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Thread: How does leasing work?

  1. #1
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    How does leasing work?

    Can someone explain to me in depth of how it works?

    I'm thinking of leasing a 2009 BMW 528i for 3 years.

    $459 First months payment
    $3,500 Down payment
    $500 Security Deposit
    $725 Acquisition fee
    Total - $5,184 Cash due at signing

    Do I get any of this money back? Is the car under 100% warranty aka dealer pays for everything for 3 years? Exactly how much will I be paying per month ($459)? What are the gotchas of leasing?

    Any help is much appreciated.

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    Quote Originally Posted by i2onnel View Post
    Can someone explain to me in depth of how it works?

    I'm thinking of leasing a 2009 BMW 528i for 3 years.

    $459 First months payment
    $3,500 Down payment
    $500 Security Deposit
    $725 Acquisition fee
    Total - $5,184 Cash due at signing

    Do I get any of this money back? Is the car under 100% warranty aka dealer pays for everything for 3 years? Exactly how much will I be paying per month ($459)? What are the gotchas of leasing?

    Any help is much appreciated.

    You go into dealership, give then 5184 for the 09 528i.

    Then you pay 459/mo for 3 years. At which point towards the end you may have the option to trade early for a newer bmw, or you can return the car for a small fee. Mileage matters.

    Warranty - not sure but i think thats additional. I know ther is a basic warranty with every new car but the bumper to bumper things are usually an extra 15-20$ a month.

    You will get back the 500 i believe when you return all the extra shit. I.e. owners manual, spare keys, floor mats etc.
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  3. #3
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    $459/month even?

    Is the small fee for returning the car, the $350 disposition fee?

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    How does it work? You get screwed, that's how. If you don't plan on writing it off as a business expense, it's a great way to waste money.

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    http://www.carbuyingtips.com/lease.htm

    Begin studying.

    The problem with leasing is unlike a traditional purchase, leasing provides more ways for the dealer to screw you without you knowing it. You need to walk in there and know how the game works backwards and forwards.

    Study all the material provided in the link above and get ready to go to war.

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    Quote Originally Posted by i2onnel View Post
    Can someone explain to me in depth of how it works?

    I'm thinking of leasing a 2009 BMW 528i for 3 years.

    $459 First months payment
    $3,500 Down payment
    $500 Security Deposit
    $725 Acquisition fee
    Total - $5,184 Cash due at signing

    Do I get any of this money back? Is the car under 100% warranty aka dealer pays for everything for 3 years? Exactly how much will I be paying per month ($459)? What are the gotchas of leasing?

    Any help is much appreciated.
    it works like this:
    you pay money and drive a new car
    you stay within the mileage agreement, you don't pay anything else
    return car undamaged, buy new car/lease new car.

    where people fuck up is driving over the mileage, and damaging the car or not repairing as required including tires.
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  7. #7
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    why not just buy the car outright and not have to worry about the mileage/dealer conditions. Then just sell it in three years and get into something new. You'll probably save money

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    It's a way of always driving a new car that you *gasp* can't afford to finance with a traditional capital loan.

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    Depending on how you structure the lease:

    The lease is essentially paying the depreciation from the time you get the car to the time you turn it in. There is a money factor, but depending on the company, usually under 2% (well for my car it is under 2%). There is also rent - but that is not more than depreciation.

    When I set up my leases, I never make a down payment. Yes your lease monthly payments go down but overall, you are probably paying more:

    I.E. MSRP $30,000 Make a down payment of $3,000. Monthly payments are $300 on a 36 month lease. For the car you are actually paying $383.33/mo. Security deposits are rarely waved unless you are releasing from the same company (i.e. Honda -> Honda)

    Ask if you get gap insurance with your lease. Gap covers the difference of what the company states your car is worth and what insurance says your car is worth (they will be different, and the company will say that the car is worth more than the street value). SOme companies offer other perks - Honda includes excess damage forgiveness - that is any damages outside normal wear and tear, that can be repaired for under $500 (up to 3 incidents), you are not liable for them.

