Learn how to calculate a lease...

[VeeDubDriver]

With so many leasing questions, I thought I would make a seperate post with the lease info from the Car Buying FAQ's. I have also attached my trusty lease calculator for those who still need it.

Calculating a lease payment is not difficult, once you have all the
information you need. The lease payment is based on the difference between
what you pay for the car and what the car will be worth at the end of the
lease, plus interest.

When it comes to leasing, here is the lingo:

Capitalized Cost - This is the selling price of the vehicle.

Capitalized Cost Reduction - This is simply a down payment.

Residual Value - This is what the car will be worth at the end of the lease
(usually stated as a percentage of the MSRP).

Money Factor - This is the interest rate. It is always give as a decimal
figure. While it is not necessary to know the actual percentage rate when
calculating the lease, you can figure it out by multiplying the money factor *
2400. This number is used no matter what the term of the lease. For example, a
money factor of .0025 would be an interest rate of 6%.

Inception Money (or Get In Money) - This is the amount of money that you have
to come up with at the start of the lease (not including any Capitalized Cost
Reduction). The inception money usually consists of the first month's payment,
a security deposit (usually equal to one month's payment rounded to the
nearest $25 and a bank fee. It can also include the dealer documentation fee,
tags and sales tax on the any Capitalized Cost Reduction (more on that later.)
It is important to have all of these costs broken down so you know exactly
what is being covered.

Now, here is how we calculate a lease. First off, you need to have several
things: the MSRP (or sticker price), the selling price (Capitalized Cost), the
residual value (as a percentage) and the money factor.

Let's use the GTI 1.8T as an example. Adding in the 17" wheels, luxury and
leather packages, it will have an MSRP of $22,000. The residual value for a
36-month lease (with 15K miles/year) is 57%. Usually a 12K mile/year lease
will have a residual value 2% higher (or 59% in this case). The money factor
for 36 months is .00250. Now that we have our figures, we can calculate the
lease. This may seem complicated, but take it step by step and it is quite
easy.

First we calculate the lease cost. Take the MSRP ($22,000) and multiply it by
the residual value (59%). This gives us $12,980. Now, take the Capitalized
Cost (what you pay for the car) and subtract the residual value from it. Let's
say we pay $21,500 for this car. $21,500 - $12,980 = $8520. Now, we take that
$8520 and divide it by the lease term of 36 months. $8520 / 36 = $236.67.

If you didn't have to pay any interest, this is what your monthly payment
would be . Unfortunately, few banks lend money without charging interest . To
figure out the monthly interest you take the sales price ($21,500) and add it
to the residual value ($12,980) and multiply it by the money factor (.0025).
$21,500 + $12,980 = $34,480. $34,480 * .0025 = $86.20. So, you are paying
$86.20/month in interest. You add that to the monthly lease cost of $236.67
and you end up with a monthly payment of $322.87. But wait, there's more. Your
state needs to collect their part of the deal in the form of sales tax. If
your sales tax is 8.25%, you would multiply the monthly payment by 1.0825 for
a grand total of $349.51. This is your monthly payment.

Now, what about putting more money down in the form of a capitalized cost
reduction. You would simply deduct this amount from the capitalized cost
before you run the numbers. For example, if you put $1,000 down, your monthly
payment would drop to $316.73. Now you are probably asking yourself, why not
put more money down? First off, you have to pay your 8.25% sales tax on that
$1000. But that is no big deal. The bigger problem is that if the car ever
gets stolen or totaled, the insurance will pay off your lease, but you will
never see that $1,000 again since it was paid up front. Also, think of it this
way. If you were leasing an apartment and the rent was $750/mo, but the
landlord said, "Give me an extra couple of thousand up front and I will lower
the rent to $650/mo." Few of us would actually do that. Leasing your car is
just like renting. If you can't afford the payment without putting more money
down, I would suggest taking the money you would put down and put it in the
bank to earn interest and then deduct an amount every month to cover the
difference.

