Comprehensive Lease vs Buy Financial Comparisons

[greenleaf]

A noob question: is it usually in the contract that you can buy out the car at the residue value at the end of the lease? Or is it something that needs to be negotiated?

Lease contracts are open ended or closed ended. They may also be without an option to buy. There are FTC rules on these with prescribed formats. Nissan is giving close (i.e. with fixed residual value) ended lease - just like all other leases.

Thanks. So do we know at this point whether Nissan's lease has an option to buy (at the residue value)?

 

[evnow]

Thanks. So do we know at this point whether Nissan's lease has an option to buy (at the residue value)?

Yes ....

 

[GilSchoonover]

A noob question: is it usually in the contract that you can buy out the car at the residue value at the end of the lease? Or is it something that needs to be negotiated?

If you lease with NMAC, you will have the option to buy the lease for the GROSS PAYOFF (which equals residual after all payments have been made...assuming you have not accrued any late charges, admin fees, etc.) PLUS a PURCHASE OPTION FEE of $300 plus sales tax, plus any applicable state fees (license/reg, etc.).

Before you ask......Why sales tax? Because in a lease, you've only paid sales tax on the depreciation (i.e., the difference from the capitalized cost (i.e., sales price) down to the residual.) If you buy it....got to pay the tax.....if you turn it in...you don't pay the tax.

 

[Coffee_Slurry]

Good info GilSchoonover. It all makes sense (in a taxy kind of way).

But I'm curious about the state fees (license/reg). As far as the DMV is concerned, is a Lease any different than a purchase? That is, wouldn't Year 4 (post-lease) be just the same as the first three, renewal and all that? Does the DMV or State typically charge a fee (aside from sales tax) on a Lease buyout?

 

[greenleaf]

Looks like there is no way to avoid a fee at the end of the lease: either you pay the $395 disposal fee or $300 for the option to purchase?

 

[1051]

I have leased Infiniti's over the years and usually at the end of the lease they will wave the fee if you lease a new car.

 

[Gonewild]

If you lease with NMAC, you will have the option to buy the lease for the GROSS PAYOFF (which equals residual after all payments have been made...assuming you have not accrued any late charges, admin fees, etc.) PLUS a PURCHASE OPTION FEE of $300 plus sales tax, plus any applicable state fees (license/reg, etc.).

Before you ask......Why sales tax? Because in a lease, you've only paid sales tax on the depreciation (i.e., the difference from the capitalized cost (i.e., sales price) down to the residual.) If you buy it....got to pay the tax.....if you turn it in...you don't pay the tax.

Thanks for the info. I like to know if I lease and want to buy the car does it cost the same (ie) Lease and in a few months buy it because I did not get the full $7,500 rebate. Or wait until month 36 and then buy the car.

Can you crunch the numbers for me if say I could only get $6,000 of the rebate is it close to break even with a lease if I don't get the extra $1,500? I would then go with the lease because of the flexibility of the lease at the same cost. I mean I have never lease and would never do it without the rebate. I just got a new ac and solar and could have some extra credits to carry forward the would make my head explode. :lol:

 

[Coffee_Slurry]

I'm working with Edmund's Auto Lease Calculator here:
http://www.edmunds.com/apps/calc/CalculatorController?pmtcalAction=lease_calc

and can't get anything close to the right lease payment to come up. I am using these values:
Vehicle Sales Price (with typical options; before Customer Cash Rebate): 34,000
Sales Tax (by state): +8.75%
Title and Registration: +510
Customer Cash Rebate: -7,500
Cash Down Payment: -1,650

Lease Term (months): 36
Lease Residual Value: 14,751
Money Factor: 0.0020
Miles Driven per Year: 15,000
Acquisition Fee (estimated): 595
Security Deposit: $450.00
Total Loan Amount: $26,315.00
My Monthly Payment (tax included): $438.64

What's Edmund doing differently than Nissan?

 

[Gonewild]

You forgot the $820 delivery charge as well.

 

[evnow]

This is what I have. Try these numbers ...

 

[Gonewild]

evnow>> How do I figure out if I will only the $5 to $6,000 of the rebate is it cheaper to lease the buy? What are the added cost to a lease I see the number but I do not know the bottom line. I could be leaving between $1,500 and $2,500 on the table if I buy it out right. Could you give me some advise? Thanks.

 

[Coffee_Slurry]

You forgot the $820 delivery charge as well.

Naw, I figured that into the selling price already.

