Cash down vs Single pay

Ask the Hackrs
33

IF you borrow money, you should repay it plus interest. That is the premise for a loan!!!

The question is as follows:

Should you repay a MF on a single pay lease? IF the reason is that the bank has to pay the dealer for the full value (including residual value) as some have mentioned, then guess I could see that. However, why is the MF still based off of just lease payment amount and not the full MSRP or Cap Cost?

It doesn’t make sense that there is a MF for a single pay lease! The buyer is paying the full value of the lease or loan and then returning the car for a set value.

Another way to put it… what if a dealer added interest to a person paying cash for an outright purchase? Doesn’t make sense!

34

When you say MF, I’m assuming you mean rent charge? Rent charge = (Net Capitalized Cost + Residual) × MF.

35

Correct! So, when you do a single pay leas you are basically lowering the rate paid on the residual value. Is that correct?

36

Not exactly. In one-pay or not, the net cap cost and the RV don’t change. Only the MF changes. So you are saving = (original MF - onepay MF) * (net cap cost + RV)

37

Thanks! So, I understand he math and it further proves that a single pay is paying interest on he residual amount AND depreciated amount. Correct?

38

Turns out google doesn’t have a strong answer on what the probability of having your car totaled or stolen is.

Here are some statistics that shine some light on that probability. Let’s start with your leased (new) car being totaled.

There were 5,687,000 crashes in 2013, according to the NHTSA. The total population was around 315 million at the time. So your probability of being in a crash is 1.8% (in a rough estimate, not taking into account miles driven and more granular stuff).

I couldn’t find any info on how many of those crashes resulted in the car being totaled. But consider this information on cars that have been in accidents and are then either repaired or totaled. When new cars get in accidents, only 7% of those crashed cars are totaled.

Comparison by CCC of total loss frequency by vehicle age shows total loss frequency grows with the age of the vehicle. For example, the average repair cost for a one year old vehicle is about $3,300, and yet the average vehicle value of one year old vehicles was over $25,000. Over three-quarters of one year old vehicles sustain damage that results in a repair cost that is between zero and thirty percent of the loss vehicle’s value; with less than seven percent of one year old vehicles overall that are deemed total loss

39

I think we are all very close to getting a PhD in auto leasing :wink: … we are just missing @RVguy

40

@chrisgo There are a few people here that are getting close to honorary doctorates.

One-pay leasing is an interesting topic but my experience with them at the captive I was at was minimal. The only time I saw them was on 12mo leases and these were usually for sports teams or some sort of contest where the prize was a free 1 year lease on a car. The 12mo RVs were just set conservatively off the 24mo 15k RV (+4pts) so it was never a great deal. I know we offered them on 24-60 mo terms but I was not involved with the MF decisions on the program.

41

TL,DR

one pay lease + car gets totaled = Shit out of luck?

42

There have been conflicting reports on this.

I personally called GM Financial and asked this and was told single payment would be forfeited. I am not sure if they 100% understood the question.

A poster here said Mercedes would pro-rate the unused part of the single pay lease back to the customer.

43

pro-rating the “unused part” and a refund seems like the logical thing to do

44

If the rebates went toward cap cost and your ACV exceeded the payoff amount, you would get money back from your insurer.

45

Wouldn’t that be a totally separate transaction than from the single pay lease being possibly pro-rated?

46

Yes. …(20)

47

I mean, single pay leases are only good for crazy extreme deals right? Like the chevy’s from last month?

Why else would you single-pay? Lower the money factor I guess that doesn’t make sense on an average lease right?

48

When the company states it will prorate returns, there is no risk of being SOL.

Even on an expensive Mercedes lease the savings could be worth it.

49

Actually you save more on the more expensive leases since more principal is being charged interest.

50

Just found out a written clause in my GM lease which should clear some air on what should happen if one pay leased car is totaled…
To my knowledge, general motors will give you pro rated portion back.

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51

:fearful: really? wow, must be a crazy story. I hope you were ok, but oh man what a day that was.

52

Awesome! Thank you for that info. I knew when I called them the rep had no clue what they were talking about or what I was even asking.