Stealership lease

[minisoda]

Have been kicking around the idea of buying a Wrangler for a fun extra car at our home in SWFL. Noticed the Stellantis / federal incentives on 4xe are really good right now ($13k) and decided to pull the trigger. Have a 2017 X5 trade in that the Jeep website estimated $20k trade-in value.

1. Called the first dealership and worked with a complete tool over the phone. Didn’t know that the 4xe had a Rubicon package and when I asked him to put pricing together, sent it to his “deal desk” to put pricing together.

2. Waited a day for the “deal desk” to call me back. Got a call from a guy the next day who started negotiating on the trade. He asked me, “what I owed and what I needed to get for it”. I told him we owed nothing and just want fair market trade in value. He offered $16,500 which didn’t totally surprise me, but then came back with a lease payment of $350/month!

3. I told him the Jeep website with the same 10k mile 36 month lease and a $16,500 trade in came back with a lease payment of like $30/month.

4. I double checked all my figures and told him I didn’t understand why were so far off from their own website. I asked him what residual value they applied … he said he didn’t know and needed his manager to call me.

Unique situation why it makes sense for us to put that much money into a lease down payment, but it makes sense for our situation. I triple checked my numbers and the only thing I can surmise is that they just thought they could pull a fast one and screw me over.

Am I missing something here?

Price was $53,500 MSRP
- $3,200 dealer savings
- $13,000 incentives
———-
$37,300 price + taxes and fees

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[Ratbert]

Consider checking the spreadsheet in my sig. Hopefully you'll have better luck with them.

 

[TheBirdie72]

@Ratbert ’s spreadsheet has apparently saved so many people so much money on new Jeeps that I think he deserves a cash bonus… Now if we could just create a go fund me page… and everyone gives at least a nickel… ?

No seriously… excellent resource. ?

 

[Goesquik]

Find a better dealer as mentioned above. With the incentives you should walk out with them cutting you a check. My $63k Willys 4xe would have been like $5/month if I had your X5 to trade-in ?

 

[morph860]

Are you looking to buy it from a FL dealership? If so, reach out to Mike at Lakeland. They are one of the dealers in the spreadsheet mentioned above. Lots of people on here have ordered from them. I have 2 orders in process with Mike and the process has been great so far.

A lot of dealers in FL have “dealer added options” on their in-stock vehicles. LoJack, tinted windows, nitrogen tires, paint protection, etc. I’ve seen this stuff add $3-7k to the price. Ordering will let you pick what you want and don’t want.

 

[JLRyder]

Buy somewhere else.

 

[Ratbert]

@Ratbert ’s spreadsheet has apparently saved so many people so much money on new Jeeps that I think he deserves a cash bonus… Now if we could just create a go fund me page… and everyone gives at least a nickel… ?

No seriously… excellent resource. ?

I eventually added a Venmo link to that page

 

[MarylandMojave]

Put the down payment into a bank account and make the higher payments from that account Instead of using it as a down payment. That way is something happens, you don’t lose it all. If you put it down and wreck the vehicle, it’s gone.

 

[Ratbert]

Put the down payment into a bank account and make the higher payments from that account Instead of using it as a down payment. That way is something happens, you don’t lose it all. If you pit it down and wreck the vehicle, it’s gone.

Unless, of course, you have insurance that covers it.

 

[tomk62]

Put the down payment into a bank account and make the higher payments from that account Instead of using it as a down payment. That way is something happens, you don’t lose it all. If you pit it down and wreck the vehicle, it’s gone.

How do interest rates work?

 

[MarylandMojave]

Unless, of course, you have insurance that covers it.

The insurance will pay the owner of the vehicle, and that’s the leasing company. If you total a leased vehicle any money you put down is gone. It’s also why you can’t claim diminished value on a leased vehicle if it gets hit, you’re not the owner, you haven’t been harmed.

 

[MarylandMojave]

How do interest rates work?

A lease does not have an interest rate, it has a money factor that is figured in, and paid, up front. A lease has a starting number, and an ending number, you are paying the difference between those numbers.

Here is a very basic breakdown. If the Starting number is $50k, and the ending number (residual) is $32k, you are paying the $18k between those numbers. You can pay $500 over 36 months, pay 6 payments of $500 then one of $15K, does not matter.

A down payment on a lease (called cap cost reduction) just lowers the starting number, so in the example above, putting $10k down leaves $8k difference or a payment of $222 for $36k. Either way you are paying $18k.

