Leasing?

[Atty]

I've always known leasing can be a good option if you always want a new car and don't plan to keep it very long but I always thought dealerships would want you to buy vs lease.

In the past two days I've been to two VW dealerships and taken out two GTI's, each time the sales guy has pushed so hard to get me to lease the car I thought he was begging.

What is the huge incentive to lease a car for the dealership? What is the point for them? I'm curious as to why they are pushing so hard for people to lease.

 

[Ferzerp]

Errr... Really?


They get your payment for a few years, and then get the asset back that's worth more than the difference in the sum of your payments vs. what they can sell it for. Why would they not push for this?

 

[iamwiz82]

Errr... Really?


They get your payment for a few years, and then get the asset back that's worth more than the difference in the sum of your payments vs. what they can sell it for. Why would they not push for this?

The dealers do not get the payments, they get your money up front via the lessor. The lessor then charges you back. There can be kick backs from the lessor to the dealership, however. Banks can (and do) the same for finance rates.

 

[Ferzerp]

Yes, but my point is, it is not as if you're coming out ahead by leasing. They are great money makers. That's why they are pushed.

 

[Atty]

Well, I knew they get the car back and get for sure payments, I just thought they wouldn't push so hard for someone to lease when I came in asking about actually buying. Hmph.

 

[rcpratt]

A loyal lease customer is basically an automatic sale every three years for the dealer.

 

[ElFenix]

because most people only think about the payment, not how many of the payments they will have to make. so, because a lease payment is typically lower than a buy payment for the same car, the car dealers can often get someone to buy more car by selling the person on a lease. more expensive car = more profit for the dealer on just that part of the transaction. on top of that, lease payments often have higher interest rates on them, which means that the lessor can pay the dealer more money to buy the lease from the dealer. so, more profit for the dealer from that as well.



although leasing isn't always a bad deal.

 

[JackBurton]

Renting cars is a very profitable business.

 

[Atty]

because most people only think about the payment, not how many of the payments they will have to make. so, because a lease payment is typically lower than a buy payment for the same car, the car dealers can often get someone to buy more car by selling the person on a lease. more expensive car = more profit for the dealer on just that part of the transaction. on top of that, lease payments often have higher interest rates on them, which means that the lessor can pay the dealer more money to buy the lease from the dealer. so, more profit for the dealer from that as well.



although leasing isn't always a bad deal.

Ah, these things make it all make sense. Hadn't thought about it all that way.

 

[EagleKeeper]

Leasing gets you into $400/month car for a $300/month payment. Now because you were expecting a $400 payment, the dealer can sell you a $500 car for $400.
Extra increase should only be $75, but you are so happy that you never challenge the overage because the dealer is taking care if you.

You are paying what you expected, but getting more car for it.

Of course after 3 years you have to start walking or buy another vehicle. Having no equity in a car, you again go the lease route. This time you get a $600 car for a $500 payment. Dealer is happy; they have sold two new cars to you in a three year period instead of one. You are happy having a new $600 vehicle for $500. Wash and repeat.

Purchase Option
Now after 6 Years you do not have to still have to walk and can start banking $500 for next 3 years.
The vehicle is not as nice by this time, but you have equity in the vehicle and are banking cash and lower insurance rates.

In 3 years, you can get a $700 car and not have to worry about walking again.

For business, it is different. The vehiclr costs gets picked up by Uncle over a 7 year period to support the business as needed for the business.

 

[JackBurton]

Leasing gets you into $400/month car for a $300/month payment. Now because you were expecting a $400 payment, the dealer can sell you a $500 car for $400.
Extra increase should only be $75, but you are so happy that you never challenge the overage because the dealer is taking care if you.

You are paying what you expected, but getting more car for it.

Of course after 3 years you have to start walking or buy another vehicle. Having no equity in a car, you again go the lease route. This time you get a $600 car for a $500 payment. Dealer is happy; they have sold two new cars to you in a three year period instead of one. You are happy having a new $600 vehicle for $500. Wash and repeat.

Purchase Option
Now after 6 Years you do not have to still have to walk and can start banking $500 for next 3 years.
The vehicle is not as nice by this time, but you have equity in the vehicle and are banking cash and lower insurance rates.

In 3 years, you can get a $700 car and not have to worry about walking again.

For business, it is different. The vehiclr costs gets picked up by Uncle over a 7 year period to support the business as needed for the business.

You missed the part where when you go to turn in your car after 3 years, they inevitably find something to nickel and dime you on (over mileage, tires worn more than they'd like, dings). BUT instead of charging you, they will be nice and roll you into a new lease. What a great deal!

 

[exdeath]

Yes, but my point is, it is not as if you're coming out ahead by leasing. They are great money makers. That's why they are pushed.

You are if you are the type that always buys new, takes the depreciation hit, and can't keep a car for more than 1-2 years.

 

[iamwiz82]

You missed the part where when you go to turn in your car after 3 years, they inevitably find something to nickel and dime you on (over mileage, tires worn more than they'd like, dings). BUT instead of charging you, they will be nice and roll you into a new lease. What a great deal!

Have you ever leased, or are your opinions based on the words of someone you do not even know? I have no affinity to leasing nor buying, whatever works at the time is fine for me. I have leased 5 or 6 vehicles now and have never had a fee outside of what was in the contract as payments, never an overage and never any wear or tear. Then again, I bought the last 6 or 7 cars I have had, it all depends.

 

[Doppel]

The dealership sells the car either way. Incentives change from time to time encouraging one over the other, but ultimately the dealership has offloaded the entire car in either case.

A loyal lease customer is basically an automatic sale every three years for the dealer.

