car lease question. yay or nay? (calling The Financial Lounge!)

[Hostile]

subie was financed and it had negative equity rolled in from the damn GTI. (i've learned NO MORE FINANCING!)

Or just stop trading in cars you still owe money on...

[a2a4raddo]

Incorrect. You can easily sell a car you're financing and get a new one. It's nearly impossible to break a lease unless you want to line their pockets with your money.

As far as ownership goes, you still own the car, even if making payments. The bank has a lien on it, but you are free to dispose of it if you want to. You own nothing if you lease.

Companies lease for profit, at your expense. You are paying for depreciation and mileage up-front. That's what makes no sense.

You can sell your car if you are leasing as well. There is always a pay off on the vehicle, and every month you are buying down that pay off just like a finance. And just like a finance, the bank owns the car.

Companies lease and finance for profit. In a lease you are simply paying for the depreciation of the vehicle (the portion you use). You aren't paying up front, you are paying over 3 years. The vehicle is going to depreciate more in the first year then you have paid for it. But it's a curve and your break even point is typically going to occur right around the time your lease matures, at which point you can extend your lease, purchase the car, or give it back.

You finance a car for 5 years and trade it after 3, you will still have negative equity unless you put. Large sum of money down. With a lease, you don't have that issue. The bank assumes the risk. If its worth more then the residual, great for them. If it is worth less then the residual...that's a risk they took and they were on the losing end. Most people trade every few years, leasing costs less then buying and trading. You also always have the latest in technology, safety, and a reliable car that won't break down, as well as one that will require minimal maintenance as you are always driving a late model car.

Leasing may not be for you, but it works for many people. I have purchased cars outright, financed cars as well as leased cars. And you can most def" get out of a lease early. There are a few ways to do it. Trade, sell, or have someone else assume your lease......which my friend just did with his BMW.

[a2a4raddo]

is lojack for $9.00 a month extra worth it?

No, not at all. The vehicle is leased. It belongs to Honda. As bad as this sounds, it would actually work in your favor if the car is not recovered. Insurance will pay it off, most leases include gap insurance as well. I know Honda leases do. So you are off the hook. Now you can lease a new oddy and your payment will be much lower as you no longer have negative equity being rolled in.

[Brendan@bwalkauto]

I guess I do understand why some people lease.

For some it is to drive a car they can't really afford. For some, it's a way to have an exit strategy because they flip through cars every few years (need to appear successful, etc). For some, they get bored easily, and want to drive different things.

Or, in my case, I leased my LEAF because the lease payment is less than the money I spend on gas commuting in my 540i, and I charge for free. Kinda hard to pass on a free car.

[Mike!]

You can sell your car if you are leasing as well. There is always a pay off on the vehicle, and every month you are buying down that pay off just like a finance. And just like a finance, the bank owns the car.

A lien is not ownership. You own a financed car, but the bank has a legal claim against the property.

[dieselraver]

No, not at all. The vehicle is leased. It belongs to Honda. As bad as this sounds, it would actually work in your favor if the car is not recovered. Insurance will pay it off, most leases include gap insurance as well. I know Honda leases do. So you are off the hook. Now you can lease a new oddy and your payment will be much lower as you no longer have negative equity being rolled in.

Exactly! Thank you guys. It's been a process. In order to buy a car from Massachusetts and bring it to New York is a nightmare but in the end it's financially worth it.

[a2a4raddo]

A lien is not ownership. You own a financed car, but the bank has a legal claim against the property.

Yes. However......untill you make that last payment...the car isn't really yours as the bank has legal claim against it. So you can't do anything you please with it....such as export it to a foreign country permanently or temporarily for that matter.

[dieselraver]

Yes. However......untill you make that last payment...the car isn't really yours as the bank has legal claim against it. So you can't do anything you please with it....such as export it to a foreign country permanently or temporarily for that matter.

exactly.

people think that when you lease a car you don't "own" it. in all reality you do. but you only own 3 years of depreciation on it. the car is fully financed through whichever company foots the bill, at the end of the lease, they hope to recoup the remaining cost of the car (plus a profit) by reselling it as a CPO/wholesale/auction etc.

so if a car was worth $50k and it had 50% residual after 3 years, they would lease it to you for $25k + interest for 3 years, then be able to sell it for at least $25k CPO or at auction. (its not concrete but thats the general concept)

[dieselraver]

so i went over the numbers. the original lease was $366

with the depreciation of the outback (offering me 17,000 for it and total payoff is 19600 so $19600 - $1700 = 2600) the number jumped to $461.

thats a $95.00 discrepancy x 36 months = $3420.00

he said its that high because of "tax savings" what on earth does that mean? can someone elaborate?