One more bit of advice. Never lease a car for a longer term than the
manufacturer's warranty. If you do and something breaks past the warranty
period, it will be your responsibility to get it fixed and pay for it
yourself. Since you will give the car back at the end of the lease, you are
basically paying to fix someone else's car. So while generally longer lease
terms will give you lower payments, don't lease past the warranty period.
Also, don't lease longer than you will think you will want your car. Breaking
a lease early can be very expensive.

Updated Lease/Loan/Balloon calculator added (thanks GTakacs).


Modified by VeeDubDriver at 6:02 PM 8-28-2003

[GTakacs]

Excellent lease advice here! There are only a couple of things that I would add to it.

As VdubDriver already said ALWAYS lease with no money down. (And with current interest rates I'd expand that to purchasing as well) If you have money just stick it in the bank and deduct from it every month as he said. To illustrate this issue better, here is an example (I am using a 48 month balloon loan to figure numbers, actual lease numbers would a be worse actually):

Let's say you buy a car for $25,000 and you either put nothing down and lease for 48 months for $323/month or you put $5000 down and lease for 48 months for $211/month.

The difference between the two monthly payments is $112 which seems like a lot. Multiply that by 48 months (number of payments) that is $5376. So you will end up paying $376 more over the term of the lease by not putting anything down and keeping your $5000 in your pocket. I am not going into details that you can actually earn interest on that $5000 and keep taking $112 out of it every month making the $376 difference even less, or that you could have used the $5000 to pay off a higher interest debt with it.

So if nothing goes wrong with your car during the term of the lease you will be out of $376 more by going this route. that is about $8/month (not counting other interest earning possibilities on your $5000).

Now let's look at the other scenario when your car gets totaled or stolen after a year. After 1 year that car will worth about $20,000 due to depreciation. If you paid no money down, after the first year your payoff would be about $22100. If you put no money down up front then you insurance will pick up the gap (GAP insurance) between what the car is worth ($20,000) and what you owe ($22,100). So the gap insurance will pay $2100 while the rest will be paid by the regular car insurance. You walk away clear and free and with $3656 left of the $5000 that you put aside (you made 12 payments of $112 from it towards the car)

However if you put down $5000 up fron on this car as a cap reduction by the end of the first year your payoff would be about $18,200. Since the car is worth $20,000 at this point and you owe $18,200 the insurance would pay the lender $18,200 and give you $1800. So you would end up with no car and $1800 in your pocket.

So if you compare the two numbers you can see that if your car is stolen or totaled after 1 year you would be losing over $1850 just because you put money down up front. This number would get smaller as the years go by, but you will be pretty much uspide down throughout the entire lease.

The other thing I would want to point out with leases is that in some states (Texas included) they asses sales tax on the ENTIRE purchase price of the vehicle even if you only lease it. And to top it off if you decide to purchase the vehicle at the end of the lease term they will asses sales tax on the residual value and you would have to pay that sales tax again during the financing of the used vehicle. Add to it the lease origination fee, safety deposit and other fees and it turns out that lease is not really the best option in these states. If you still want lower payments you might want to consider the premiere purchase (balloon payment) option in which they still calculate residuals, but you pay it as a loan with regular interest rates, and you have a huge residual balloon payment as the last paymet. At that point you can turn the car back in for a disposition fee (about $250) you can refinance the remainder of the loan, you can sell the car yourself and pay off the loan with the cash or you can trade it in on a new car and get the tax credit (in Texas if you trade in a vehicle during a new purchase you only pay tax on the difference between the two). So I think balloon payment loans make a lot more sense than leases, it gives you the same flexibility and some more!

My last advice is relating to mileage. If you know that you'll drive your car a lot, buy miles up front, they are a lot cheaper up front than at the end of the term. Also if you drive a LOT of miles lease is not your best option probably. If you leased your vehicle thinking that you'd only drive it about 12K miles a year but your driving habits changed (because of job, etc.) then be prepared to pay the mileage overage at the end of the lease. If you set out a 1000 mile/month plan but you actually drive 1500 miles a month, put the money that is needed to pay the extra miles into a savings account at the end of each month so you would be prepared to pay the $2000-$3000 in overage miles at the end of the lease. There is no such thing as a free lunch, so don't expect to get away with the excess miles (however if you turn in the lease at the end of the term and lease a new one from the same brand, chances are you can negotiate the excess mileage down).

