lesz

My thinking isn't based on things like the car having to be returned to the same dealer or other things that you mentioned. Instead, it is based on the fact that the depreciation for the bare-bones ES is going to take a much bigger percentage hit than will the depreciation for a more nicely equipped vehicle. Thus, the residual value of the bare-bones car is going to have taken a much bigger hit in percentage terms than the residual value of the more nicely equipped ES. Since that lower residual value is a major factor in determining the lease payments, the offer that the dealer can make through Lexus Finance for the bare-bones car will not be as attractive as the lease offer for a more nicely-equipped ES with a residual value that is a higher percentage of the car's original MSRP.

SW17LS

You'll get a much better deal on a typically equipped car on the lot at a dealer.

gmanusmc

I understand what you are getting at but a major portion of your first post stated that a dealer might be hesitant to take in a bare bones lease return and have it on their lot for an extended period - I was just pointing out that's really not an issue if the dealer doesn't want it to be - the lease return belongs to Lexus Finance, not the dealer. Also, I don't believe the residual, percentage-wise, is different on a lesser equipped ES350 than one with more options (other than the difference for mileage allowance and length of lease). Of course, it is understood that a car with more equipment will be worth more after a few years than a bare bones car but that is mostly because it cost more to begin with. All this being said and done, the dealer's quote of 650 a month for a $40k ES350 seems way out of line when others are leasing for around 450 or less for ES350s with msrp's of $45k or more.

SW17LS

There are definitely different lease rates for different package levels...

gmanusmc

I agree that money factors can vary Steve but I'm referring to residual value percentage. When shopping for our ES, the residual percentage was the same regardless of price point - no difference between premium, luxury, or ultra luxury - only variation was with lease term/mileage allowance. Even if there was a regional difference, which I understand there is sometimes, it would be 1-2% which amounts to $400-800 difference - that would not account for the massive disparity we have in the example we are looking at in this thread. Hopefully, with a detailed break down of the deal, jasone can determine how these folks are arriving at the number quoted.

SW17LS

Residuals absolutely vary on trim levels too. When I leased my ES in 2010 there was a different residual and money factor for UL cars, when I leased my GS in 2013 there were different MFs and residuals on luxury package, F Sport, and base cars. For the Jeep, residuals were dramatically different depending on trim level. I can't speak to currently on the ES because I haven't priced one since 2012, but I recall the UL having different residuals and MFs in 2012 also.

For instance, thats why in 2010 I did not get a UL ES. Thats also why I got an Overland Jeep and not a Summit. The luxury package ES and the Overland Jeep leased significantly better and had better residuals than those higher trims.

Leases are also cash dependent. If he's paying closer to MSRP on a low optioned car thats hard to find or a big spread off MSRP on a higher optioned car thats on the lot, I can absolutely believe the higher optioned car could be a much better lease.

gmanusmc

I agree with you that residuals "can" vary between trims - that's been the case when I've been shopping Acura's/Honda's. I don't know about Jeeps - never shopped for one. I do know this - leased a 2013 and 2016 ES350 - spent a couple months in each case shopping, pricing and crunching numbers - the residual percentage was the same between option packages (at least here in CA). You might have a point about a bare bones vehicle - I've never shopped for one or actually seen one on a lot so I don't know. I'd really be interested in seeing the selling price, money factor, and residual percentage that would result in a $40k msrp vehicle to lease for over $200 more a month than a same model & year $47k car. Like I said in a previous post, getting a detailed breakdown of the quote jasone received would probably fill in the blanks here.

jasone36

This is a wonderful discussion (I am the OP).

Overall, my impression was that the dealer was utterly uninterested in leasing a base model car (as others have stated here)... and my credit would be Tier 1, so that's not the issue.

Moreover, the dealer would not allow me to take a copy of the paperwork home (obviously I did not go through with the deal), by saying I can simply write down whatever I needed.

When I indicated to the dealership that leasing brokers in the area are offering me around $440 per month on a 46K MSRP 2016 model, they escalated to the "manager", who came out to see me, briefly introduced himself, and said (fairly politely) that dealerships typically cannot match or even come close to the pricing offered by leasing brokers because "leasing brokers write their own paper on their own terms... while the dealerships are locked into certain pricing ranges".

At this point, I asked for the Money Factor on that ridiculous deal, which was given to me as .0019... and then the manager again (politely) said something to the effect of "if you're looking to bargain and analyzing all the numbers, please do that on your own..." He was diplomatically asking me to stop wasting their time, essentially confirming they can't match leasing broker's prices in the area.