[gsprobe]

is lojack for $9.00 a month extra worth it?

Dude, you want to pay for lojack on a car with $5000+ in negative equity? Don't do it! Believe me, the BEST thing that can hapopen is the car getting stolen or totaled. Your car gets paid off in full (with GAP) and now you can lease another replacement for $100 less per month.

[gsprobe]

No, not at all. The vehicle is leased. It belongs to Honda. As bad as this sounds, it would actually work in your favor if the car is not recovered. Insurance will pay it off, most leases include gap insurance as well. I know Honda leases do. So you are off the hook. Now you can lease a new oddy and your payment will be much lower as you no longer have negative equity being rolled in.

I posted mine before reading yours. How refreshing to see someone offering correct advice...

[MatchStick]

I have posted before, the way you can tell if you own a car - you have possession of the title, your name is on it and there's nothing under the lienholder section.

[Mike!]

so i went over the numbers. the original lease was $366

with the depreciation of the outback (offering me 17,000 for it and total payoff is 19600 so $19600 - $1700 = 2600) the number jumped to $461.

thats a $95.00 discrepancy x 36 months = $3420.00

he said its that high because of "tax savings" what on earth does that mean? can someone elaborate?

No idea what the "tax savings" bit is, but on the surface that's effectively 18% interest rate on the $2600 for 3 years. It seems high.

At the end of the day it's a matter of $820, and surely there should be at least some borrowing cost to them covering the $2600 shortage, but something about it sounds dirty to me. "Yeah sure, we'll cover the negative equity" and then squeezing extra money out of you.

[SVTDanny]

so i went over the numbers. the original lease was $366

with the depreciation of the outback (offering me 17,000 for it and total payoff is 19600 so $19600 - $1700 = 2600) the number jumped to $461.

thats a $95.00 discrepancy x 36 months = $3420.00

he said its that high because of "tax savings" what on earth does that mean? can someone elaborate?

Why wouldn't you just kick in the $2600 at the time of the deal? Jumping the payment by $100/mo for 3 years for negative equity seems really dumb.

[dieselraver]

Why wouldn't you just kick in the $2600 at the time of the deal? Jumping the payment by $100/mo for 3 years for negative equity seems really dumb.

Ideally i'd love to do that, but my millions of dollars is tied into Gold Bullion...

in all reality, our car payment is $500 a month, we'd be going into a newer vehicle with a $40.00 savings, no negative equity at the end of 3 years trading up in 2.5/3 years for $366/month versus owning an outback after 4 years (one that doesn't suit our needs)

[dieselraver]

No idea what the "tax savings" bit is, but on the surface that's effectively 18% interest rate on the $2600 for 3 years. It seems high.

At the end of the day it's a matter of $820, and surely there should be at least some borrowing cost to them covering the $2600 shortage, but something about it sounds dirty to me. "Yeah sure, we'll cover the negative equity" and then squeezing extra money out of you.

i guess, but even then the price of the EX-L without a tradein here in NYC is around $450 a month already so im winning regardless most likely pick up the swaggervan this weekend

[Mike!]

Ideally i'd love to do that, but my millions of dollars is tied into Gold Bullion...

in all reality, our car payment is $500 a month, we'd be going into a newer vehicle with a $40.00 savings, no negative equity at the end of 3 years trading up in 2.5/3 years for $366/month versus owning an outback after 4 years (one that doesn't suit our needs)

i guess, but even then the price of the EX-L without a tradein here in NYC is around $450 a month already so im winning regardless most likely pick up the swaggervan this weekend

You invoked The Financial Lounge, so here it is.