Yeah from this perspective it is a great way to keep getting repeat business. Selling a new car to the same person every 3 years is about as good as it gets.

Leasing gets you into $400/month car for a $300/month payment. Now because you were expecting a $400 payment, the dealer can sell you a $500 car for $400.

This is absolutely how a lot of people shop. I'm not one of them; I have two leased vehicles right now both at around $200/month lease. These are $22,500 vehicles that to buy would have given me a monthly payment of $450/month. Last few years have had some profound lease deals on vehicles. When the first of my two leases is up next year I'll lease again, unless the brand (or some other) doesn't have any steals like I got this time, in which case I'll buy one of them out or get something else.

-----

Leasing is a tool, as is financing, as is buying new or buying used. Sometimes you need a hammer, sometimes a saw and neither one is necessarily better than the other.

You missed the part where when you go to turn in your car after 3 years, they inevitably find something to nickel and dime you on (over mileage, tires worn more than they'd like, dings). BUT instead of charging you, they will be nice and roll you into a new lease. What a great deal!

I have yet to return a lease vehicle. My father used to only ever lease. I have a co-worker who had a terrible experience with it and will never do it again (he had to dump the vehicle early because he had kids and got bent over a barrel on it, not surprisingly). Many people lease endlessly, and if brands were nickel and diming all the time over minute issues they would turn customers away.

 

[JackBurton]

Have you ever leased, or are your opinions based on the words of someone you do not even know? I have no affinity to leasing nor buying, whatever works at the time is fine for me. I have leased 5 or 6 vehicles now and have never had a fee outside of what was in the contract as payments, never an overage and never any wear or tear. Then again, I bought the last 6 or 7 cars I have had, it all depends.

Yes, and that's exactly how it went.

 

[Ferzerp]

You are if you are the type that always buys new, takes the depreciation hit, and can't keep a car for more than 1-2 years.

I prefer to call that "less behind" than ahead

edit: Though, until the used market is oversaturated again (the perfect storm of smashing a large number of perfectly usable used cars around the same time that new car purchases had trickled to nearly nothing for a bit), that hit is not nearly what it once was. I know of at least one individual who was actually paid to keep a car for two years. Yes, he sold his two year old car for more than he paid for it, and it was nothing special, just a ford fusion. He bought at the perfect time (when dealers were desperate to make any sale) and then sold at the perfect time (when the used supply was at its lowest, and demand had started to pick up again).

 

[jagec]

I have yet to return a lease vehicle.

Do you mean that you're still on your first lease, or that you keep renewing the lease over and over? I thought the whole point of leasing is that you get to drive a new car every few years.

 

[halik]

A loyal lease customer is basically an automatic sale every three years for the dealer.

Pretty much this.

 

[Doppel]

Do you mean that you're still on your first lease, or that you keep renewing the lease over and over? I thought the whole point of leasing is that you get to drive a new car every few years.

Two current cars are the first I've ever leased...so on first lease, yep.

 

[Zivic]

You missed the part where when you go to turn in your car after 3 years, they inevitably find something to nickel and dime you on (over mileage, tires worn more than they'd like, dings). BUT instead of charging you, they will be nice and roll you into a new lease. What a great deal!

or you just take that same vehicle... assuming you leased it right, and buy it out and resell for a profit. It can be easy money...again, assuming you leased it right

 

[EagleKeeper]

or you just take that same vehicle... assuming you leased it right, and buy it out and resell for a profit. It can be easy money...again, assuming you leased it right

Profit on the resale; what about the three years of lease payments that you have nothing to show for. 10-15k of payments and potentially a 3-5k resale profit.

Lousy finances to please an ego

 

[leper84]

Don't forget you might also have the option of purchasing the leased car after the terms are up; depending on who is doing the leasing. So you get 2/3 years to feel a car out for any problems before you make a long term commitment.

I know Honda is great about leasing... but then you have to drive a Honda.

 

[TakeNoPrisoners]

Ahhh leasing, one of the best ways to destroy your wallet.

Smart people buy cars, make large down payments, and keep their cars for a long time. A new car is not an investment, it is an expense, it is all about maximizing value and making sure you spend as little as possible to keep it running for as long as possible. You will only come out ahead with vehicles if you are talking about classics which are a whole different thing altogether.

Cars are a terrible status symbol, buy something that actually holds its value or will appreciate in value.

 

[Zivic]

Profit on the resale; what about the three years of lease payments that you have nothing to show for. 10-15k of payments and potentially a 3-5k resale profit.

Lousy finances to please an ego

My last lease
314 for 36 months no money down = 11304
Bought it out at the end and sold it in 48 hrs for 5200 profit. So my total out of pocket was 6104 for 3 yrs of vehicle use. That comes out to under 170/month for a mark 32k vehicle.... now add in potential tax incentives and it can make it even cheaper

 

[heymrdj]

Ahhh leasing, one of the best ways to destroy your wallet.

Smart people buy cars, make large down payments, and keep their cars for a long time. A new car is not an investment, it is an expense, it is all about maximizing value and making sure you spend as little as possible to keep it running for as long as possible. You will only come out ahead with vehicles if you are talking about classics which are a whole different thing altogether.

Cars are a terrible status symbol, buy something that actually holds its value or will appreciate in value.

Everything that is a status symbol is a bad value. I laugh everyday when I hear someone is upside down on their mortgage because for too long people were taught that a house could be leveraged as an asset instead of a shelter that was an expense in order to live safely in this country. All those people that are now bankrupt when they were saying "don't rent, home ownership is the only way to add equity" are now the fools.