[CS VW]

Great advice, guys. Thanx.

One question: Why does EVERY advertised lease REQUIRE you to put money down? Can you just tell the dealer that you're not putting any money down, anyway?

[VeeDubDriver]

Well, all leases have some sort of upfront costs (first payment, bank fees, security deposits, tags, etc). If so desired, a dealer will gladly roll all of these costs into the lease either by increasing the capitalized cost or the money factor (or both). The thing to remember is that you are paying interest on these items if you do, although sometimes the leasing companies will run promotions waiving various startup items. Other than that, there is really nothing wrong with a "sign and drive" lease.

[mbuxton]

Great information! Still don't quite get the balloon payment option.

[VeeDubDriver]

You pay all of the sales tax upfront, instead of on just a portion of the car, as with a lease. Also, the payments tend to be a bit higher. I have said it before that I consider balloon payments sort of the bastard child of financing and leasing. The worst aspects of both with no clear benefit.

[GTakacs]

The balloon is not much different than a conventional loan. Just think of it as a long term loan that you turn in at the point where you owe exactly as much as your car is worth and walk from the car with no money to owe and no money to gain.

With a conventional loan for 60 months, for the first 20 months or so you actually owe more than the car is worth. With the baloon you owe more than the car is worth for 36-48 months depending on the term of your baloon. You can think of it as a 90 month long conventional loan that you trade in after 48 months.

So your monthly payments on a baloon that runs for 20 months would be the same as the monthly payments on a 60 month regular loan. I hope that made it clear.

Also I disagree that the baloon is the "bastard child". I think it is a legitimate child and it does carry a lot of the benefits of both conventional loans and leases.

1) In several states you have to pay sales tax up front on a lease just as you would on a conventional or balloon loan. Check with your state to see if your state is penalizing like that on leases or not. In these states you end up paying sales tax twice if you decide to keep the car at the end of the term.
2) balloon loans have no security deposits, no lease initiation fees and their "walk fees" at the end of the term are generally lower than lease turn-in fees.
3) you have more options at the end of the term than with lease.
a) you can walk from the car free and clear, less excessive wear and mileage
b) you can refinance the remainder of the loan, usually with good terms, and you don't get taxed twice.
c) you can trade the car in and get the tax benefit of trading in (check with your state if it applies)
d) you can sell the car on your own and pay off the loan and keep the difference between sale price and pay off. Lease third party buyout can be a tough, if not impossible, task in some states with some lenders.
4) the car is titled in your own name, it gives you the feel of ownership (placebo effect, but I like it)
5) you can sell your car ANY time without worrying about the lease company. You are in total control (and your remaining balance of course). You will be ALWAYS upside down in a balloon loan, so take that into account, but it is not as bad as paying the rent fee to the lease company on a car that you don't want any more.
6) your car value is guaraneed by the residual percentage. So you know ahead of time that your car will worth AT LEAST the residual value after 48 months. If it is worth less, you just turn it in and walk from it. The way the economy is doing right now, I'd rahter have the bank/auto manufacturer take the risk of guessing what the car will worth in 4 years and I might pay a little extra for it.
7) with the extra monthly savings over conventional loans you can pay off higher interest debt (if you have any) saving you money.

I also question the statement that says that balloon payments are generally higher than lease payments. On Audi financial calculator I have constantly gotten lower montly payment calculations for the premiere purchase than lease.

With the currently offered low interest rates on balloon loans it is a good alternative for a lot of people (including me).

Edit: added point 6 and the stuff about lease being lower than balloon.



[Modified by GTakacs, 5:09 PM 4-17-2003]

[VeeDubDriver]

You are right, I keep forgetting that in some states you have to pay the sales tax differently on a lease.

quote:

---

3) you have more options at the end of the term than with lease.
a) you can walk from the car free and clear, less excessive wear and mileage
b) you can refinance the remainder of the loan, usually with good terms, and you don't get taxed twice.
c) you can trade the car in and get the tax benefit of trading in (check with your state if it applies)
d) you can sell the car on your own and pay off the loan and keep the difference between sale price and pay off. Lease third party buyout can be a tough, if not impossible, task in some states with some lenders.

