Opinions on this deal?

[coreyrc]

Hi all,

I've been looking to buy a 2013 Limited or Sport, get a 100k mile warranty (I'm one of those guys who always gets the warranty lol) and put $10k down. But after shopping around, the monthly payments (best I was offered was $489 a month) were a bit too steep.

 

One dealer recommended that I lease my Edge for 3 years, at 10.5k miles a year (around $350 a month, still making the down payment of $10k) then once the lease was up, buy it (he said I'll owe approx. half the list price, so about $22k) and thus avoid any over-mileage penalties, and still get to own my Edge when it's all said and done. This seems like a pretty good deal to me, as once it's all over with, including interest, I'll be paying only about $1000 over list, and I'll have a more manageable monthly payment.

 

So I guess my question is - has anyone else done something similar to this? And if so, how did it work out? This would be my first time to lease a vehicle instead of financing it, so I'm curious as to what peoples' opinions are on leasing vs buying if I plan to buy in the end anyway?

 

While it seems like the perfect deal to me, I'm always afraid it'll bite me in the bum at the end - like maybe when the lease was up, they might still make me pay for mile overage, or somehow I'd owe more than half the list price. I don't think a dealer would try to screw me over like that, but then again I'm always cautious lol.

 

Thanks!

[exodus]

Hi all,

I've been looking to buy a 2013 Limited or Sport, get a 100k mile warranty (I'm one of those guys who always gets the warranty lol) and put $10k down. But after shopping around, the monthly payments (best I was offered was $489 a month) were a bit too steep.

 

One dealer recommended that I lease my Edge for 3 years, at 10.5k miles a year (around $350 a month, still making the down payment of $10k) then once the lease was up, buy it (he said I'll owe approx. half the list price, so about $22k) and thus avoid any over-mileage penalties, and still get to own my Edge when it's all said and done. This seems like a pretty good deal to me, as once it's all over with, including interest, I'll be paying only about $1000 over list, and I'll have a more manageable monthly payment.

 

So I guess my question is - has anyone else done something similar to this? And if so, how did it work out? This would be my first time to lease a vehicle instead of financing it, so I'm curious as to what peoples' opinions are on leasing vs buying if I plan to buy in the end anyway?

 

While it seems like the perfect deal to me, I'm always afraid it'll bite me in the bum at the end - like maybe when the lease was up, they might still make me pay for mile overage, or somehow I'd owe more than half the list price. I don't think a dealer would try to screw me over like that, but then again I'm always cautious lol.

 

Thanks!

I would NOT tell you to put down 10k...With a lease if you were to total out your car you will lose all that money all you should put down in 1st mth, tax, bank fee and DMV.. It's not worth putting all that money down. Also when you buyout your lease what ever your buyout is you still need to add the remaining taxes to that number. But if you do want to put all that money down look at doing a shorter term lease like a 24mth. With money down it will usually work out to be a better payment...Hope this helps if you have other questions please ask.

[NatG]

I'd strongly advise against Lease-to-own. You always end up paying more for the car in the end.

 

HAve you investigated getting a Loan through your own bank?

 

EDIT: I'm not against leasing the car, I am just against lease-to-own. IF you do lease, follow the advice of Exodus.

Edited April 18, 2012 by NatG

[coreyrc]

Thanks guys!

 

So, Exodus, how much would you suggest putting down? I'd have to put some down to get the lease affordable - otherwise it's about the same monthly payment as financing (with $10k down)... It's not so much the overall price I pay (pretty much every way I've had it figured at dealers, there's been only about a $3k gap in overall price paid lease-to-own vs overall paid finance), but the monthly payment, that I'm worried about.

It does concern me though about losing the $10k if it gets totaled... I'm a really safe driver, but other drivers... Whew.

 

And as far as the shorter term, I'm not 100% sure if I can quite save up the remaining $22k + tax (and yeah, I knew that I'd have to pay tax on the remainder as well) by that point. I'd hope and expect to be able to, but I'm just not sure. I am sure I could in 3 years though. I don't plan on financing the remainder at the end of the lease - I plan to just pay it off as soon as my lease is over.

 

And NatG, no, I haven't investigated a loan through my bank yet. They weren't able to beat Toyota's financing when I bought my Tacoma in '05, so I just haven't given it much thought. I'll make that phone call during my lunch break today, though - maybe they can figure me up a good rate!

[Dingo]

Wtf are y'all talking about with losing the down payment in a wreck? And what does the dealership have the residual figured at? Standard ford red carpet lease or something else?

[coreyrc]

Wtf are y'all talking about with losing the down payment in a wreck? And what does the dealership have the residual figured at? Standard ford red carpet lease or something else?

 

Tbh, I have no clue what the residual is figured at, I've just been getting as many quotes on a monthly payment as possible. So the whole "losr your down payment if totalled" thing isn't accurate? I knew it was the first I'd heard, but I'm still new to leasing so I didn't know.