    You can negotiate extra miles into the lease, or lower miles (which will reduce the monthly payment) - Extra mileage is usually $0.15/mile. Leasing is not usually advantagous if you drive over 15,000/yr or under 10.000/yr.

    That's all I can think of right now, if you have other questions, post up and I'll try to answer them. Chifo, Jr. is another great source for leasing info.

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    Quote Originally Posted by pbclax423 View Post
    You go into dealership, give then 5184 for the 09 528i.

    Then you pay 459/mo for 3 years. At which point towards the end you may have the option to trade early for a newer bmw, or you can return the car for a small fee. Mileage matters.

    Warranty - not sure but i think thats additional. I know ther is a basic warranty with every new car but the bumper to bumper things are usually an extra 15-20$ a month.

    You will get back the 500 i believe when you return all the extra shit. I.e. owners manual, spare keys, floor mats etc.
    Dude, have you not seen a single BMW commercial in the past four years?


    What I want to know is at the end, does it end up being a better idea than buying. Hypothetically, lets say you put the same amount down on a 5 year loan as you would a 3 year lease and drive the same amount of miles. In 3 years if you want to sell the car, you are upside down. With a lease you'll spend a little bit less a month and have more restrictions, but when you are done with the car, you just take it back to the dealership without having to worry about depreciation as you would with a loan.

    If you don't plan on keeping a car until the end of the loan, is it a better idea to lease?

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    Quote Originally Posted by pbclax423 View Post
    You go into dealership, give then 5184 for the 09 528i.

    Then you pay 459/mo for 3 years. At which point towards the end you may have the option to trade early for a newer bmw, or you can return the car for a small fee. Mileage matters.

    Warranty - not sure but i think thats additional. I know ther is a basic warranty with every new car but the bumper to bumper things are usually an extra 15-20$ a month.

    You will get back the 500 i believe when you return all the extra shit. I.e. owners manual, spare keys, floor mats etc.
    Do you actually know anything about leasing?

  12. #12
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    Leasing is like renting a car.

    You put down the money that the OP listed as an up front payment. Some cases people do not put a down payment which may increase your monthly payment (depending on how good you are at negotiating with the dealer) Then pay the agreed on monthly payment in this case $460 a month. make sure that then include the registration fees and plates for the car as well. At the end of the 39 months (or other lease term) your bring the car back to the dealer and get another car (if you keep the same maker you can not turn in a BMW at a Lexus dealer unless it has been inspected before hand by BMW) At which point you put a new down payment a new depostit etc on the next car.

    The issues with leasing is that you are given X miles to use during the term normally one of the follow -10K,12K,15K,20K a year. the higher the mileage lease term the more you will pay per-month as well (most dealers advertise 10K because it is the cheapest) If you go over your mile you will be charged a determined amount anything from 15 cents to 50 cents a mile (about average) that the driver put on it. The other issue is that you have to keep the car in good shape any thing that happens to the car parking lot dents scratches etc you will have to pay to remove (some place give you a a set amount of wear and tear (1,500 dollars +/-) anything over that amount the driver will have to pay for.

    Plus of a lease is that the car is under warranty so if any issues that come up with the car it is always covered. A driver can get a new car every few years and should not get board of driving the same thing for 5+yrs. The payments are much cheaper then if a drive was to finance the car for the whole amount. leases are great if you own a business you can write off the car as a business expense and get some of the money back that was paid for the lease.

    A google search will yeald a great deal of info on diffrent car makers lease agreements i would suggest that you look at it. My wife leased her first car (before we where married) even though i told her not to and in the end she did see that it was not good for us, so i financed a simular used car (same make and model just diffrent year) for the same amount as her lease was.


