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Old 03-07-2015, 08:10 AM
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Help me understand lease prices

Hello. Thanks to help from you I have decided on my JGC. 4x4 v6 overland max steel w indigo/brown leather and advanced tech package. I have used true car to buy several cars for myself and my wife and have been very happy with pricing- although I actually recently did better for a new highlander. Anyway there is no overland w those specs within 400 miles so I will have to order it.

So the best true car price I got which includes destination but not doc fee and title taxes is $44908. MSRP is 49285 so that's pretty good. I am actually planning on leasing (for the first time ever) and was told to negotiate best price then get the lease price. Planning on 12k for 46 mos nothing down. Have excellent credit.

Now bear with me... So the true car price deanships will actually honor the price on a special order and I have gotten a quote of $570 from one and $599 from another.

A local delete who does do trucar offered $46920. 2k more than trucar. But then said the lease would be $449!!!

They all say that the price might change by $10-30 based on incentives and residuals when I pick up the car. The local dealer-which is in my state while the others are 60-100 miles away in other states- said they would refund my $500 deposit if I wasn't happy with the final lease price upon delivery.

Am I missing something? How can the local dealer be so much less for the lease when the price is $2000 more? Different state pricing or scam?

Thanks.!


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Old 03-07-2015, 09:46 AM
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Re: Help me understand lease prices

I've leased many cars so here is leasing in a nut shell....

Your monthly payment is based on the selling price of the car (Cap cost) minus the residual amount (cars value that is determined at the end of the lease by the manufacturer). That figure, or the difference is multiplied but the interest rate (money factor) for the term of the lease. You are basically "financing" the depreciated value of the car (selling price-residual=financed amount..).

So leasing means you are paying the manufacturer for the amount of money the car will depreciate over the time you are using it. Basically that figure (financed amount) is usually lower if the car has a higher residual (worth more at the end) and you can knock down the selling price so that "financed (cap cost)" is smaller.

$40k (selling price) - 22k (residual) = $18K financed over 36 months (term of the lease) at 1.5% = payment + tax (simple example)

The only real negotiating you can do in a lease is the "selling price". The money factor and residual amount are set by the bank and the manufacturer. Incentives, cash back, rebates, etc... are used to lower the selling price. The term of the lease will usually drive the money factor as well.


All things being equal the monthly payment should be the same if all the numbers add up. Dealers like to hide stuff so keep it simple when asking for this information. It's not a secret, it's math. I've had plenty of finance guys get pissed that I can unwind their deal and prove to them the math didn't work. Leasing can be complicated if you don't understand it but I broke it down in it's simple form. Keep in mind the down payment lowers the "selling price" of course along with dealer incentives. I would stay as low on out of pocket as you can unless you're trying to widdle down the selling price to get to a payment you're comfortable with. My advice is not to lease with the intention to buy, plan on modifying the beans out of the car, or you drive a lot of miles. You are usually throwing money away if that is your plan. A lease for me is being able to drive a nicer car with a far much less monthly payment. I don't have to worry about maintenance and I get a new car every 24-36 months with little to no money down. Keep in mind you rarely get money back on a lease at the end, but it's possible known as equity, however I won't get in to that here...

Key points to ask in your case:

1. What is the "selling price of the car"?
(use tax is added monthly in to your payment. Licensing is paid at the time of purchase plus all the dealer "add-ons" knock the price up)

2. What is the money factor or interest rate on the lease? (if they give you the money factor like .00035 multiply it by 2400 to get the actual rate)

3. What is the residual on the car? (Should be the same no matter what dealership. This is set by Jeep)

With those base numbers you should be able to see how you're getting different payments. Again it's just math. The only way you're numbers don't make sense is you're not getting the same numbers from each dealer. Oh last thing I would point out is keeping your lease under or at the manufacturers warranty period. Remember you do not own the car so why do you want to be responsible for repairing items that would otherwise be covered by the warranty when it runs out and you're still making a lease payment?!? Stick to 36 months if I were you....
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Old 03-07-2015, 10:34 AM
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Re: Help me understand lease prices

Quote:
Originally Posted by robs15altitude View Post
I've leased many cars so here is leasing in a nut shell....

Your monthly payment is based on the selling price of the car (Cap cost) minus the residual amount (cars value that is determined at the end of the lease by the manufacturer). That figure, or the difference is multiplied but the interest rate (money factor) for the term of the lease. You are basically "financing" the depreciated value of the car (selling price-residual=financed amount..).