5) you can sell your car ANY time without worrying about the lease company. You are in total control (and your remaining balance of course).

---

Most of these you can do with leases just as easily, but it probably depends on the individual laws in your state. I know things are different in Texas, guess that's why they say you shouldn't mess with it.

quote:

---

I also question the statement that says that balloon payments are generally higher than lease payments. On Audi financial calculator I have constantly gotten lower montly payment calculations for the premiere purchase than lease.

With the currently offered low interest rates on balloon loans it is a good alternative for a lot of people (including me).

---

I guess the important thing to do is work the numbers on every alternative and see which one fits the best.

[GTakacs]

quote:

---

I know things are different in Texas, guess that's why they say you shouldn't mess with it.

---

ROFL! I guess that's right

quote:

---

I guess the important thing to do is work the numbers on every alternative and see which one fits the best.

---

Yup, yup, absolutely! But lest get back to leasing here, as this tread is about how to calculate your lease numbers not about baloon payments.

Edit:Fixed quotes


[Modified by GTakacs, 9:13 PM 4-17-2003]

[NickNick]

Hi VW...well my lease is finally up and I'm going in next week to see about leasing a 2003 GTI 1.8T again, do you know what the lease rates are at the moment. I understand that sales are down so I'm hoping to get a good deal on the car with the luxury package and 17's. I would actually like the R32 wheels but I don't know if they are on offer as an extra yet. I know my dealership will have to order the car as they told me there is not one on the East Coast that they can get hold of.
Thanks for your help.

[GTInolonger]

This may be a foolish question, but is there a source for the residual values of cars outside of the "black book"? Is there any internet site that details this?

Thanks.

[VeeDubDriver]

The Automotive Lease Guide (ALG) is the main source for lease residuals, however most manufacturers do not adhere to their values. There is really no one source for lease residual values.

[GTInolonger]

So, more or less you're at the mercy of the dealership to tell you what the residuals are? I wonder if you'd get different numbers depending on where you called?

[VeeDubDriver]

Dealerships do not have the power to change residuals. They have to go by what the leasing company lists. Having said that, dealerships use multiple leasing companies and their residuals can vary greatly. Generally, the manufacturer's captive finance companies will have better terms, especially when they have special lease rates, like VW Credit does right now.

The money factor, on the other hand, can be raised by the dealership. This puts more money in their pocket. The only way to know what the actual money factor is is by getting an honest dealer, or you can just ask here.

[GTInolonger]

Sorry for all the dumb questions. I've never considered leasing until recently, but...

How would you go about getting all this information before you approached the negotiating table?

Would you call ahead to get their current residuals from leasing companies?

How would you try to get the money factor?

Perhaps a step-by-step of what you did before you leased your car would be helpful? There are plenty strategies for negotiating price on a purchase, and plenty of info on calculating the lease price, but you don't see as much on leasing strategies. The one time I ever mentioned it to a dealer, they just said "our lease price is $xxx a month".

Thanks again.

[VeeDubDriver]

If your dealer is not willing to show this info to you, just ask here. I can get the lease info for most of the manufacturer finance companies.

[unixb0y]

Quote, originally posted by GTakacs »

Now let's look at the other scenario when your car gets totaled or stolen after a year. After 1 year that car will worth about $20,000 due to depreciation. If you paid no money down, after the first year your payoff would be about $22100. If you put no money down up front then you insurance will pick up the gap (GAP insurance) between what the car is worth ($20,000) and what you owe ($22,100). So the gap insurance will pay $2100 while the rest will be paid by the regular car insurance. You walk away clear and free and with $3656 left of the $5000 that you put aside (you made 12 payments of $112 from it towards the car) However if you put down $5000 up fron on this car as a cap reduction by the end of the first year your payoff would be about $18,200. Since the car is worth $20,000 at this point and you owe $18,200 the insurance would pay the lender $18,200 and give you $1800. So you would end up with no car and $1800 in your pocket. So if you compare the two numbers you can see that if your car is stolen or totaled after 1 year you would be losing over $1850 just because you put money down up front. This number would get smaller as the years go by, but you will be pretty much uspide down throughout the entire lease.