My strategy is now to shop via the leasing brokers, and watch closely for next month national "lease deal" for an indication of where things are going on the 2017 ES350's.

lesz

If the residual is anything close to being an accurate predictor of what the car will be worth at the end of the lease, it would make sense that there would be a different residual for a bare-bones ES than there would be for a better equipped one because there is no question that the bare-bones ES will take a bigger percentage hit on its trade-in or re-sale value a couple of years down the road.

There is someone who occasionally posts here and who is used car manager at a Lexus dealership, and he, in other threads, has confirmed this to be the case. He has said, for example, that used ES buyers want popular options, such as navigation systems, and that he will severely discount the dealership's trade-in offer when someone wants to trade in an ES without a navigation system because he knows that such a vehicle is much more likely to sit on his lot for an extended period of time and that it will have to have its price severely lowered before it sells or else he may have to send it to auction.

For the OP, if he really wants a bare-bones ES, it might be worth considering a used 2013 or 2014 ES because those cars will be ones whose value has already been severely discounted because of the lack of popular options, and, thus, those cars may very well be the best ES buys.

gmanusmc

Yes - the .0019 money factor explains a lot. To get to approx 650 a month would require a selling price of msrp, about $2000 in fees, 62% residual, 9% sales tax and zero at signing. Truly a deal from the twilight zone.

Hope you're able to find a more reasonable deal jasone - please let us know how it goes.

Bill G

gmanusmc

I noted on our currrent lease that Lexus has adjusted their residuals to a more reasonable percentage. I think our 36 month deal was 62% which will probably be close at lease end. The 24 month residual on our IS350 was 73% which ended up about $3-4k higher than what the car was actually worth at lease end (immaculate with less than 15k miles). So, I think they have learned and adjusted accordingly.

You are correct - not many folks want an ES without navigation.

SW17LS

I'm sure it varies on time of the year, whatever promotions and programs Lexus has at whatever time. Bottom line is that LFS DOES charge different residuals based on package levels, they may not ALWAYS do that, but they certainly can and do from time to time.

For my luxury package GS for instance the residual was 2% lower than a premium or base GS, and an F Sport was 1% lower than a premium or base GS. The MF on all the base and the premium was a little higher than the MF on the luxury. So the luxury had a lower residual, but a better MF. All of that changes from month to month.

If you want to get the "rack" MF and residual, then check out Edmunds leasing forums. Theres a guy there that posts the figures every month, that way you know exactly what the program is for that month, residual, MF, any lease cash and you will know when the dealer marks it up (in my experience they always at least try to).

Thats a HORRIBLE MF. Good lord. The MF on my LS is .0008 and my GS was .0007...don't remember the ES but that was a long time ago. I'm sure thats a marked up MF. If that was really the MF on an ES they'd never lease any of them. You can lease a GS for less than that.

If you're in NY, I would use a lease broker. If they can't be competitive I'd just cut them out. No lease brokers here, and I could get one from NY if I wanted but it would be a pain.

62% after 36 months is still pretty aggressive. My GS was 58%, which was aggressive, but that was 15k miles and the GS doesn't hold its value like the ES. I think my 2010 ES was 51%, which was quite weak.

On a luxury car IMHO anything over 55% on a 36 month lease is aggressive. Manufacturers know what they're doing though, they know they're robbing peter to pay paul with these high residuals, they do it to get low payments and move product.

gmanusmc

Oh yeah, been a member of the Edmunds forums for 15 years or so. Your posts got me thinking so I touched base with Michael over there who is one of the guys who helps folks out by providing up to date leasing info. For what it's worth, he states there is no difference in residual percentage based on options or packages for the ES350. That's consistent with what I encountered in leasing both of our ESs. I believe what you are saying about the GS because I know you are a stickler for details - I don't have any shopping or leasing experience with that model. I'm somewhat baffled by the seemingly cavalier treatment jasone got from the dealer - seems like they went way out of their way NOT to lease him a vehicle - really strange.

bostonsnow

If you can wait, around the time of the holidays there will be in general some overall Lexus discounts on the 2017s in the "december to remember" sales event. In general, a lower sales price should translate to better lease.

lesz

Even if they are keeping the residual % the same regardless of trim/option levels, if they are raising the money factor, it has the same ultimate effect on the bottom line cost of the lease. With multiple variables involved in lease terms, that is what makes leasing confusing to the typical car buyer, and I'm confident that manipulation of the multiple variables is something that dealers can take advantage of to better their bottom line.

I still suspect that the dealer or, more accurately, Lexus has little interest in leasing a bare-bones ES because, whether it is the dealer or Lexus, they don't want a low demand car coming back to them that they will either have to sell at auction or reduce the price of significantly to dispose of it. And, whether it with an unfavorable (to the customer) money factor or an unfavorable residual %, they are showing that they don't have much interest in making a deal on a bare bones car.