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    Quote Originally Posted by Frogger View Post
    How does it work? You get screwed, that's how. If you don't plan on writing it off as a business expense, it's a great way to waste money.
    Quote Originally Posted by hinzm3 View Post
    why not just buy the car outright and not have to worry about the mileage/dealer conditions. Then just sell it in three years and get into something new. You'll probably save money
    Quote Originally Posted by Lendo View Post
    It's a way of always driving a new car that you *gasp* can't afford to finance with a traditional capital loan.
    All the above, especially Frogger's input.

    Leasing is for company cars, or if you run your own business and can write it off as a business expense. It also works for people that for some irrational reason, need a brand-new car every two or three years.

    You pay drive off fees and possibly a downpayment, then when you return it you pay for excess mileage and wear parts that you didn't replace, like tires. At this point, you have nothing to show for your expenses and have to start the process over again. Meanwhile the dealer sells your lease return as a CPO for more margin than they would have made if they sold it new.

    Do some researching using the links others have mentioned. I think edmunds has a good article on buying vs leasing as well. Everything you find will say that unless it is a business expense, you should only lease if you hate money.

    Personally, I think leasing is for suckers.

  14. #14
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    This was just one of my options or something I thought I would look into. After reading more about it, I've decided it's back to this.

    http://shellybmw.com/invDetail.php?v...id=&evox=3896#

    Thanks for all your help!

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    This subject is all a matter of opinion, and it really depends on the person, the car, and your own financial situation.

    However, I couldn't disagree with some of you guys more.

    If you finance a $50k car for 5 years, you're paying $850/mo. Then, at the end of 5 years, you own a 5 year old BMW with anywhere from 60-80k miles on it - and it starts needing work. More money out of your pocket now since it's out of warranty. Not to mention you're still paying $850/mo on a five year old car that final year. That's just brutal in my opinion.

    You lease that same $50k car, and you'll pay roughly half of that per month and be done with the car in 3 years. You don't have to worry about anything - the car will be under warranty for the entire time you're driving it. And BMW will take care of maintenance too. After your 3 years, you can turn it in or buy it out. The car doesn't need to be immaculate at lease end, they expect wear. Buyouts are always negotiable at the end of your lease, should you choose to buy the car and not lease a new one.

    I would much rather have a $450/mo payment for a car that I know is brand new, will be reliable, and need no additional money out of my pocket. If it's $450/mo, that's how much you allocate to the car every month. Period. There's no surprises when something breaks and costs you thousands to fix.

    Personally, I think buying is for suckers.

    Again, if you put a lot of miles on the car, plan on doing some mods, or know you're absolutely keeping it for 6+ years, then you should absolutely finance it.

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    Wow. When the majority of posters to this thread are recommending that leasing is a suckers game, then I know that the times have changed (economically).

    Two years ago, if someone posted a buy vs. lease thread, it would have been overwhelmingly pro-lease. It was all about getting the most expensive car possible for the lowest monthly payment.

    Today its changed to having a managable payment plus having something you own at the end.

  17. #17
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    Everyone's hypothetical involve keeping the car for the full loan term, which is typically two years longer than lease.

    What about those people who like a new car every 3 years. In the end, when you buy, you pay more a month, and lose more at the end of 3 years in depreciation.

    Am I right?

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  18. #18
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    you spend alot of money for a car you don't own.

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    Leasing is long-term renting.

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    renting (leasing) will always be more expensive in the long run because at the end of the lease you have just thrown away money as opposed to the purchase where you are paying to actually own something. I think buying a new car is stupid anyways, and I wouldn't do it even if I could afford it. You can buy a car that is just as fast/beautiful/economical or whatever for a lot less used, even if it's 2-3 years or a decade old.