Where i live it's provincial insurance. So if you don't have a fleet to insure, you go the the province(or state). Anyway, gap insurance is not included with your policy. You need to get it.

Also, apparently some leases come with gap insurance.

[surw1n007]

VeeDubDriver, i recently leased a 2003 Jetta GLS 2.0 with the leather cold package, the allow rims, the sunroof, monsoon sound system... and automatic (ma moms drives it sometimes) , pretty tight car..and i'm leasing it for 1700 down and 265/mth for 42 months..and residual 10,000 the sticker price was 21,650. you think i got a good deal?

[GTakacs]

That sounds about right. Looking at the numbers, your residual is 46% (kind of low I think) and if you paid $20K for the car your money factor is 0.0018 (which is 4.32% interest) and assuming 6.5% sales tax.

So I'd say it's about right.

[VeeDubDriver]

Quote, originally posted by surw1n007 »

VeeDubDriver, i recently leased a 2003 Jetta GLS 2.0 with the leather cold package, the allow rims, the sunroof, monsoon sound system... and automatic (ma moms drives it sometimes) , pretty tight car..and i'm leasing it for 1700 down and 265/mth for 42 months..and residual 10,000 the sticker price was 21,650. you think i got a good deal?

I personally have a strict policy of not telling someone if they got a good or bad deal after the fact. If you didn't get a good deal (and I am not saying you didn't), you will just be reminded of the fact every time you get in and start your car. As long as you are happy with your car and with what you are paying, you got a good deal.

[surw1n007]

okay, when i was about to sign the lease agreement, i told him about switching the car if i didnt like it...his response was keeping the car for two years and then getting a new one without having any penalty...and i was like whoa...nice...he says that between 2-3 years, if i dont like the car, i can get a new one....what do you guys think? is this guy b.s'n me?

[VeeDubDriver]

Sure you can get a new one, if you don't mind rolling your negative equity into the new lease! Don't believe what he is telling you!!!

[GTakacs]

Quote, originally posted by VeeDubDriver »

Sure you can get a new one, if you don't mind rolling your negative equity into the new lease! Don't believe what he is telling you!!!

Just what I wanted to write! There is no such thing a free lunch. If you want to replace your car in 2 years, get a 2 year lease. If you want to trade it in after 3 years, the 3 year lease is for you. Don't ever expect to walk from a 4 year lease free and clear after 2 years, it's NOT GOING TO HAPPEN (otherwise everyone would do that instead of doing a 2 year lease)!

[Intgr8VAG]

GTakacs,

What hapens if the balloon has no mileage restriction written on the front page of the contract or anywhere in it? I think the dealer forgot rather than be nice to me.

Thanks

[VeeDubDriver]

Every lease or balloon payment is based on a residual value. That residual value is partly based on an annual mileage allotment. So whether or not it was specifically written in the contract, the finance company based the payment on a mileage limitation. Because of this, I don't think the dealer's omission on the contract will net you unlimited miles.

I am sure it states somewhere on the contract that it is valid pending the final approval of the finance company. The contract may also be considered null and void if it is not filled out completely.

[GTiandrewK]

Little known subject to buyers is Yield Spred Premium.

YSP. Dealerships get YSP(back end premium payment from a lender) when they charge customers with higher rate than they actually qualify.

Don't forget, It is buyers market. Interest Rate is low.

[Intgr8VAG]

I agree with GTiandrewK. I found out this 7 years ago when I bought my first financed car.
My credit wasn't that great so I had to eat the high interest rate. Later I found out from another dealership that the dealer gets a profit from any rate above the one given by the bank.
As always, shoot for the lowest APR or Money Factor.