Just because you've lowered your monthly payment, that doesn't mean you're "winning." You're buying a new vehicle, with inherent new car depreciation, and paying money for 3 years to cover that depreciation. You may be able to sell it for more than the buyout after 3 years, so that's some silver lining, but you're not "winning" anything; you're out money. On top of that, you're paying them an extra $820 to make the $2600 you're in the hole go away over the 3 years.

The TFL perspective is if you can't cover $2600 of negative equity in cash, you shouldn't be buying a $30k+ new vehicle. You've made poor financial decisions leading up to this, and this is another one. The smart thing to do would be keeping the Outback a touch longer to pay the gap down somewhat (extra payments if allowed to, or saving up the negative equity in cash), and sooner or later trading it in on a used Ody farther along in its depreciation curve.

I wouldn't be harsh like this in a "hey, look at my new car!" thread, but you asked for our advice. Having purchased two cars brand new, and having sold one with negative equity myself to downsize to one vehicle, I know firsthand that sometimes 'dumb decisions' can be worth it because you really want that car or whatever. I'm not saying don't do it. Just recognize it for what it is: another dumb financial decision. This isn't a fix or getting you out of a negative equity hole. This is a new car you're buying because you want it, and new cars cost money.

[dieselraver]

You invoked The Financial Lounge, so here it is.

Just because you've lowered your monthly payment, that doesn't mean you're "winning." You're buying a new vehicle, with inherent new car depreciation, and paying money for 3 years to cover that depreciation. You may be able to sell it for more than the buyout after 3 years, so that's some silver lining, but you're not "winning" anything; you're out money. On top of that, you're paying them an extra $820 to make the $2600 you're in the hole go away over the 3 years.

The TFL perspective is if you can't cover $2600 of negative equity in cash, you shouldn't be buying a $30k+ new vehicle. You've made poor financial decisions leading up to this, and this is another one. The smart thing to do would be keeping the Outback a touch longer to pay the gap down somewhat (extra payments if allowed to, or saving up the negative equity in cash), and sooner or later trading it in on a used Ody farther along in its depreciation curve.

I wouldn't be harsh like this in a "hey, look at my new car!" thread, but you asked for our advice. Having purchased two cars brand new, and having sold one with negative equity myself to downsize to one vehicle, I know firsthand that sometimes 'dumb decisions' can be worth it because you really want that car or whatever. I'm not saying don't do it. Just recognize it for what it is: another dumb financial decision. This isn't a fix or getting you out of a negative equity hole. This is a new car you're buying because you want it, and new cars cost money.

you're right. i apologize for being brash.

the decision I am making is financial but moreso for necessity. the need for a minivan is absolute. We need it for family travel and for picking up grandma. While I wouldn't mind keeping the outback, it doesn't make sense "financially" in terms of monthly payment to keep the vehicle that is no longer of use to us. I'd rather offload it, cut my losses, lease the odyssey, tie the negative equity into the outback and come out even at the end with 0 negative equity to give me time to renegotiate a new lease in 2.5 years - 3 years.

[SVTDanny]

come out even at the end with 0 negative equity

That's what you thought would happen when you signed the papers for the GTI. That's what you thought would happened when you signed the papers for the Outback. Why is this time going to be any different? Just because it's a lease doesn't mean you're going to hold onto the vehicle for the term of the commitment.

[dieselraver]

That's what you thought would happen when you signed the papers for the GTI. That's what you thought would happened when you signed the papers for the Outback. Why is this time going to be any different? Just because it's a lease doesn't mean you're going to hold onto the vehicle for the term of the commitment.

GTI was when i was single

Outback was the wifes decision, i told her to get a minivan. she refused to "succumb to a minivan"

after 2 and a half years of the outback, shes come to terms and understands that its a necessity.

We will use the odyssey for the full 3 years. unless we plan on becoming the next John & Kate plus 8 I don't plan on buying a Mercedes Sprinter Van.

[Chiropractor JW]

We just leased an Odyssey this week. 2012, EX package, 324.99 a month out the door, nothing out of pocket. Was in a very similar situation as you. I know, CSB

[dieselraver]

We just leased an Odyssey this week. 2012, EX package, 324.99 a month out the door, nothing out of pocket. Was in a very similar situation as you. I know, CSB

mileage allowance? how many months? what state? (tax rate?)

[Chiropractor JW]

12,000 miles a year, 35 months (they covered the first month.) I'm in Florida.