So leasing means you are paying the manufacturer for the amount of money the car will depreciate over the time you are using it. Basically that figure (financed amount) is usually lower if the car has a higher residual (worth more at the end) and you can knock down the selling price so that "financed (cap cost)" is smaller.

$40k (selling price) - 22k (residual) = $18K financed over 36 months (term of the lease) at 1.5% = payment + tax (simple example)

The only real negotiating you can do in a lease is the "selling price". The money factor and residual amount are set by the bank and the manufacturer. Incentives, cash back, rebates, etc... are used to lower the selling price. The term of the lease will usually drive the money factor as well.


All things being equal the monthly payment should be the same if all the numbers add up. Dealers like to hide stuff so keep it simple when asking for this information. It's not a secret, it's math. I've had plenty of finance guys get pissed that I can unwind their deal and prove to them the math didn't work. Leasing can be complicated if you don't understand it but I broke it down in it's simple form. Keep in mind the down payment lowers the "selling price" of course along with dealer incentives. I would stay as low on out of pocket as you can unless you're trying to widdle down the selling price to get to a payment you're comfortable with. My advice is not to lease with the intention to buy, plan on modifying the beans out of the car, or you drive a lot of miles. You are usually throwing money away if that is your plan. A lease for me is being able to drive a nicer car with a far much less monthly payment. I don't have to worry about maintenance and I get a new car every 24-36 months with little to no money down. Keep in mind you rarely get money back on a lease at the end, but it's possible known as equity, however I won't get in to that here...

Key points to ask in your case:

1. What is the "selling price of the car"?
(use tax is added monthly in to your payment. Licensing is paid at the time of purchase plus all the dealer "add-ons" knock the price up)

2. What is the money factor or interest rate on the lease? (if they give you the money factor like .00035 multiply it by 2400 to get the actual rate)

3. What is the residual on the car? (Should be the same no matter what dealership. This is set by Jeep)

With those base numbers you should be able to see how you're getting different payments. Again it's just math. The only way you're numbers don't make sense is you're not getting the same numbers from each dealer. Oh last thing I would point out is keeping your lease under or at the manufacturers warranty period. Remember you do not own the car so why do you want to be responsible for repairing items that would otherwise be covered by the warranty when it runs out and you're still making a lease payment?!? Stick to 36 months if I were you....
So Question, at 3 years and 36k miles you may likely be getting near tire replacement when you turn in depending on the type of driver you are. will they expect you to have decent tires on it when you give it back? or as long as they are not below the wear indicators they are fine with it? to me tires are often shoot before they get to the wear indicators when I replace them. but what is there typical requirement on tires, because that could possibly be a big expense on turn in
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Old 03-07-2015, 10:35 AM
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Re: Help me understand lease prices

Quote:
Originally Posted by silvermax04 View Post
So Question, at 3 years and 36k miles you may likely be getting near tire replacement when you turn in depending on the type of driver you are. will they expect you to have decent tires on it when you give it back? or as long as they are not below the wear indicators they are fine with it? to me tires are often shoot before they get to the wear indicators when I replace them. but what is there typical requirement on tires, because that could possibly be a big expense on turn in
They allow for normal wear and tear on a vehicle, including the tires.
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Old 03-07-2015, 10:39 AM
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Re: Help me understand lease prices

That's normally wear and tear so depending on the amount of driving you do it could play a factor. Usually going from one lease to the next I've been able to get in and out of cars without having to put new tires on since they wanted to do the next deal they didn't care about those things and took the car as-is. If you were just going to turn it in and walk away there could be a requirement in your lease that the tires must be within a certain range. You could always put cheaper tires on it...

Leases may not work for everyone so stuff like that should be considered in to the cost of a lease.
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Old 03-07-2015, 11:18 AM
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Great breakdown thanks for sharing
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Old 03-07-2015, 11:25 AM
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Re: Help me understand lease prices

Very good explanation rob. As you said get the vehicle selling price first and foremost as that is what is going to determine your lease payment. Never ever say how much you want to pay a month as the dealer will always find a way to make that work to there advantage. Also tell them you want to see the lease work up sheet. That way everything is right up front none of that cloak and dagger negotiating. Here is my lease sheet so you can see an example. ImageUploadedByJeepGarage1425745494.227301.jpg


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Old 03-07-2015, 08:45 PM
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Re: Help me understand lease prices

Ask in this forum for the exact Money Factor and Residual that Chrysler financial uses.