[ImRollin]

Quote, originally posted by Intgr8VAG »

I agree with GTiandrewK. I found out this 7 years ago when I bought my first financed car. My credit wasn't that great so I had to eat the high interest rate. Later I found out from another dealership that the dealer gets a profit from any rate above the one given by the bank. As always, shoot for the lowest APR or Money Factor.

This is exactly how mortgage lenders make $$$. (This and charging points)

[Cyberrick]

Hi All:

Just a couple of other notes on Leasing that I did not see addressed in the other threads.

VW Credit has a Acquisition Fee of $575. This fee is capatilazed so when you are trying to figure your lease payment take the Cap Cost or sale price and add $575 to it to arrive at the Adjusted Cap Cost. Then deduct the residual from this number. The number divided by the term equals your monthly depreciation payment. To figure the rent charge take the adjusted cap cost plus residual and multiply by the rate factor. This figure will be your monthly rent fee. Add the 2 figures together and you will have your base payment. In Michigan this payment would be subject to 6% tax adding the 3 figures together would give you your total payment.

As some states charge tax on the total cap cost instead of use tax like in Michigan you would need to know how the tax is figured for your state. If charged up front it would be added to the adjusted cap cost before deductiong the residual.

This brings me to another item the VW Drivers Option Program. The VW Web sites payment calculator is very deceptive as it generally figures the Drivers Option payment to be less than the lease payment. This might be true in a state where the customer pays all the tax up front however, in Michigan and most other States that is not the case. Drivers Option payments here are always higher than lease payments. The purchase option at the end of the contract is the same as the lease. Hence very few people ever use the Driver Option Program in Michigan.

12000 vs 15000 mile leases: The payment increase to go from a 12000 mile lease to a 15000 mile lease is typically between $10-12 per month. Basically the residual is 2% less on a 15K lease than a 12K lease. So on a vehicle with a $20000 MSRP the residual would be $400 less on the 15K lease. On a 48 mont payment it would increase your depreciation portion by $8.33 400/48. However, the rent charge would decrease as you are adding the same cost to a lower residual before multiplying by the rate factor. So assuming a .00175 rate factor the rent charge would decrease by $.70 (400x.00175=.70)

On a 4 year lease the excess mileage charge with VW is $.15 on 12000 mile leases and $.12 on 15000 mile leases. So a person that contracts for 12K and drives 15K would have an excess mileage charge of $1800 at the end of 4 years vs paying maybe $450-500 more up front in payments by selecting the 15K lease in the first place. So the moral is if in doubt take the 15K lease as you will recover the difference in about the first 3500 miles you go over the 12K plan.

Someone asked why advertised lease specials always show a down payment. The logic is simple. Dealers spend thousands of dollars advertising. In Detroit a full page ad in the Detroit News runs between $20,000 -$30,000. The object of advertising is to catch the eye of a potential customer by having a very attractive price point. So typically the vehicles advertised will be the lower trim level cars, with manual transmissions, minimal option, the advertised payments are always before tax, and the down payment used is a number we use to arrive at an attractive price point for that vehicle hopefully less than the competitions. A $199 payment looks much better than a $231 payment. So by creating the ad with a $1000 down payment the dealer is able to offer the $199 price point.

When in doubt about what the dealer is doing simply ask for a copy of the lease worksheet on the add car. You can then apply the numbers to the vehicle you are interested in and keep the dealer honest. In other words the work sheet will tell you the residual %, rate factor, cap cost, down payment. So let say you want the automatic instead of the manual. The MSRP is $875 more the invoice is $864 more. Simply apply the new numbers to the work sheet to calculate the payment.

If the dealer is reluctant to share the worksheet information with you find another dealer. A common practice is the Bump. The Bump is to increase profit in the ad deal when the customer changes to a more expensive vehicle, changes the down payment, or the term of the lease. A common bump logically explained by skilled salespeople is the vehicle change. It goes like this:

So the vehicle you want is $875 more than the advertised car. We are not changing the mark up just adjusting for the automatic transmission. So if we take the $875 divided by the term 36 your payment will only be $24.30 more for the automatic. To which most consumers reply OK. The fact is the 875 transmission has a residual of about $480 so the actual difference in the depreciation portion of the payment is only like $11.00 per month. The dealer just picked up almost $500 more profit with the Bump. There are a million ways to create the Bump. So the best advice is take the lease worksheet and analize it. Unless you are leasing the ad car which is generally a pretty safe deal as the profit has been greatly reduced to get you in to the store.

