Stealership lease

[rcadden]

I saved $7K cash money using Ratbert's spreadsheet, even after accounting for travel costs to fly from DFW to Nashville to pick it up and drive it back.

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[MarylandMojave]

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



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.

I over simplified it on purpose, it’s why I started with "basic breakdown" but let’s go a little deeper. A money factor, unlike an interest payment does not go down as you pay off the principal, it’s the same every month. A down payment (called cap cost reduction) will lower that charge some, so let’s see how much.

To keep the number close to my original, here are the numbers. Selling price $50k, 75% residual (37,500) and money factor of .00183 (about 4.4% APR) 36 months.

With 0 down, you have 36 payments of $507, total of $18365 out of pocket.

$10k down gets you 36 payments of $212 (7632) for a total of $17632 out of pocket., saving you $733 over 36 months.

People wreck cars every day (14,000 each day) so no clue why you picked 1/10 of 1% as the risk is much higher. The real question someone needs to decide is if the $733 savings is worth the risk? Is it worth saving $22 a month (733/36) to risk $10k going away? That’s also assuming no interest on the $10k sitting in the bank, any interest earned make the $733 savings even less.

Leasing is renting a vehicle with the right to buy it at the end. If you needed to rent a car from Enterprise for 6 months, and they offered you $500 a month or $2000 now, $166 a month, what would you choose? What if they say if it gets wrecked in a few weeks, no refund of the $2k, what do you choose?

 

[tomk62]

Thank you.

I have no idea about the chances of totaling your car, I just guessed a low number.

According to this, there were about 72,469 crashes in 2020 in NJ. In 2021 there were 6,461,950 licensed drivers in NJ.

So that's an average of .0112 crashes per licensed driver, or 1.12%. What percent of crashed vehicles are totaled?

https://www.cccis.com/news-and-insights/posts/whats-driving-total-loss-frequency

Vehicles from 0-3 years old seem to be 6% on average. So you have about a 1% chance of getting in an accident in a year in NJ, one of the most populous states., and if you are in that 1%, you have roughly a 6% chance your leased vehicle will be totaled. In this simplistic case it's 0.067% chance. (my original guess was too high by almost a factor of 2)

I know the numbers are not perfect, but it should give us an idea.

 

[kenp1985]

This is not a good idea. No interest rates on a lease, there is a residual value (what the vehicle will be worth at the end of the lease), a money factor (interest or dealer profit) and lastly a CCR or capital cost reduction (dealer discounts & rebates)

Take the $16500 in a check, invest it, and make the payments bc 3 years from now that $ will be gone.

Or, sell it, and rent a Jeep when you are in SWFL.

We have a place in Punta Gorda, rentals aren’t that bad.

 

[NWJeepr]

Without seeing the deal sheet, it's hard to say. Did they apply your trade credit to the lease, or did they assume cash out?

 

[MarylandMojave]

Thank you.

I have no idea about the chances of totaling your car, I just guessed a low number.

According to this, there were about 72,469 crashes in 2020 in NJ. In 2021 there were 6,461,950 licensed drivers in NJ.

So that's an average of .0112 crashes per licensed driver, or 1.12%. What percent of crashed vehicles are totaled?

https://www.cccis.com/news-and-insights/posts/whats-driving-total-loss-frequency

Vehicles from 0-3 years old seem to be 6% on average. So you have about a 1% chance of getting in an accident in a year in NJ, one of the most populous states., and if you are in that 1%, you have roughly a 6% chance your leased vehicle will be totaled. In this simplistic case it's 0.067% chance. (my original guess was too high by almost a factor of 2)

I know the numbers are not perfect, but it should give us an idea.

For you the risk is worth the $22 savings, for others it’s not. There are plenty of posts about Jeeps getting stolen, so maybe the risk is higher, who knows? I think money down on a lease is a bad financial move, others don’t. Do what’s right for you.

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