2015 Jeep Grand Cherokee Lease Questions - Car Forums at Edmunds.com
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Old 03-08-2015, 12:39 AM
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Re: Help me understand lease prices

Quote:
Originally Posted by Mtortoph View Post
Planning on 12k for 46 mos nothing down.
I assume 46 is a typo and you meant 36 (46 would be a very unusual term in the first place..).

I'm asking because THIS is indeed very important:

Quote:
Originally Posted by robs15altitude View Post
Oh last thing I would point out is keeping your lease under or at the manufacturers warranty period. Remember you do not own the car so why do you want to be responsible for repairing items that would otherwise be covered by the warranty when it runs out and you're still making a lease payment?!?
Although my lease is set at 39 months, I would never keep it longer than 36 due to the warranty.
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Old 03-08-2015, 12:43 AM
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Re: Help me understand lease prices

BTW, this site, IMO, is also very helpful in order to figure out the basics. Although I leased many vehicles before, it came in handy to me to get to all numbers:

Lease Payment Formula Explained - LeaseGuide.com
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Old 03-08-2015, 12:50 AM
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Re: Help me understand lease prices

Quote:
Originally Posted by robs15altitude View Post
Usually going from one lease to the next I've been able to get in and out of cars without having to put new tires on since they wanted to do the next deal they didn't care about those things and took the car as-is.
That's a perfect example where you are actually in the driver's seat. Since you are leasing from Chrysler and not from the dealer, you can turn in your ride at ANY dealership - not just the one you got it from. And in case they are indeed so dumb (or cheeky) to demand new tires, they might think again if you tell them that new tires = new dealership for your next ride...
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Old 03-08-2015, 01:34 AM
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Re: Help me understand lease prices

Quote:
Originally Posted by robs15altitude View Post
I've leased many cars so here is leasing in a nut shell....

Your monthly payment is based on the selling price of the car (Cap cost) minus the residual amount (cars value that is determined at the end of the lease by the manufacturer). That figure, or the difference is multiplied but the interest rate (money factor) for the term of the lease. You are basically "financing" the depreciated value of the car (selling price-residual=financed amount..).

So leasing means you are paying the manufacturer for the amount of money the car will depreciate over the time you are using it. Basically that figure (financed amount) is usually lower if the car has a higher residual (worth more at the end) and you can knock down the selling price so that "financed (cap cost)" is smaller.

$40k (selling price) - 22k (residual) = $18K financed over 36 months (term of the lease) at 1.5% = payment + tax (simple example)

The only real negotiating you can do in a lease is the "selling price". The money factor and residual amount are set by the bank and the manufacturer. Incentives, cash back, rebates, etc... are used to lower the selling price. The term of the lease will usually drive the money factor as well.


All things being equal the monthly payment should be the same if all the numbers add up. Dealers like to hide stuff so keep it simple when asking for this information. It's not a secret, it's math. I've had plenty of finance guys get pissed that I can unwind their deal and prove to them the math didn't work. Leasing can be complicated if you don't understand it but I broke it down in it's simple form. Keep in mind the down payment lowers the "selling price" of course along with dealer incentives. I would stay as low on out of pocket as you can unless you're trying to widdle down the selling price to get to a payment you're comfortable with. My advice is not to lease with the intention to buy, plan on modifying the beans out of the car, or you drive a lot of miles. You are usually throwing money away if that is your plan. A lease for me is being able to drive a nicer car with a far much less monthly payment. I don't have to worry about maintenance and I get a new car every 24-36 months with little to no money down. Keep in mind you rarely get money back on a lease at the end, but it's possible known as equity, however I won't get in to that here...

Key points to ask in your case:

1. What is the "selling price of the car"?
(use tax is added monthly in to your payment. Licensing is paid at the time of purchase plus all the dealer "add-ons" knock the price up)

2. What is the money factor or interest rate on the lease? (if they give you the money factor like .00035 multiply it by 2400 to get the actual rate)

3. What is the residual on the car? (Should be the same no matter what dealership. This is set by Jeep)

With those base numbers you should be able to see how you're getting different payments. Again it's just math. The only way you're numbers don't make sense is you're not getting the same numbers from each dealer. Oh last thing I would point out is keeping your lease under or at the manufacturers warranty period. Remember you do not own the car so why do you want to be responsible for repairing items that would otherwise be covered by the warranty when it runs out and you're still making a lease payment?!? Stick to 36 months if I were you....
Very helpful explanation -- thanks. One question: where did the number 2400 come from here: "if they give you the money factor like .00035 multiply it by 2400 to get the actual rate"?
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