Less interest – Because you are making an upfront payment that covers the depreciation of the car over the period of time you’ll drive it, you don’t have to pay interest on this amount. So rather than paying interest on the full cost of the car, you only pay interest on the residual value, or the value of the car at the end of the lease, which is usually about 60% of the MSRP.
Lower interest rate – Some manufactures (including Audi, Mercedes-Benz, Lexus and Porsche) will discount the interest rate for one pay leases. The savings can be significant—for example a 0.4% interest rate for a one pay instead of 2.8% for a traditional lease.
When I first started researching I wanted to avoid financing and I’m fortunate enough to be able to pay cash upfront. Plus I had purchased a couple of expensive macbook pros and Amazon had a great deal with earning 5% using my prime card so I charged it. Due to having no debt and a low need for credit I keep my accounts all paid. This put a LARGE hit on my score like 80 points. So I didn’t want that to affect my chances. I read credit wouldn’t play a factor with a single pay. Then when talking to the dealers I learned I heard wrong. Even when leasing there is still financing involved. Even though I had a hit they saw my history and my 1 hit but they said I had no issues with my score for them so I still qualified for top tier. The dealer reassured me that even if it would have dropped me in terms of a lower tier they would be able to talk to the necessary people to get it worked out. I still saved nearly $1000 over the traditional lease.
The take away is this. As long as your credit score isn’t extremely low due to negative factors. Thus demonstrating poor credit habits. and you don’t qualify on paper for top tier they will factor in the fact that you are putting up so much cash.**** Of course that was my experience and my outcome. Your results may vary.
Congrats on the deal.
In regards to credit, doesn’t matter if you are doing a one pay or traditional monthly lease, your credit worthiness is still measured and once the agreement is in place, the total amount of the lease payments which in your case is $12k will show up on your credit. Now what effect that new Honda loan will have on future needs all depends on your overall credit picture which is age and history, credit debt balances and new inquiries or credit apps.
Nope… not true. The monthly base payment used to compute the one pay consists of an interest component and a depreciation (principle) component. In your case, the interest component is very small… $0.45 per month while the depreciation component amounts to 364.07 per month for a total of 364.52. Adding 21.87 tax @6.00% yields 386.39. Your one pay is…
36 x 386.39 = 13,910
The $0.45 per month interest is based on the average depreciation…
0.00001 x 2400 = 0.024%
(0.024%/12) x (28,889.19 + 15,782.75)/2 = $0.45.
Observe that (0.024%/12)/2 = 0.00001
The lease balance is computed by calculating the present value of the residual minus the present value of the unearned interest charges at the time of the accident. So, let’s suppose he totals the car after 4 months. The present value of the residual is $15,773 and the present value of the unearned interest charges is $14. His lease balance is $15,759. The payoff is $15,759 plus all applicable fees. Let’s say it’s $16,000. If the insurance carrier values the vehicle at an ACV less applicable deductible at $26,000, then Honda receives the $16,000 payoff amount and the OP receives the $10,000 difference. So, yes, there is some risk where OP could lose a substantial portion ($2,000) of the one pay.
Rent charge is always calculated the same way (Cap cost + RV) * MF * lease term. In this case, the MF was really really low, that’s why the rent charge was low.
In my case and per my insurance company, I would not be at a disadvantage in the first year of this lease. My coverage offers new car replacement that would cover the entirety of my vehicle cost plus an extra amount of around $1000. An example would be if the cost would be $28000 to replace my car in it’s entirety then they would provide $29,000. After the first year, well that is another story as it was hard enough to even get this much information. Neither Honda Financial nor my insurance company can give me a clear explanation.
The theory in this post sounds like it might vary depending on vehicle make.
GAP coverage kicks in when the lease payoff exceeds the ACV less the deductible. It essentially covers the difference between what you owe on the lease in the event of a total loss or, if the car is declared stolen, and what the insurance company actually pays based on their assessed value (ACV - actual cash value). For one pay leases with extremely low interest rates like yours, the max lease balance is approximately the residual value. Add to this all applicable fees to get the lease payoff. In this instance, your lease payoff might not exceed the ACV less deductible except, perhaps, toward the end of the lease. It’s a tough call and depends on the depreciation time line profile of the vehicle.
In the past, I’ve found AHFC to be uncooperative. They’re tight mouthed and won’t answer very many questions which is why I won’t deal with them any more. Transparency is an absolute must with me.
Just to clarify, That wasn’t a question I had. That was merely the heading link for another post.
This is why I made sure that my personal insurance policy included the New Vehicle replacement coverage.
After reading several posts on the topic of GAP waiver, I found many people are under the false impression that GAP would benefit them in the instance of a One Pay lease. I’m wondering if MB,and AUDI refer to the provision of reimbursement as something else?
I don’t have my old mb lease contract anymore, but on an Audi contract they key term is “unearned”. This verbiage comes under the one pay terms on the back of the contract.
