[sedeuce]

Hi folks - appreciate your guidance in advance! I'm so impressed with the responses in this community.

I'm working on my 6th Subaru, after a handful of WRXs, 3 Foresters (XTs and Sport), and now up to an Ascent. Interesting how the circle of life might take me back thru the model lineup and put me into a BRZ one day :-D

New to leases, so forgive me for my novice questions. I've been furiously studying various terms and gotchas on this forum and other car sites.

The current lease deal I'm working on is:

• 36/15k loaded up Touring with MSRP $47391
• trade in (2019 Forester Sport; clean condition, ~13k miles) with a payoff amount ($10,800)

Parameters of the lease deal:

Sale Price: $43,296 (~8.6% discount, deal seems off already; can be made up for via higher trade value and other rebate/cash)​

Trade value: $23,500 (about $4,000 under private party, low but probably avg for how dealer trade-ins go)​

Trade payoff amount: ($10,800)​

Net Trade Allowance: $12,700​

Rebate: $500 (assume this is loyalty rebate, I have another $500 from SOA I'll look to add here, no luck yet getting $1000 build discount)​

Doc Fee: ($175) (seems standard)​

Advanced Payment: ($221.47) (first month)​

Total Cap Reduction: $12,978.53 (what is this? It doesn't seem to come from trade+rebate-docfee-advancedpayment)​

So the net point of the above is that, I should have equity coming into this lease deal based on the trade value.

The terms of the lease are written as:

Monthly Payment: $221.47 (this seems high given that I have equity coming in)​

Term: 36 mos​

Mileage: 15,000​

Residual Amount: $25,117.23 (this seems low but maybe this is a fixed value from Subaru?)​

Money Factor: .0007% (I guess I'm OK with this but in the current climate, might have expected lower)​

The dealer included some verbiage in the email which leaves me perplexed:

On the lease we have some tax credits and using them on this Ascent lease so, you really won't pay any sales tax at all except for the L&M fee which is 1.5% of selling price which is still saving you approximately $600 on sales tax.

I have no clue what an L&M fee is and why it is 1.5% of a sale price, nor did I really expect Sales Tax to be an actual thing being leveraged as part of the deal - I'm in Texas if that's relevant.

Thank you for reading and responding and I do appreciate in advance any time you to spend to help me out.
thx!

 

[gomd]

Before I read your post over a few times, are you sure you want to trade in a vehicle with a $23k trade value, that you could own for $11k?

Once your lease is up, that $12k of equity will go out the window. I would never recommend much money down on a lease, especially this much(in equity).

Purchasing this vehicle, with your trade, would be a much better decision, financially.

Even if you buy out the lease at the end of the term, it is usually cheaper just to purchase from the beginning.

 

[gomd]

Both the residual % and the money factor are set by the manufacturer, and .0007 mf is actually pretty low for an average lease, but I don't specifically know what programs subaru runs. Also, dealerships can be allowed sometimes to add onto the money factor a certain percentage, to aid profit, and this could be the case here.

 

[rockthebeef]

I always hear the car salesman over at r/askcarsales (reddit sub forum) say that it is never a good idea to put a down payment on a lease. Reason being is that you could lose all of that money should something happen to the car early on. If you go through with this, it’s probably better to keep the down payment in the bank and take the higher lease payments.

Here’s a related article:

Why It&#039s Not Smart to Put a Down Payment on a Lease

 

[Jim_in_PA]

No way would I trade in a vehicle for a lease or make a down payment. Sell the used vehicle and pocket the money; put it to work. Negotiate the best price for the vehicle you want to lease...just like you were buying it...and then elect to lease at the finance stage. Make sure that the residual (expected value of the vehicle at lease end) is as high as possible and the money factor is as low as possible.

Any kind of down payment on a lease...cash or trade...doesn't effectively lower the cost of your lease. You're still going to pay about the same amount in the end because of how leases work. You're only paying for the depreciation (difference between agreed upon price for the vehicle and the residual) with a money factor (effectively interest) on that capital cost. A down payment is just pre-paying part of that capital cost. Yes, it lowers you "monthly" payment, but it doesn't lower your cost.

