Hey guys, I have an offer on a new Lexus GX. I like the monthly: $481 but that comes at a cost: a $5000 downpayment and another $5000 in security deposits for:
$481/36/15k miles in North Carolina
Leasehackr Score is 8.3 years
The security deposits are saving me $68 over the course of 35 months (1st month paid by Lexus) so by my math that’s $2380. If it were an investment, it’d be a 48% ROI. This sounds good to me but at the same time, tomorrow I’ll have to walk in there and cut a check for $10,000 - very tough! I feel the risk of something catastrophic happening that would cause that MSD to not be refunded to be pretty low so that really isn’t a factor for me. Makes you think though.
I think this is a pretty good deal. My biggest concerns are the up front money and Lexus changing body style next year.
dont put 5000 down, do you realize that god forbid something happens to the car, you lose all that 5000, it is not buying equity, it is just reducing the payment so just spread the 5k over the lease and its in your bank account, not the dealers
The down payment is psychological for me. It’s like buying a large Christmas present knowing I have the cash to do it today. The other side is the monthly, having it bought down to something reasonable for the next three years.
Points are well taken here though that if I do wreck it (basically if airbags come out) then I’m out of that $5k.
All in all, paying $640/month is a tough pill to swallow for the next three years. Why not move up to the LX for $900?? (I kid)
ok Max, maybe this wont come off as a totally correct analogy but i am leasing a 20,000 MSRP vehicle, I total that vehicle the next day, yes , with gap insurance, i can pay off that 20,000, but the 5000 i put down does not get paid by the insurance company, i do not buy any equity in that vehicle by putting money down, i am just trying to reduce the payment to something i feel i can afford a month, so basically, i am out that 5k,
please correct me if my logic is wrong
Insurance co’s do not pay off the balance, otherwise there would be no need for gap protection. They pay ACV (actual cash value) unless you have something different in your contract. Depending on the state or contract, they may also be obligated to pay for the sales tax of the equivalent car you would theoretically buy with the ACV proceeds.
In your example, if the balance is 15k and the ins co pays 17k plus tax = ~18k, you get 3k back.
I think down payments are a mistake…mainly because the most important thing to think about is the total cost of the lease, not just the monthly payment.
I totaled my Q5 last year (only 9 months into lease), so I have a decent idea of what happens. The insurance company looks at comparable cars (trim, mileage) in your area…takes some sort of average/median. If the number is lower than the payoff, gap kicks in. If it’s higher, they (insurance) company writes you a check for the difference. Fortunately, I negotiated a killer deal so I got a nice check (will cover my increased insurance premiums!), plus got my audi care back. And I replaced it with a car that leases for nearly 200/month less.
lol @ max_g in your scenario you assume the ACV is worth more than the remaining loan amount. Most of the time a car loses between 10-20% off the top as soon as those tires hit the road so your scenario is bunk.
Most BMWs and Mercedes leases are under water after 1 year.
ex. MSRP was 56k you bought it for 50k, car is totaled 1 year later --> actual cash value on market is 35k you still owe 40k hence you get NOTHING from the insurance company and your downpayment is vaporized.
So you see, the answer is, “It depends.” Some people like the above poster will get a check, some will not. There is no categorical rule that you always lose your CCR entirely.
CCRs are a bad idea because they create a false impression of a lower monthly, and do not lower the total cost of the lease (maybe a little bit if the MF is super high). But the internet hysteria around CCRs is overblown.