We went in Sunday interested in the LX lease, which was advertised as 310/mo, nothing out of pocket. I didn't realize that was without tax and about 1300 in various "fees." Plus they didn't have an LX on the lot, only 3 or 4 EX's. So I made a stink and left. They called me back and said they would get me an EX for nearly the same price - taxes and fees rolled into the payment, and it was something like 361 a month. I said thanks but no thanks. Monday was the last day of their sales month, I guess they just wanted to deal. I was able to talk them down to the 324.99 price I previously mentioned.

The lease price was based on a purchase price of something like 26 or 27 and change, MSRP was 33 I think. Lease buyout is 18500 or so, I don't know the money factor (don't completely understand how that works), but the finance guy multiplied it by 2400 (or whatever) and it came to be less than .5% interest if I recall correctly. Hope this helps.

[GolfVIDriver]

Incorrect. You can easily sell a car you're financing and get a new one. It's nearly impossible to break a lease unless you want to line their pockets with your money.

As far as ownership goes, you still own the car, even if making payments. The bank has a lien on it, but you are free to dispose of it if you want to. You own nothing if you lease.

Companies lease for profit, at your expense. You are paying for depreciation and mileage up-front. That's what makes no sense.

Very, VERY wrong.

You can sell both financed and leased cars, and in each case, the only thing holding you back is what you owe.

Leasing is like financing in that its one more way to finance a car.

Leasing makes complete sense to me in that you know you will own a car for X years, and are only paying for the portion of the car you are using (miles and depreciation, which is basically the same thing in a lease). You are not putting a down payment down, that's still in the bank. On a loan, you are putting a huge downpayment down, paying the entire amount in monthly payments, and if you sell the car before the end of the loan, how is that any different than leasing?

[GolfVIDriver]

I have posted before, the way you can tell if you own a car - you have possession of the title, your name is on it and there's nothing under the lienholder section.

Yep. This is the truth.

[GolfVIDriver]

Ideally i'd love to do that, but my millions of dollars is tied into Gold Bullion...

in all reality, our car payment is $500 a month, we'd be going into a newer vehicle with a $40.00 savings, no negative equity at the end of 3 years trading up in 2.5/3 years for $366/month versus owning an outback after 4 years (one that doesn't suit our needs)

As much of a fan of leasing as I am, you're really not too bright with trading in and leasing cars, and based on your previous posts, I would seriously re-evaluate your decision making process.

You still have negative equity, it's just built into your lease and inflated in the payoff amount. You are now underwater (or will be if you got the Honda) by the $2500 (or whatever) to that, plus whatever depreciation you are subjected to when you drive off the lot. You still pay that negative equity too, in the form of higher lease prices for the new car. You didn't think the bank would just pay it for you, did you?

If you can stick it out for the terms of the lease at your $366/month (or whatever), then what you are doing is saving money in CASH FLOW, which The Financial Lounge here does not generally get, and is a serious practical consideration in daily finance decisions.

But don't for a second think you are off the hook for that negative equity. You just packaged it up and disguised it as something else. And you are pretty well locked into this Honda till the end of the lease, like it or not.

And one more thing.....

WHAT'S THE RESIDUAL????
WHAT'S THE MONEY FACTOR?!?!?!!

You didn't research this deal well enough if you cannot answer those two questions.

[dieselraver]

As much of a fan of leasing as I am, you're really not too bright with trading in and leasing cars, and based on your previous posts, I would seriously re-evaluate your decision making process.

You still have negative equity, it's just built into your lease and inflated in the payoff amount. You are now underwater (or will be if you got the Honda) by the $2500 (or whatever) to that, plus whatever depreciation you are subjected to when you drive off the lot. You still pay that negative equity too, in the form of higher lease prices for the new car. You didn't think the bank would just pay it for you, did you?

If you can stick it out for the terms of the lease at your $366/month (or whatever), then what you are doing is saving money in CASH FLOW, which The Financial Lounge here does not generally get, and is a serious practical consideration in daily finance decisions.

But don't for a second think you are off the hook for that negative equity. You just packaged it up and disguised it as something else. And you are pretty well locked into this Honda till the end of the lease, like it or not.

And one more thing.....

