Look into extension while you shop.
Tundra are leasing very well using the right bank.
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The cheap f150 lease from that time frame was due to a RV set too high because the data hadnât come in on the new gen f150 yet. Plus Ford had various rebates that when stacked by clever dealers could net 8-12k in rebates on the right customer and get those insanely low payments. In my world those are like holes under the waterline on a boat and we try to plug those as quickly as possible.
Ally and US Bank have some MAJOR holes in their boat on these tundra and Tacoma RVs but they apparently donât care or donât know. Those would be your only opportunity for a good truck lease these days in the same ballpark as your f150 payment.
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I have a feeling that Toyota must know this by now, no? How are they not taking any steps to plug these holes on the dealer end? They canât be thrilled about seeing all these trucks drive off lots without their own finance arm getting a piece of the action.
Problem is, how would they plug them without taking a bath themselves in 2 years? They canât force USBank or Ally to use different residuals since they donât own them. The only thing they could do would be meet or beat their numbers, ultimately costing them money in the process when this metal comes back in 2 years.
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Iâve heard other posters here mention that Toyotaâs policy with franchised dealers is that they must offer TFS financing in the first instance and use third parties as an alternative. If a dealer has too many third party deals going through and not enough TFS deals to make it look like they at least tried I could see that causing some issues.
Toyota and TFS arenât concerned with where US Bank and Ally set their RVs on the Toyota products. They see their crazy low penetration on the Tacoma and Tundra lease volume but donât chase the business with ultra risky RVs.
What is worrying is that Toyota has increased the option content available on Tundra to where there are much bigger MSRP spreads for the same SR5 trim level. If those packages arenât very visually distinct from the exterior, auction bidders donât know which trucks have which packages so their bids donât line up with true content value. This means the lender is taking much higher risk levels when they residualize a $4k package at 60-75%.
Ally and US Bank are the ones that are really going to be seeing the big losses on all the 24-27mo lease volume.
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And if you remember, the aluminum body F150 had 1 or 2 months where sales were lumpy and concern customers might not buy it (they came around)
TFS would already have seen the take rate in that category is lower than expected, sure
So TFS is not buying as many Tacos and Mucho Mas Tacos, generating cashflow. But they have plenty of other cars theyâre buying that are.
Usually when the residual and MF is subvented by the captive, itâs to lubricate sales and thus manufacturing, and some/all comes to captive as a credit to manufacturer. If manufacturing is fine and sales is fine, not really a reason to buy the rate down, the MF up, or put cash on the hood.
Agree this could be a concern as these trucks move to secondary market. Used car managers and auction buys could misprice them the first couple times.
Iâm not an employee at a Toyota franchise but my understanding with all the manufacturers is that the captive is the lender of 1sr resort. At the end of the month the captives rep to the dealership almost always looks at the number of deals and the breakdown that were sent to them, and has the right to audit the deals that didnât come to them (cash, credit union, other banks for loan/lease). But when the captive is offering subvented financing on so many other models, and does so much volume, they would stay inside guidelines even with a handful of 3rd party leases.
And when they fall outside that and get spoken to, Finance Directors often make the argument that there isnât enough special rates and they are just out matched by their competition.
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@RVguy
and others who can answer
Can you elaborate on how a lease works in the background in terms of the relationship between the Bank (ie BMW FS) & the Manufacturer & the customer?
Is the customer borrowing money (ie. sum of total payments + any fees not paid at signing) from the Finance company? Or is someone else technically doing the borrowing and part/all of the cost of borrowing is passed on to the customer via the MF?
On a related note, how does it work when companies offer 0% financing? Is the Financial Service arm actually loaning the money at 0%, or is the manufacturer is actually buying down the rate in the background by paying the cost of the interest to the financial arm? In the end itâs the same umbrella company (assuming their own finance arm), so net result is the same I think.
Thank you
MF is the interest rate equivalent variable that is used to calculate the rent charge. When you look at the lease contract, ârent chargeâ is an itemized line item. âMoney Factorâ is a variable used to compute ârent chargeâ, much like interest rate is used to calculate an interest charge. One isnât charge a âmoney factorâ AND a ârent chargeâ.
You forgot to include one major entity in this circular relationship, the dealer. The manufacturer establishes the suggested pricing (MSRP) and builds in margin for their franchised dealers through the various layers of pricing (invoice, holdback, etc.) and then also creates incentive programs to increase sales velocity.
In a lease or a finance purchase, the dealer structures the deal according to the guidelines of what a specific lender will buy outlined on their rate sheet. This is the process with all lenders, not just the captives. On a finance purchase, the net capitalized cost is the amount of money that the lender is lending to the customer which is paid to the dealer in addition to any dealer reserve or rate participation (also outlined on the lenderâs rate sheet). On a lease purchase (closed end), the lender is also lending the full net capitalized cost but the customer is only on the hook for the total of the monthly payments. I believe most lenders will report the entire cap cost amount as the loan amount to the credit bureaus. The lender sets the MF on a lease just like they set the rates on their retail loan program.
On 0% loan deals and all other special rate offers, the manufacturer has an agreement in place with the captive finance company to pay the difference in rate income between a standard rate and whatever that incentivized rate is. Sometimes the standard rate is global and other times it is model-specific. They (captive and manufacturer) meet on a regular basis, usually monthly, to determine what the desired program on each model will look like and determine the cost of that program. By program, I mean the rates and any other incentives.
The same thing happens for the special rates on the lease program. The lender will have a standard moneyfactor for each credit tier and the manufacturer will agree to pay the difference on a special moneyfactor for a specific time frame. The lease program negotiation between the captive and manufacturer can also include any RV support above certain levels with a share of the risk between the captive and manufacturer. So if the captive is setting the RV of a vehicle at 52%, but the sales division needs to be at a 56% for a desired competitive payment, they will negotiate the risk share on the additional 4pts of risk.
With true captive lenders and manufacturers, they are all under the same parent company umbrella so the goal (in theory) is to optimize end-to-end net profit at the portfolio level. Very few are structured in a way to be open and transparent enough to actually analyze the entire umbrella to the point where the captive and manufacturer can negotiate each component of their pricing system to optimize the total P/L. The usual relationship has some walls in place where each side is only thinking about their own P/L.
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Thank you for this detailed reply; very helpful and interesting
âOn a lease purchase (closed end), the lender is also lending the full net capitalized cost but the customer is only on the hook for the total of the monthly payments.â
On leases, isnât the actual vehicle owner the Lender?
So is another way to look at it, that the Lender buys the car upfront and is renting it to you with various fees?
Yes, youâre on the hook for the sum total of monthly payments, but thatâs similar to renting a car from Budget/Avis/etcâŚWhen you agree to rent the car for 2 weeks, you are on the hook for 2 weeks worth of payments, even if you return it early (generally speaking).
What happens in the background at lease turn in? You bring the car to the dealerâŚbut the car is technically owned by the captive.
- Dealer can choose to buy it?
- Else it they sell it to an auction company?