In Maine. 2021 Jeep Gladiator Sport. Sign and drive (so 5.5% tax included ). MSRP of $36,433. Lease for 4 years, $379/month with a $25,500 residual. So someone is making about $7400 on the lease only. So to buy it at the end, we would spend $43,692 overall. If I put $6000 down, my payment drops by $125 per month ($254 per month) but the total out of my pocket is the same. Is this Typical for Jeeps? 70% residual factor after 48 months? I cannot find any residuals listed on JEEP leases.
I have leased many times and my total out of pocket has always been greatly less than (great rebates) or equal to MSRP but never that much more. It’s Ally leasing. Thoughts please and thank you. I most likely will not buy it at the end, but that is how I typically analyze a lease, overall with buy out.
I don’t know about this one specifically, but ally frequently leases jeeps with very very high residual values. Unfortunately, since there’s no free lunch, the money factors they use tend to be very very high as well. They can still be great deals though.
Have you gone to the Edmunds forums to verify mf’s,
residuals and incentives?
If or when you rented a place to live, do or did you give your landlord thousands of dollars to lower your rent payment? I know this is beating a dead horse but it’s just foolish and so many people do it.
Have you gotten the Chrysler numbers? I’d also see what US Bank is offering if the dealer will disclose it. Shopping around is always important, but it is particularly important when dealing with brands that offer multiple leasing banks so you can analyze the deals on your own. As stated before, Ally tends to offer higher residual values but they usually come at the cost of astronomical interest rates. These can be mitigated when there is a large amount of IDL cash on the hood of the vehicle, but that doesn’t seem to be the case at the moment. A 48 month term is a long time for a lease. You are going to be out of warranty for at least a year, possibly more depending on your mileage allotment. It sounds to me like the dealer in question knew you had a number in mind (1% of msrp?) and crafted a deal that was close to that while giving up very little on their end, hence the longer term. Stick with 36 months if possible and research the available incentives, as well as the programs other banks are offering.
Your analogy doesn’t make sense. If you prepay rent, you don’t avoid interest. If prepaying rent gave me a 6% lower payment right now, I’d do it.
There’s always the risk that your car gets totaled but on a brand new car, that risk is rather remote and when you start to get to some higher rates, it makes sense to make a large down payment or one pay.
MF on Jeep’s are up there so downpayments make much more sense than a Lexus or BMW.
To be a bit pedantic, a one pay does not carry the risk of the vehicle being totaled like a large down payment does, but it also doesn’t save you from paying rent charge (although you do get some MF reduction usually).
Your comment literally adds zero value. How is my math flawed? Please elaborate on how reducing the principal balance would not reduce the corresponding interest expense?
Let’s use a simple calculator example;
No downpayment - total cash payments = $14,720
All other inputs being the same, with a large downpayment ($5K) - total cash payments = $14,320
Difference of $400 in cash, or effectively a 3% straight lined pre-tax return assuming 25% in taxes. While you can do better in the market, there isn’t a 3% 3 year T note available, so you’re getting “paid” for your risk.
Yes, but my point relates to a Jeep, which does not offer MSD’s and has high rates. For brands with lower interest rates, I agree that a downpayment does not make sense.
There is nuance to each rule and the concept of “never pay any downpayment” is flawed in certain situations, very much like the 1% rule.
That MF is ridiculous. It may be likely you may come out ahead buying rather than leasing, have you explored that? Regardless, I’m sure your landlord still loves you
That said, and since these things are never as cut and dry as we would like them to be, as evidenced by the conversations above, the Ally RV is much much higher, so things start to even out. In the end, one has to look at their personal situation and risk tolerance to figure out what is the best path forward.
My planned approach for the jeep wrangler I am planning to sign on in the next week or so is to do a one pay through CCAP. The simple return for OP vs monthly ends up being about 7%, which is too good to pass up in my opinion. I don’t know where else to get a 100% guaranteed 10% pre-tax return. However, there are a myriad of reasons why a single pay could be a bad choice for someone as well.
