I understand that the interest rate used to calculate lease payments is based on credit score.
However, is that an issue if you plan to trade in your old Vette for an amount almost equal to the total lease payments? Let's say $30,000.
In other words, can you get a better deal on a lease if you do a trade in especially considering that the dealer will make money on the trade in and on the lease?

 

If you pay for the entire lease up front wouldn't that be like having a perfect 800 credit score?

 

I thought a perfect score was 850. Mine's 805.

A large downpayment definitely assists your rate because it reduces the risk that the lender must assume.

 

If you have $30K in equity in the old car, why not purchase the new one and receive a low interest rate on the balance because of the loan-to-value ratio?

 

I have leased my last 7 cars, to include my current Lincoln LS. One exception is my new C6, which I purchased. I never put any money down, as it does not save you any money on interest. Plus, If you put a huge chunk of cash down on the lease, and the car is destroyed or stolen, you could lose most, if not all, of your down payment.

 

True, but doesnt putting no money down lend itself to a significantly higher monthly payment.

 

Either trade it in and "buy" the Vette. Or lease the Vette with min. down and sell your other Vette. Keep cash from sell in an interest bearing account or invest it somewhere. Use that money to pay payments.

Why are you leasing? Do you get a business deduction? If not it's not the best way in general to go. Plus right now there are no good lease programs on the Vette. It's too new and the banks are a little skitish on residuals down the road.

I was going to lease my Vert and in the end after running every number under the sun I decided to go with the 5.9% GMAC financing.

Another thing when you do a trade in on a leased car the dealer has so many more ways to scr*w you hard!!!

Are you trying to basically trade in your Vette and have no payments for 36 months on a new C6? Sounds great but probably not gonna work.

 

That sounds right. I knew it was 800 something.

 

I think there is a limit to what you can put down on a lease (not the same as paying in one payment). There are tax and other issues associated with leases (for the leasing company) that go away if certain conditions aren't met and thus the limit.
Many feel if you put much down on a lease and then total it, you lose that even with gap insurance since you have no equity in car - the insurance just pays leasing company.

 

If you get no tax deduction for leasing, and you can't get a good lease rate because of credit score, don't lease. Using your equity to reduce lease payments just turns that equity into vapor. I agree with others that having equity to make a down payment on a purchase is a much better idea in this case. If you must lease, sell the car outright, and use only some of the money as cap reductionon the lease.

 

 

You get taxed (in some states) on the downpayment as well. Generally when leasing you want to try and get away with as LITTLE down as you can for reasons stated above (or get GAP coverage on your car).

I disagree with the bad leases...I went through www.leasecompare.com and got a great rate (like 4.5%) on a 48 month lease. I have a good credit score though.

 

For me, a lease only makes sense if the following is the case:

You only get a lease term for 3 years or less - therefore the car is under factory warranty the whole time

And you DO NOT plan on purchasing the car after the lease is over - if not you should just buy the thing to begin with.

The reason for not buying the car after the lease term is that for the payments to be good, the car needs to have an INFLATED residual value (and this is usually the price you would have to pay to buy the car at the end). In other words, you want the depreciation they are calculating for the lease to be small because they are estimating the end of lease value of the car to be too high. This has got lots of leasing companies in financial trouble in the last few years so it's now very hard to find these types of leases.

Finally, you can not intend to drive over the mileage alloted per year, however you can buy higher mileage up front at a significantly reduced rate to the end of lease penalty rate.

to answer the posted question, you're probably not going to be able to pull the trick off because there will be no cash to pay the leasing company for the trade in value of the car since the dealer still needs to sell it first. even so, if you have a good rate you should hold onto your money and just make the payments, but again, the days of the cheap lease payment are mostly gone.

 

Please allow a Mercedes-Benz salesman, who does this for a living, give you some advice...
Buy the car, don't lease it. With a $30,000 trade-in, you're only financing $20K-$25K. This payment on a 60 month loan won't be much more than a lease payment, and you have equity in the car at the end. A lease is essentially renting the car and makes no sense when you have a trade-in worth a significant amount of money. In most states, you save the tax on the trade-in on a purchase, but not on a lease. Under NO circumstances put $30K down on a lease ... if the car is totalled you DON'T get your $30K back!
In terms of somehow getting "a better deal" on a lease because you have a trade-in, don't count on it. A dealership is a for profit business, they certainly won't be sharing the profit they make on your trade-in in any way with you. The bank that leases you the new car establishes the interest rate to be used in the lease calculation based on your credit, they're the ones making the interest on your lease payments, not the dealer.
Hope this helps!

 

"The bank that leases you the new car establishes the interest rate to be used in the lease calculation based on your credit, they're the ones making the interest on your lease payments, not the dealer."

Are you sure? You might be right on a lease.

But I know on purchases "loan, not lease" dealers put a spread on the interest rate all the time "some dealers as much as they can get away with". They are making money on the sale of the vehicle, plus mark up on the loan. I assume they can do it on a lease too. Either that or they make some kind of a referral fee on leases from lease companies.

 

Yeah the dealers have a buy rate for their money and that includes leases. They mark it up like any other product they sell.

 

Thanks for the info.

Not one person has recommended a lease. I just wanted to get feedback since I have never leased a car.

I probably will end up buying a 2006 vette next year.

 

ok well then how about this situation...you have a back-up car and will have financial obligations in a few years but in the mean time you want a C6. You lease it for a few years and then when your expenses (wife/house) come into play you turn in the C6 and have a car free and clear.

 

Yes, of course, the dealer leasing the car could mark up the "buy rate" from the bank and receive a "reserve" directly from the bank. Not very likely however, given that it's so competitive among dealers and it's difficult enough to make the lease #'s on a C6 sound attractive even without marking the rate up any higher than it already is.

 

There are cases where a lease makes sense, but the scenario presented here is not one of them. Generally, if you don't have great credit, a lease will be costly.

While I'm not a financial adviser, I have leased and owned many cars. Right now, I lease a Jaguar XJ8 and am buying a C6. Here are some guidelines I use.

If you can write off a lease, it makes sense. This only applies to cars used for business purposes, and the rules have gotten pretty tough.

If you know you'll only want the car for 3 years or less, and you know you'll not be driving more than 10K miles per year, a lease might make sense. Example, with my Jag (MSRP of $65K), leasing for 36 months has a lower payment than buying with 60 month loan (with the same upfront money). After 3 years, even with a loan, I'd have no equity in the car. So I can lease, save money, and not have any problem with negotiations over value after 3 years.

On the downside of leasing, you can't make any mods to the car that can't be easily undone. If you aren't willing to be very careful about parking lot dings, etc., you may have a surprise at the end of the lease. If you want out early, be prepared to pony up. If you change jobs and end up driving a lot of miles, you'll pay big time.

I'm buying my C6 because I don't know how long I'll keep it and I want to do mods on the car as I see fit. I may pay it off and just not have a car payment after a bit.