WHAT'S THE RESIDUAL????
WHAT'S THE MONEY FACTOR?!?!?!!

You didn't research this deal well enough if you cannot answer those two questions.

I did the numbers for "ideal" using Honda's money factor and residual values given to me by Edmunds, they beat my best number by almost $40.00 using a 54% residual and a 0.00064MF. it just can't be touched. I am getting this van at below market value the number I used was $32,052.00

here are my numbers just to show you

msrp 35025
invoice 32021
my price = 30804
35025 x .54 = 18913.5
30804- 18913.5 = 11890.5
11890.5/36= 330.29
30804 + 11890.5 = x .00064 = 26.90

Total = $330.29 + 26.90 = $357.19

Plus tax = $357.19 x 1.8875 NYS Tax rate = $388.89

Lets not forget the DMV $240 for NYS, plus whatever else, "finance, doc fees etc"

this is a TRUE sign and drive, i pay $0.00 when i pick up the van, nothing due at lease end, nada.

my first months payment is in 30 days when they mail me a statement.

so you see. i really am getting a spectacular deal.

[Chiropractor JW]

Dude.

1 - Get the van. Don't dildo around and trade in until the lease is up in 36 months. All will be well.

2 - Post a write-up in 6 months or whatever to let us all know how you and your lady friend like the car, etc.

3 - ???

4 - Profit!!!!

[caj1]

Dude.

1 - Get the van. Don't dildo around and trade in until the lease is up in 36 months. All will be well.

2 - Post a write-up in 6 months or whatever to let us all know how you and your lady friend like the car, etc.

3 - ???

4 - Profit!!!!

^^This

Is dicking around with a few bucks a month really worth this thread?

[dieselraver]

^^This

Is dicking around with a few bucks a month really worth this thread?

Truth in this. Deal is set. Just waiting on the overnight financials to get here. Then we pick it up next weekend. Appreciate all the help folks.

[caj1]

Truth in this. Deal is set. Just waiting on the overnight financials to get here. Then we pick it up next weekend. Appreciate all the help folks.

Congrats and enjoy!

[noludoru]

Truth in this. Deal is set. Just waiting on the overnight financials to get here. Then we pick it up next weekend. Appreciate all the help folks.

Thumbs up. I totally agree with Mike, but if you stick with this lease and pay it off, you will come out fine in the end and ready to lease again. I see it all the time at work - rolling negative equity and paying it off is part of the reason why I recommend leases.

As far as Lojack goes? It's 90% profit. Don't buy it unless you are actually worried the car will be stolen; and in this particular case, you want it to be. Get gap coverage though. And maybe ibex if your kids are messy.

[GolfVIDriver]

I did the numbers for "ideal" using Honda's money factor and residual values given to me by Edmunds, they beat my best number by almost $40.00 using a 54% residual and a 0.00064MF. it just can't be touched. I am getting this van at below market value the number I used was $32,052.00

here are my numbers just to show you

msrp 35025
invoice 32021
my price = 30804
35025 x .54 = 18913.5
30804- 18913.5 = 11890.5
11890.5/36= 330.29
30804 + 11890.5 = x .00064 = 26.90

Total = $330.29 + 26.90 = $357.19

Plus tax = $357.19 x 1.8875 NYS Tax rate = $388.89

Lets not forget the DMV $240 for NYS, plus whatever else, "finance, doc fees etc"

this is a TRUE sign and drive, i pay $0.00 when i pick up the van, nothing due at lease end, nada.

my first months payment is in 30 days when they mail me a statement.

so you see. i really am getting a spectacular deal.

This is what I needed to see.

In that case, I retract my post with an apology. Yes, you are getting a screaming deal, and I would jump on it.

[NoXenons]

we're talking a true sign and drive

[dieselraver]

This is what I needed to see.

In that case, I retract my post with an apology. Yes, you are getting a screaming deal, and I would jump on it.

thanks man! the MF is even lower than the one i used, 0.00032

the negative equity is rolled into the monthly but honest, its still a damn good price. just received the paperwork yesterday via overnight express UPS. sending it back and i'll have my van by next weekend (they have to get it registered in NYS and plated which takes time)

and proof i am not leading TCL on another tire kicking adventure!