$33,720 17311 Nissan LEAF ETEC Trim, Blue Ocean
    820 Destination & Handling
      0 F01/CHA Quick Charge Port
    170 L92 Floor Mats & Cargo Mat
     20 M93 Cargo Net
    125 N92 Hologram Kick Plates
    225 B94 Protection Package
 -1,000 Discount
$34,080 Total car cost.

evnow, your monthly payments sound low, compared to what Nissan is posting ($379). What do you suppose accounts for this?

I wish Edmunds would "show their work" like you have, so I could figure out what they do differently.


Which brings me to another question: Do all DEALERS compute the lease the same way, or will they each derive a different set of numbers? Is the lease fully determined by the selling price and Nissan formula, or does the Dealer introduce variables?

If they're all the same, maybe a friendly dealer could take these numbers over to Finance and see what they would work up. Sure would help close the question of cost-of-lease.

 

[evnow]

evnow, your monthly payments sound low, compared to what Nissan is posting ($379). What do you suppose accounts for this?

I'm using "sale price" (invoice) not MSRP.

 

[LEAFfan]

This is what I have. Try these numbers ...

That looks about right for the monthly lease payment, but the residual will be higher because it is based on TOTAL MSRP, which is more like $35,220. So 44% of that is about $15,500.

 

[evnow]

That looks about right for the monthly lease payment, but the residual will be higher because it is based on TOTAL MSRP, which is more like $35,220. So 44% of that is about $15,500.

What do you mean by total msrp ?

 

[DaveinOlyWA]

I think its msrp without destination taxes etc....

 

[stanley]

I have never leased a car. However I want to hedge my bet on the acquisition of my 2011 Leaf so I am thinking of leasing. Perhaps the second generation battery will be out in 2014 and with it`s entended driving range it may be better suited for my daily drive.

Please forgive my lack of understanding about leasing. I dislike paying interest charges especially since investment returns have recently been a lot less than the Nissan lease interest rate. If I paid a substantial down payment such as $20,000 to $25,000. would there be a significant reduction in my interesr payment under the lease. I would appreciate it if someone could do some calculations

 

[SanDust]

I have never leased a car. However I want to hedge my bet on the acquisition of my 2011 Leaf so I am thinking of leasing. Perhaps the second generation battery will be out in 2014 and with it`s entended driving range it may be better suited for my daily drive.

Please forgive my lack of understanding about leasing. I dislike paying interest charges especially since investment returns have recently been a lot less than the Nissan lease interest rate. If I paid a substantial down payment such as $20,000 to $25,000. would there be a significant reduction in my interesr payment under the lease. I would appreciate it if someone could do some calculations

Good idea about reducing risk. There isn't any concept of a down payment when leasing (cap reduction or drive off costs yes but down payment no). During the course of the lease you're paying for the depreciation of the car during the lease period, finance charges on that depreciation, and finance charges on the piece of the car that won't depreciate -- aka the residual. Leases sometimes allow you to prepay all the lease expenses which would save you the finance charges on the depreciation but I've never heard of a lease that allows you to prepay finance charges on the residual. It could be done of course but Nissan Financing might want to do it. You can ask. No downside to this.

I'm rather surprised about your comment about investment returns. No idea what you invested in but just about everything I know of has had a banner year. Up many times the Nissan lease rate. Even now you can get something like a Vanguard or T Rowe Price Hi Yield Corporate Bonds yielding 6.7%, which may not beat that rate by much but should beat it.

 

[DaveinOlyWA]

yielding how much?

and how can finance charges be prepaid when there is no purchase agreement possible until the end of the lease?

 

[SanDust]

yielding how much?
and how can finance charges be prepaid when there is no purchase agreement possible until the end of the lease?

Not sure I understand the question. During the lease term, you're "borrowing" the residual part of the car as well as the part of the car which has not yet been depreciated (each month you pay off more of the depreciation which causes the balance to fall). You pay finance charges on both of these borrowed parts. Buying the car at the end of the lease for the pay-off price has nothing to do with these charges.

The yield is 6.7%. If you think that's low it's because the quality of the paper is high, probably better than a lot of rated paper. But if you're thinking a return of 6.7% is dinky, total returns for the last year have been more like 17% because interest rates have been falling. But that's not so hot in comparison to the 43% the Reit Index returned. My point is that I didn't understand why he was saying investments returns were so poor when it's hard to find an asset class -- stocks, international stocks, whatever -- that isn't up 10% -20% over the last year.