[srs148]

I'm not sure what the current money factors are for the 2013's but i just purchased a 2012 Limited and found that it actually saved me money to keep the down payment in my pocket. To illustrate, my payment on a 3-year lease was $450 with $3000 down. When i asked how much more it would be to reduce my down-payment by $1000, they told me it would only cost me $24 more per month. Over a 36-month lease, that $24 extra per month would total $864 vs me putting out $1000 right now... see what i'm saying? So i lowered my down-payment to $0 and saved around $400 over the life of the lease... and that $3k is in my pocket and can work for me (a couple of shares of AAPL) now instead of into the car.

[exodus]

Tbh, I have no clue what the residual is figured at, I've just been getting as many quotes on a monthly payment as possible. So the whole "losr your down payment if totalled" thing isn't accurate? I knew it was the first I'd heard, but I'm still new to leasing so I didn't know.

If you put money down on a lease and total it you LOSE any and all of your down payment I know this because I am a Ford dealer. As far as the residual goes it depends on the miles a year you take

[coreyrc]

If you put money down on a lease and total it you LOSE any and all of your down payment I know this because I am a Ford dealer. As far as the residual goes it depends on the miles a year you take

 

Lound and clear, sir! Thanks for telling me this. Between this and srs148's experience, I'll just keep my down payment then and use that money on my monthly payments.

Edited April 18, 2012 by coreyrc

[Dingo]

Okay, now I'll do the incredibly brief leasing crash-course. I'm always amazed at the misconceptions surrounding leases and how some people think they're instruments of Satan.

 

First of all, a lease isn't paying for the car. It's paying for the value that the car loses during the time you have it. Say, for example, that the car is worth $40k when you acquire it. If it's worth $25k at the end of your lease term, your total payments would equal the $15k difference plus interest. It's basically a souped-up rental.

 

As far as losing your down payment, that's total crap in every way. What happens is that the at-fault person's insurance pays for the value of the vehicle, but to the leasing company, it's identical to an early lease termination. Often, people still owe more on the lease than the insurance company pays, leading to that misconception. This is why GAP insurance was created. It covers the difference, letting you walk away with no further burden on a vehicle that you no longer have. It's inexpensive, and most leases actually require that you have it.

 

As far as saving more money by not having a down payment, again, crap. Let's think about basic math. If you owe someone an amount, how is it even remotely possible to owe them less by paying it over time (with interest), than it is to pay it all upfront? Srs148, what they did with you was to play with your interest rate and or mileage factors to give you that impression.

 

I can go on forever, but here's the basic advice: Monthly payment isn't the most important thing with a lease. Many people get caught up in what the payment is and make poor decisions by looking at the tree instead of the forest. Your most important factors are vehicle selling price, interest/miles, and residual. Miles aren't really that important if you work the rest right, because you can often sell or trade the vehicle at the end for more than the lease payoff, making mileage completely irrelevant. Make sure the selling price is what you'd be willing to pay for it if you were doing a purchase. Next, make sure the interest rate is good. It's often not, because leasing has gone up in popularity lately because of the economy and the public perception that it's the only affordable way to have a new car. The residual is equally important, and is figured based on projected resale value of the car at the end of the lease term. All of these are things to be considered. Let me know if you have any practical questions.

[coreyrc]

Wow, thanks Dingo!

 

So basically, I need to investigate gap insurance and residual. Gotcha. I have the figures the dealer wrote for me back at home, so I know my interest rate (and I'm sure the residual is there too), I just can't quote it off the top of my head.

 

I already did the math on the total price paid as far as selling price & interest, and the lease only came out slightly higher - not enough to make it a deal breaker. And yeah the miles will be irrelevant, as I'm planning on paying it off as soon as the lease is up - I usually keep a vehicle 5 to 7 years, unless it turns out to be a complete POS (which I really doubt the Edge will).

 

Thanks for setting me straight here.

[Dingo]

No problem. Like I said, let me know if you have any questions.

[akirby]

Don't pay more than $295 for gap insurance.

 

Leasing is just another way to finance a vehicle. Check the buyout price on the lease compared to what you can buy the same vehicle for used. If the buyout is higher just turn it in and buy another used one for less money.

 

Sometimes manufacturers subsidize leases more than purchasing. It's tough to tell because with purchasing you get rebates that are obvious. With leases the incentives are buried in the payment.

 

As long as you know what you're doing it's perfectly viable to lease, then buy.

[coreyrc]

So, Dingo & akirby, is Gap insurance in addition to my regular insurace, as in a separate thing, or should I just get my insurance agent to add in gap coverage?

[akirby]

So, Dingo & akirby, is Gap insurance in addition to my regular insurace, as in a separate thing, or should I just get my insurance agent to add in gap coverage?

 

Totally separate and usually offered by the lender, not your insurance company, although you can probably buy a separate policy if necessary.

[exodus]

Gap insurance is automatically included on a Ford lease