Hey Guys,
Asking this one for a buddy of mine cause I really have no clue either… He has around $13k left on his lease with BMW. What would happen if he threw a $10k payment at them next month? Is that possible to do? If so what would happen there? Would it just knock down the monthly payments, or would it prepay that amount of payments and then just resume months later?
Sorry I don’t know if this is a stupid question, but I just figured I’d ask.
It would prepay the payments. So if his payment were $400, the next month it would show 0 (or possibly -$9600) never paid that much in advance. Kind of a really really bad idea. If the car gets wrecked or you do a pull ahead, good luck getting that $ back. You will but it takes teeth pulling like a mofo.
It makes no sense to do that though. Wiser to put it in a savings account that gains interest and set it to autopay
Once a lease is signed the total price of the car (MSRP-Dealer discount etc.) is ‘loaned’ by the autofinance company to you for limited time use of the car.The interest on this ‘loan’ is rolled into the lease payments (Called money factor).This interest never changes and is non-negotiable once the ‘loan’ has been funded.So no matter how much your friend prepays this interest and hence the lease payments will never change.
The finance company will infact take his money and offset it for each months payment (so monthly payments will be ‘0$’ till the amount is burnt out) but at the same time they will invest it in some high return account to make some interest on it.
Ask your friend to put that in Tesla/Microsoft stock and forget about it for 10 years.
^^^ What they said. Put that money in an account that will accrue interest to offset interest expense on that lease. Lots of ways to get some ROI nowadays. Stock market, high-yield savings accounts, bonds, mutual funds, etc.