[GTakacs]

WOW! Only 8 posts and such a valuable response! Some people will certainly appreciate your information, even if it was nothing new to me .

Thah Bump example sounded very interesting, even though I immediately knew what was going on . It's best to be on the lookout!

As far as Buyer's Option or Premiere Purchase goes, I agree that if your state only charges tax on the monthly payments, lease is a better option as the acquisition fee is offset by the tax saving (unless you're leasing a Kia Rio, but you'd insane to lease such a low residual value vehicle). Unfortunate states like TX (where I live) Balloon loans are always cheaper than lease since no acquisition fee is in place. Also most states with their stupid vicarious liability laws will stop leasing very soon and a more expensive balloon loan will be the only option to "rent" vehicles.

At any rate, welcome to the Car Purchasing forum, there are several of us who can help others, but any newcomer with the inside info never hurts!

[Cyberrick]

Yeah, a person that understands leasing would catch that Bump right away. However, most consumers do not have a clue.

There are as many ways to bump as there are cars. Another favorite is the mileage Bump. When a customer asks how much more to go to 15K from 12K. Goes like this:

Well lets see the up front mileage charge is $.10 so your looking for 9000 extra miles. That would be $900. KaChing...Just racked up another $500 and change.

Then there is the Credit Challenged soul who knows he is a fish. VW Credit comes back with a B tier or C and we work them back down to an A or B and keep the difference by just not telling the customer we worked the bank back to a lower credit tier.

Another favorite is the $1000 out of pocket lease where the security deposit is waived and converted to cap cost reduction keeping the payment the same. Net result more $

I guess the point is Retail Brick and Mortar Sales will never change. I have been at this 20 years. The last 5 doing nothing but Internet business. This is the only way to go. Unfortunately, there are very few dealers that have really embraced the Internet and customers get frustrated waiting days for a response to their inquiry, or worse the sales person trys to handle the e-commerce customer like a Brick and Mortar customer.

We handle it very differently here. I post both MSRP and Invoice prices on every vehicle in stock on our site. I have about 20 different Internet Specials representing basically the entire line up. I even have a special where the customer can request the Internet price structure for every VW via auto-response. I did post it live at one time. However, the Michigan VW Dealers do not actively use references to invoice in their advertising so I made it interactive where the consumer is requesting the pricing. The auto response come right back telling them by model what the mark up is as a percentage over or under invoice. This month most are well under invoice with the dealer cash.

[TalYvan]

I got a spreadsheet to calculate the leasing payments, it works quite well for me. I usually go directly to the dealer and request money factors and residual numbers, they always release that data but they put the "good through date" on the paper, last one was quite impressive. 0.00149 x 36 mo @ 55% for and A4 '03 1.8T. That's about $430 for a fully loaded one w/ $2000 down.

Anyway if somebody is interested, I have no problem to share it. I just hope my inbox doesn't get flooded. yvanh@cantv.net

[VeeDubDriver]

Often a dealer will give you a money factor that is marked up. It looks like that happend in your case if that rate info is current.

[hawc]

This is a great thread. I've learned a lot already. I'm awful at math (dropped in grade 10) and just know I'm going to get burned when I go to buy my next car. So maybe I can ask a quick question here.

Let's say my next car is $65,000.

I have absolutely no interest in keeping it longer than 3 years. I have no attachement to owning a car, I'm perfectly happy in just getting rid of it and getting something new.

I live a little beyond my means and want to be able to affod the nicest car possible, but want to keep my montly payments as low as possible.

How should I pay for the car?

I assume it would be to lease it with no money down and use what I would've spent on my downpayment (say $10,000) for instance each month on my higher monthlies.

Am I correct?

[VeeDubDriver]

In the current car market, if you plan to keep a car less than five years, you are almost always better off leasing because of depressed resale values.