From: carl@Cayman.COM (Carl Heinzl)
Newsgroups: rec.autos
Subject: Re: Auto Leasing !!???
Date: 9 Apr 92 15:49:44 GMT
Distribution: usa
Organization: Cayman Systems Inc., Cambridge, MA
In-reply-to: roa@galen.med.Virginia.EDU's message of 8 Apr 92 13:18:22 GMT
bcc: carl


>        Does anyone out there lease a car...why or why not?? What are
>the advantages/disadvantages of leasing?? How long does the lease last??
>How many variables can you throw into lease deal??

>Inquiring minds......

Lease deals can be very attractive for several reasons.

1) You can usually get into a lease with very little if any money down
	(first month pmt and security).

2) Effective interest rates are usually (big caveat there!) much lower than
	the interest rate of borrowing money to buy the car.  e.g. the
	effective interest on my Legend lease is about 7%.  These numbers
	vary a LOT and you should check them out.

3) If you only want to keep the car for two, three, or four years and then
	plan on trading you don't have the hassle of trading it in.  Also,
	you only end up paying sales tax (here on MA) on the value of the
	lease, which will be less than the total value of the car.

4) There are closed end and open end leases.  My lease states a residual
	value for the car at the end of 3 years.  I can buy the car for
	that amount of $ if I want.  I can also counteroffer with a 
	LOWER figure and since the bank would end up owning the car,
	having to wholesale it, etc. they will probably know some $$$
	off that number.  Some leases state that, to buy the car at the
	end of the lease, you pay NADA average tradein value plus 5%.
	I'm sure there are other variations on this too.

5) If you can deduct (large) portions of your automobile expenses, a lease will
	probably be beneficial.

Leases can have hidden costs...

1) There is, in many cases, a "bank fee" of anywhere from $0 to $450 to
	"assume" the lease.  This is like similar to paying points on a house,
	except the $ are not dependant on the cost of the car.  This is usually
	just figured into the "money factor" as well.  In my case they said
	that there was a bank fee of $450 but it was figured in (and the
	effective interest rate was STILL at 7% on the real figure that I
	leased the car for !!!).

2) Many leases have "drop off" fees.  If you drop the car off (i.e. DON'T
	buy it) you have to pay a fee of anywhere from 0$ to $400 (or more,
	possibly).

3) Gap insurance can either be included (as part of the "money factor" which
	is the "interest" on the effective loan you're taking) or it can
	be extra.  Since you're upside down in a lease for somewhere between
	two and three years, it's probably a good idea.

Other issues.

1) They check out your credit.  You usually need to have reasonable credit to
	lease a car.  When buying a car they don't care as much because the
	bank or financier assumes the risk at that point.

2) Residual values on the cars are used to calculate how much depreciation you
	have to pay for.  For a 3 years lease, these percentages ranged from
	58% for the Q45 to something like 42% for a Taurus SHO.  That difference
	can make the payments on the lease of a much more expensive car close
	to the payments on a lower end car.  The big caveat here is that at the
	end of the lease the Q45 will cost 25k to purchase while the SHO will
	cost about $11k.  It all depends on the individual!!!

***Negotiation***

Some of these fees (such as drop off fees) are negotiable.  The
Infiniti dealer was willing to pay half the $200 drop off fee for the
G20 (actually give me a check for $100 right now, I could bank it and
get interest for 3 years).  The problem with the G20 lease was that
the effective interest rate was 10.34%, WAY to high.

Bank fees are set by the leasing institution.  You might be able to
shop dealers (different dealers might lease through different
agencies).  This is definitely true for different makes of cars.
Acura leases through American Honda Inc. (so, I'm leasing from an
American company :^) ).

As with any contract, one should strive to understand as many of the details
of the lease well before putting you name down on the paper.  I shopped
around on leases quite a bit and was pretty happy with the Acura lease.
Another excellent leasing program right now was with Nissan (on the Maxima).

Oh, btw, I was told that most (99% was quoted, but that seemed high)
of the people who lease do NOT buy their cars at the end of the
period.  

I'm sure I skipped something here, but this is a pretty good start.

-Carl-
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