Leaving the $10k in the bank and paying the payments from that account gets you 20 of the 36 payments, then you have 16 left at $500, still adds up to the same $18k.

If it’s wrecked at 10 months, insurance pays the owner (leaseholder) and you walk away. You still have $5k in the account.

It is strictly a math problem as the variables are set from the start.

 

[BXFXJeep]

@Ratbert ’s spreadsheet has apparently saved so many people so much money on new Jeeps that I think he deserves a cash bonus… Now if we could just create a go fund me page… and everyone gives at least a nickel… ?

No seriously… excellent resource. ?

Go fund me might seize the money if you buy a colour they don't like, there are better sites out there like the buy me a coffee or something like that.

 

[alphawolff]

Unless, of course, you have insurance that covers it.

This isn't how it works. If you put $10k down on a lease and it's totaled 5 minutes after driving it off the lot you're out of that $10k. The insurance will pay off the cost of the vehicle to the lease company and you will get nothing back.


With all leases you want to put the absolute bare minimum down, ideally you even roll the fees into the lease deal. Yes, your monthly payment will be higher, but you absolve yourself of a lot of liability. OP should toss that 16.5k into a savings account instead and just pay the monthly payment using it as the time goes on. That way it's still there for the payment and it's building interest as it sits while avoiding it going *poof* into thin air.

At the end of the day a lease is a rental car. You do not own it, and your lease is effectively paying the depreciation over your lease period with a few fees added on top to make the deal financially viable for the lease company. You usually get first dibs to buy the lease out at the end of the contract to own the vehicle, and sometimes you can get crazy good deals like this or avoid a massive headache. I heard of a guy who leased a subaru WRX and the valuation at the end of the lease was actually ~7k below actual market value. He bought it out at the end and immediately sold it for some sweet profit. On the flip side you could leave a BEV with a value retention of 50% after 3 years, but when the time comes you find out it's only worth 35% of its original value. Good thing you leased it so you can walk away.

 

[tomk62]

A lease does not have an interest rate, it has a money factor that is figured in, and paid, up front. A lease has a starting number, and an ending number, you are paying the difference between those numbers.

Here is a very basic breakdown. If the Starting number is $50k, and the ending number (residual) is $32k, you are paying the $18k between those numbers. You can pay $500 over 36 months, pay 6 payments of $500 then one of $15K, does not matter.

A down payment on a lease (called cap cost reduction) just lowers the starting number, so in the example above, putting $10k down leaves $8k difference or a payment of $222 for $36k. Either way you are paying $18k.

Leaving the $10k in the bank and paying the payments from that account gets you 20 of the 36 payments, then you have 16 left at $500, still adds up to the same $18k.

If it’s wrecked at 10 months, insurance pays the owner (leaseholder) and you walk away. You still have $5k in the account.

It is strictly a math problem as the variables are set from the start.

I am aware of "money factor". https://www.capitalone.com/cars/learn/managing-your-money-wisely/what-is-the-lease-money-factor/1700

The lease money factor or lease fee is essentially the interest rate you pay to lease a vehicle. Similar to how a lender charges interest on a mortgage, a car dealership or finance company will apply a money factor to a lease. Including taxes and residual value, this number will account for a portion of your monthly lease payments.

Within a lease agreement, this number is represented in decimal form — for example, 0.0010 or 0.0025. This can make it difficult for the average consumer to understand what it means financially. To convert the money factor into a digestible number like the interest or annual percentage rate (APR) you'll pay, multiply it by 2,400.

For example, if the money factor in your lease agreement is 0.0010, when you multiply this figure by 2,400 you'll get an APR of 2.4%.

In your example you are not accounting for or explaining any money factor payment. How does what you pay for that with and w/o the down payment compare to what you earn if you save the down payment?

I am not a finance guy, but I do understand math, statistics, and risk. I think the problem with your argument is it's over simplified. Any finance experts please feel free to correct and educate me where I am wrong here.

What are the chances you total the leased vehicle? Let's assume 0.1% as an example. So for that $10k cap reduction in your example, there is a 0.1% chance you lose that $10k, which means the "expected value" of that is 0.001 x $10,000 = $10. What this means that over time, the population of people putting $10k down on their lease lose an average of $10 across the sample. This is similar to gambling and insurance.

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