 

[Titanrx8]

No way would I trade in a vehicle for a lease or make a down payment. Sell the used vehicle and pocket the money; put it to work. Negotiate the best price for the vehicle you want to lease...just like you were buying it...and then elect to lease at the finance stage. Make sure that the residual (expected value of the vehicle at lease end) is as high as possible and the money factor is as low as possible.

Any kind of down payment on a lease...cash or trade...doesn't effectively lower the cost of your lease. You're still going to pay about the same amount in the end because of how leases work. You're only paying for the depreciation (difference between agreed upon price for the vehicle and the residual) with a money factor (effectively interest) on that capital cost. A down payment is just pre-paying part of that capital cost. Yes, it lowers you "monthly" payment, but it doesn't lower your cost.

@Jim_in_PA , if this were a game show, the grand prize gong would be going and balloons would be falling. Correct answer.

Also, I'm not too sure the whole sales tax issue was explained correctly, perhaps not even honestly. In Florida, the sales tax is paid monthly based on the capital acquisition price.

 

[Jim_in_PA]

Also, I'm not too sure the whole sales tax issue was explained correctly, perhaps not even honestly. In Florida, the sales tax is paid monthly based on the capital acquisition price.

Sales/Use tax is state specific in how it's calculated. PA is similar to Florida as you mention. Some states have taxation based on other things. Some have no tax. Etc.

 

[packout]

Hi folks - appreciate your guidance in advance! I'm so impressed with the responses in this community.

I'm working on my 6th Subaru, after a handful of WRXs, 3 Foresters (XTs and Sport), and now up to an Ascent. Interesting how the circle of life might take me back thru the model lineup and put me into a BRZ one day :-D

New to leases, so forgive me for my novice questions. I've been furiously studying various terms and gotchas on this forum and other car sites.

The current lease deal I'm working on is:

• 36/15k loaded up Touring with MSRP $47391
• trade in (2019 Forester Sport; clean condition, ~13k miles) with a payoff amount ($10,800)

Parameters of the lease deal:

Sale Price: $43,296 (~8.6% discount, deal seems off already; can be made up for via higher trade value and other rebate/cash)​

Trade value: $23,500 (about $4,000 under private party, low but probably avg for how dealer trade-ins go)​

Trade payoff amount: ($10,800)​

Net Trade Allowance: $12,700​

Rebate: $500 (assume this is loyalty rebate, I have another $500 from SOA I'll look to add here, no luck yet getting $1000 build discount)​

Doc Fee: ($175) (seems standard)​

Advanced Payment: ($221.47) (first month)​

Total Cap Reduction: $12,978.53 (what is this? It doesn't seem to come from trade+rebate-docfee-advancedpayment)​

So the net point of the above is that, I should have equity coming into this lease deal based on the trade value.

The terms of the lease are written as:

Monthly Payment: $221.47 (this seems high given that I have equity coming in)​

Term: 36 mos​

Mileage: 15,000​

Residual Amount: $25,117.23 (this seems low but maybe this is a fixed value from Subaru?)​

Money Factor: .0007% (I guess I'm OK with this but in the current climate, might have expected lower)​

The dealer included some verbiage in the email which leaves me perplexed:

I have no clue what an L&M fee is and why it is 1.5% of a sale price, nor did I really expect Sales Tax to be an actual thing being leveraged as part of the deal - I'm in Texas if that's relevant.

Thank you for reading and responding and I do appreciate in advance any time you to spend to help me out.
thx!

1. your trade in offer has nothing to do with the valuing of the lease deal. You either want the convenience of one stop or not knowing you can probably get a higher price through a private sale.
2. lease terms and conditions
3. How much is your excess mileage charge per mile?
4. Did you negotiate the price for the vehicle you are considering leasing?
5. Your coupons and or SOA offers will be there regardless of the price negotiated so do not bargain with them
6. the mileage allowance seems far too low. Are you really only going to drive 15000 miles in three years? If you are going to drive much more in three years you will be paying a huge sum for excess mileage.
7. How much is your early termination charge?
8. negotiate effectively

 

[sedeuce]

Before I read your post over a few times, are you sure you want to trade in a vehicle with a $23k trade value, that you could own for $11k?
Once your lease is up, that $12k of equity will go out the window. I would never recommend much money down on a lease, especially this much(in equity).
Purchasing this vehicle, with your trade, would be a much better decision, financially.
Even if you buy out the lease at the end of the term, it is usually cheaper just to purchase from the beginning.