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    Quote Originally Posted by i2onnel View Post
    This was just one of my options or something I thought I would look into. After reading more about it, I've decided it's back to this.

    http://shellybmw.com/invDetail.php?vVin=WBANE53537CY04486&vin=WBANE5353 7CY04486&vMake=Bmw&vModel=5-series&vYear=2007&vStatus=2&vBodyType=&vskey=681b8 cb4e4a40dc60ab12fd08d48f2e6&stknum=L13727&sid=&evo x=3896#

    Thanks for all your help!
    Wow. Rarely does a thread like this end up with the OP taking advice and making a smart decision. Good choice.

    Quote Originally Posted by jopa489 View Post
    This subject is all a matter of opinion, and it really depends on the person, the car, and your own financial situation.

    However, I couldn't disagree with some of you guys more.

    If you finance a $50k car for 5 years, you're paying $850/mo. Then, at the end of 5 years, you own a 5 year old BMW with anywhere from 60-80k miles on it - and it starts needing work. More money out of your pocket now since it's out of warranty. Not to mention you're still paying $850/mo on a five year old car that final year. That's just brutal in my opinion.

    You lease that same $50k car, and you'll pay roughly half of that per month and be done with the car in 3 years. You don't have to worry about anything - the car will be under warranty for the entire time you're driving it. And BMW will take care of maintenance too. After your 3 years, you can turn it in or buy it out. The car doesn't need to be immaculate at lease end, they expect wear. Buyouts are always negotiable at the end of your lease, should you choose to buy the car and not lease a new one.

    I would much rather have a $450/mo payment for a car that I know is brand new, will be reliable, and need no additional money out of my pocket. If it's $450/mo, that's how much you allocate to the car every month. Period. There's no surprises when something breaks and costs you thousands to fix.

    Personally, I think buying is for suckers.

    Again, if you put a lot of miles on the car, plan on doing some mods, or know you're absolutely keeping it for 6+ years, then you should absolutely finance it.
    The financial side is fact, not opinion. In the long run, it costs more to lease than to own and here is why:

    If buying, you buy the car and then have an asset until it is sold. You can buy it and then sell it two years later for what it is worth, three years later for what it is worth, etc.

    In a lease, it works the same way only the dealer owns the car and, at the end, sells it for what it is worth, just like that above. The difference is that the dealer needs to make a profit. This profit occurs because your lease payments are such that, during the time of the lease, the leaser pays in more money than what is required to compensate for the drop in resale value over that period of time.

    So, if one were to buy and then sell three years later, the purchase price minus the selling price would be less than the total of the lease payments for the same car over the same period of time. If this were not the case, the dealer would not make money, plain and simple.

  23. #23
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    Quote Originally Posted by jopa489 View Post
    This subject is all a matter of opinion, and it really depends on the person, the car, and your own financial situation.

    However, I couldn't disagree with some of you guys more.

    If you finance a $50k car for 5 years, you're paying $850/mo. Then, at the end of 5 years, you own a 5 year old BMW with anywhere from 60-80k miles on it - and it starts needing work. More money out of your pocket now since it's out of warranty. Not to mention you're still paying $850/mo on a five year old car that final year. That's just brutal in my opinion.

    You lease that same $50k car, and you'll pay roughly half of that per month and be done with the car in 3 years. You don't have to worry about anything - the car will be under warranty for the entire time you're driving it. And BMW will take care of maintenance too. After your 3 years, you can turn it in or buy it out. The car doesn't need to be immaculate at lease end, they expect wear. Buyouts are always negotiable at the end of your lease, should you choose to buy the car and not lease a new one.

    I would much rather have a $450/mo payment for a car that I know is brand new, will be reliable, and need no additional money out of my pocket. If it's $450/mo, that's how much you allocate to the car every month. Period. There's no surprises when something breaks and costs you thousands to fix.

    Personally, I think buying is for suckers.

    Again, if you put a lot of miles on the car, plan on doing some mods, or know you're absolutely keeping it for 6+ years, then you should absolutely finance it.
    I think much of what you said simply ties in to what myself and other members have said about leasing allowing people to drive something they couldn't otherwise afford to own.

