

Dealer can decide what the selling price on the leased new car will be. However, they will shoot for MSRP..if the buyer accepts, they will take it. The problem is that most lease customers are payment shopping, without looking at the sales price. Dealers love leases, they usually make more profit. So, they will quote you MSRP first, I am sure.

Bob is right. Compare apples to apples. What is the buy payment with the $2K down? If you can handle the difference, buy the car and pay the higher payment. I think you can negotiate a better deal on the buy.

However, if you own a business, a lease will be better for tax purposes.

Bottom line, if you can afford the buy payment...buy the car and don't lease. Just my two cents, and I work for a finance company....which finances auto loans

ES350Bob

MD,

Do you mind elaborating?

What if any benefit would there be to get much lower than sticker in a lease as regards monthly lease payment amount?

If there is a benefit then she needs to bargain with dealer on that first then to maybe get an even lower monthly lease payment?

toneman

Just as when it comes to purchasing a vehicle, the first thing to shoot for is negotiating a purchase price for the exact vehicle you're looking to purchase--i.e., how much are you willing to pay for the car. Once you and the salesperson come to an agreement on this, all that is really left is (I will leave out the relatively-minor stuff like penalties for excessive mileage/wear/etc.):

--Length of lease...e.g., how many years/miles per year; this determines what residual value is applied to your lease.

--Residual value; this isn't really something you can negotiate but can be a factor towards how long a lease term you're shooting for. Also, the residual dollar amount is based on a percentage of the MSRP of the vehicle so no matter what purchase price you're able to negotiate, it will not affect your residual value one way or the other. I believe that as recently as three months ago the residual on a 3 year/12K mile per year lease on an ES 350 was 60% of MSRP. The residual value is used in part to calculate your lease monthly payment.

--Money factor; based for the most part on your credit history, but other factors such as what region of the country you live in, and perhaps some dealers taking advantage of you not knowing what is a fairly-valid MF in your situation could account for variances in this figure.

--Down payment (AKA cap cost reduction); just as in a purchase contract, this reduces the amount being financed. One reason you'd do this if the monthly lease payment is--if everything else is all said and done--still a bit too high for your tastes; the one negative for putting any money down towards CCR (and when I say down payment, I am not talking about out of pocket expenses to be applied towards license/registration/acquisition fee/etc.--which BTW you could roll all those costs into the lease if doing so helps increase your tax write off (at the expense of a higher monthly lease payment)) is that if somehow you vehicle is written off as a total loss (e.g., unrecovered theft or accident), your down payment has just gone down the drain. In any case, you need to weigh your options when it comes to whether you want to put money down towards your lease...

Cara753--in order to determine whether you think you're being offered a fair lease deal, you need to factor in all of the above (plus the sales tax for whatever jurisdiction you live in), then plug those numbers into a lease calculator to see if the numbers jive. If you would like for me to figure it out for you, then I'll need the MSRP of the exact car you're looking to get, the purchase price of said car (before taxes/fees/etc.), residual value/percentage (I'm guessing that it'll be 60% based on you saying that the lease was for 3 years/36K miles but it might have changed a wee bit since last I heard), your MF, and the sales tax for where you live. The $2K down payment you mentioned--is all of that to be applied towards the purchase price of the car, or does that amount include any registration/license fees, tax, acquisition fee, or other fee not part of the purchase price? If the $2K includes registration/etc., then I'll need to know exactly how much of that $2K is actually being applied as CCR.

You can PM the numbers to me if you don't feel comfortable posting the numbers (I can see why one might be hesitant to post one's MF, but if you have excellent credit, then this shouldn't be an issue for you) for others to see.

MD350

Toneman's descrption above is right on the money!!

The bottom line is this, and I see this all day long while financing auto loans. Customers want to know what their monthly payment is going to be, they don't look at the sales price. "What's my monthly?" That is the question. The dealers love customers who shop this way, because they can "roll" the payment into their computer system and the computer maximizes the profit and spits out a deal structure. So, if a customer is smart enough to negotiate the sales price in a lease, you can end up with a lower payment. But, the dealer is going to shoot for the sky and quote MSRP first. If the customer bites, it is a deal.

More customers need to be smart and look at the sales price, trade allowances, interest rate (or MF) and then worry about payment.

So, if you notice Cara's question, it is all about payment numbers. I am assuming dealer is closing Cara on payment only, not sales price. That is very dangerous.

Negotiate the sales price on the lease and buy, then worry about payment.

toneman

MD350--no kidding regarding your comment about how more than a few buyers try to obtain a great deal (to them) based on how much of a monthly payment they can afford; hey, if you're willing to shell out X dollars per month...more power to you. But if you're trying to be a smart shopper and get the most out of your purchase--like MD350 said, trying to cut a deal based on price is not the smartest way to go about doing so. Matter-of-fact, I had to explain just that to my brother last week...I had to convince him as to why he thought it was okay to get a deal based on how much he was willing to pay per month (reasonable amount, of course) when he could save a bit of money simply by doing some research and obtain the best purchase price. After all, why pay more when you might not have/need to?

Evitzee

With car prices being what they are these days the buyer has shifted away from 'what will this cost me in total cost' to 'how much a month will it cost me?' The first buyer is a wealth maximizer, the second is a payment minimizer. There is a big, big difference in this approach. Once buyers started shopping for the price per month instead of the big picture the leasing gimmick really took hold. I say gimmick because leasing is almost always the most expensive way to drive a car as you are perpetually making payments. Leasing is sold on the premise that you only pay for the portion of the car that you use. True, but all cars take their big hit in depreciation the first couple of years of when they roll off the lot. So the lessee is perpetually paying the high depreciation rate. You may get to drive a newer car more often, but you pay dearly for that privilege. I hear young guys in their 20's saying 'such and such car' is only $499/mo. That's fine, but who wants to spend $500 a month (in today's dollars) for the next 40 or 50 years? Not me. I carefully pick out my car and take out a maximum 36 month loan, and usually keep my cars for 7 or 8 years, so that means I have 4 or 5 years of no payments. This really drives down the cost of running an automobile. I don't need a new car every 3 years. And most cars (especially Japanese) are so reliable that they can easily go 10 years or more without major repairs. The old saw about only leasing or owning a car for the length of the warranty is silly.