Thx for your response gomd!
I have the predicament that I need more car space and towing capacity now, given summer travel plans by car (non-air-travel), yet I don't have the money saved to do a large enough down payment on the 0%/63 loan to make the monthly payment reasonable.

I have some lease quotes prepared in which I will be getting cash equity back.

I fully get that the financial parameters of the current situation do not make sense; net/net, should have bought the Ascent last year rather than the Forester Sport.

 

[sedeuce]

I always hear the car salesman over at r/askcarsales (reddit sub forum) say that it is never a good idea to put a down payment on a lease. Reason being is that you could lose all of that money should something happen to the car early on. If you go through with this, it’s probably better to keep the down payment in the bank and take the higher lease payments.

Here’s a related article:

Why It&#039s Not Smart to Put a Down Payment on a Lease

Agree, thank you for the link!

 

[sedeuce]

No way would I trade in a vehicle for a lease or make a down payment. Sell the used vehicle and pocket the money; put it to work. Negotiate the best price for the vehicle you want to lease...just like you were buying it...and then elect to lease at the finance stage. Make sure that the residual (expected value of the vehicle at lease end) is as high as possible and the money factor is as low as possible.

Any kind of down payment on a lease...cash or trade...doesn't effectively lower the cost of your lease. You're still going to pay about the same amount in the end because of how leases work. You're only paying for the depreciation (difference between agreed upon price for the vehicle and the residual) with a money factor (effectively interest) on that capital cost. A down payment is just pre-paying part of that capital cost. Yes, it lowers you "monthly" payment, but it doesn't lower your cost.

Excellent advice here, thank you JimPA.

 

[sedeuce]

1. your trade in offer has nothing to do with the valuing of the lease deal. You either want the convenience of one stop or not knowing you can probably get a higher price through a private sale.
2. lease terms and conditions
3. How much is your excess mileage charge per mile?
4. Did you negotiate the price for the vehicle you are considering leasing?
5. Your coupons and or SOA offers will be there regardless of the price negotiated so do not bargain with them
6. the mileage allowance seems far too low. Are you really only going to drive 15000 miles in three years? If you are going to drive much more in three years you will be paying a huge sum for excess mileage.
7. How much is your early termination charge?
8. negotiate effectively

1. yes to convenience; I am now entertaining the private party option (more work/time but certainly not worth pissing away ~$4k)
3. I don't have that info yet, its on the list of things to ask.
4. yes, I'm still negotiating on the price and working with 4 other dealers on pricing.
5. yes good point.
6. 15k/year, 45k total.
7. great question, its on the list of things to ask.

 

[gomd]

Thx for your response gomd!
I have the predicament that I need more car space and towing capacity now, given summer travel plans by car (non-air-travel), yet I don't have the money saved to do a large enough down payment on the 0%/63 loan to make the monthly payment reasonable.

I have some lease quotes prepared in which I will be getting cash equity back.

I fully get that the financial parameters of the current situation do not make sense; net/net, should have bought the Ascent last year rather than the Forester Sport.

In the end, you are the only one who can decide what you are comfortable with financially. From an outside perspective, maybe a loaded Touring isn't the right trim level for you at this time.

Or you run the numbers in different scenarios (ie; trade in your forester, lease the ascent and buyout the lease at the end. Or buying now with 0% with the trade in for a down payment) and see how much more it will cost you in the end, assuming a higher interest rate for purchasing the lease later, and factoring in total lease costs.

I will admit, in the past, I have used leases to get into more expensive vehicles that I may not truly have been able to afford at the time, with the understanding that I should be prepared to buy them out at the end so as not to let my initial invest go totally to waste.

Best of luck with whatever route you decide to go.