    Also, I'm not advocating that people buy new either. Buying new is also for suckers, and represents a close second to leasing as far as wasting money.

    Buying used is the way to go. I think the car should be at least three years old. You'll need to be careful balancing repairs on older cars vs depreciation on newer cars, but either way buying used is preferable.


    Quote Originally Posted by SilverBeam View Post
    Everyone's hypothetical involve keeping the car for the full loan term, which is typically two years longer than lease.

    What about those people who like a new car every 3 years. In the end, when you buy, you pay more a month, and lose more at the end of 3 years in depreciation.

    Am I right?
    You are right. I did mention this in my first post. From a financial perspective, needing a new car every three years is not rational. Leasing will mitigate your losses if you like to drive brand new cars every three years, but it is still a waste of money.

    If someone is a car nut and needs to constantly mix things up, might as well lease. I'm not blind to the fact that cars are often an emotional decision and are never a good use of money, regardless of how they are paid for. Especially sport/luxury cars that can be expensive to run.

    Quote Originally Posted by dbarberic View Post
    Wow. When the majority of posters to this thread are recommending that leasing is a suckers game, then I know that the times have changed (economically).

    Two years ago, if someone posted a buy vs. lease thread, it would have been overwhelmingly pro-lease. It was all about getting the most expensive car possible for the lowest monthly payment.

    Today its changed to having a managable payment plus having something you own at the end.

    It's more than just renting vs owning. Lease terms in an economy like this are no where near as favorable as in a good economy. With the economy in the toilet the used car market has taken a big hit, which makes it difficult for dealers to turn a profit selling lease returns. This means they need more money from you during the course of the lease. I believe some manufacturers that typically see low resale values (i.e., American manufacturers), have stopped leasing all together because of this.
    Last edited by adam1979; 04-08-2009 at 07:10 PM. Reason: Automerged Doublepost

  24. #24
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    I hear what you're saying Frogger.

    That holds true if you can sell the car yourself, but if you're going to pay it off in 3 years then trade it in at the dealer on a new car, you'll take a hit there too. Regardless of how you do it, the dealer is making money.

    Personally, I wouldn't want to deal with selling a car myself. I agree it may cost a little more in the long run to lease it, but I'd rather take that "hit" in smaller bits over the course of 3 years. Also, financing a BMW over 3 years is not something many people can do - that's a tremendous monthly payment.

    We're all feeling the economy right now of course but, speaking personally, leasing makes more sense for me. I can't afford $1200/mo (or more) on a car payment, plain and simple. Nor do I really want to pay $500/mo and drive a Civic or Corolla just so I can own it. I feel comfortable in a lease so, for now, that's what I do.


    Edit:
    Quote Originally Posted by adam1979 View Post
    I think much of what you said simply ties in to what myself and other members have said about leasing allowing people to drive something they couldn't otherwise afford to own.
    Can't really say you're wrong.

    But, I can afford my monthly payment and, to me, that's all that really matters. I don't carry debt and I am conscious of where my money is going. I know that every month, $xxx needs to be allocated to my car.

    Remember also that something like 75% of new BMW drivers lease. Without leasing, BMW would clearly be a very different company.
    Last edited by jopa489; 04-08-2009 at 07:22 PM.

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    Quote Originally Posted by jopa489 View Post
    I can't afford $1200/mo (or more) on a car payment, plain and simple. Nor do I really want to pay $500/mo and drive a Civic or Corolla just so I can own it. I feel comfortable in a lease so, for now, that's what I do.
    Rather than continuing the lease cycle, use the money you are saving by leasing to buy a used car at the end of your lease term! I know a lot of people hate the idea of repairs and maintenance, but if you crunch the numbers, it really isn't that bad relative to even a lease payment. It would take $5400 in repairs in a single year to average the $450/month you used in your example. That's a lot, even for a high mileage BMW.

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