Fact 1- Normal Leasing is the most profitable way for an Auto Manufacturer to Sell their new auto. Thru their captive finance arms (i.e - Ford Financial, Toyota Financial etc.) they make the lessee pay for the “Depreciation” and Charge higher Interest in the disguise of MF/Rent Charge (in APR) compared to typical finance APR for ppl similar Credit Pool. Not to mention lessee pays for “Acquisition” & “Disposition” fees around $1k to cover all other ancillary costs.
On top of it once the Leased Car is returned, they stamp eligible cars with CPO stamp and charge more than the typical RV they calculated at the time of the original lease.
Compare that to a typical purchase transaction where the manufacturer only makes the profit one time and maybe some interest (usually lower than lease MF) if the buyer decides to finance thru their captive finance arm instead of getting financed thru the dealer or their own credit union or similar.
Easier for the dealers to sell a lower monthly payment of a lease to uninformed buyers then try to sell them a 60 month (now 72 to 84) higher monthly payment.
Thus, leasing is not going anywhere and it will not impact leasehackrs that dramatically.
Pretty much 90%+ of those that go into a dealer to lease or trade in a vehicle are going to get fleeced. With the tightened MSRP/invoice game, monthly payment tricks and hidden incentives a large percentage think they are actually doing well.
I mean people pay 80 cents more at a gas station right by my work when lower cost stations are literally on the same corner.
What fraction of people leasing actually check leasehakr even though a Google search can bring you here in seconds? I would bet less than 1/100th of one percent
100% agree with your points. This is all just hypothetical speak, there won’t be any dramatic near term impacts.
Also agree that leasing is the most profitable way for an auto manufacturer to sell their new auto. I also think that’s where Dave Ramsey’s advice falls flat for the more savvy amongst us. He seems to suggest that just because the lessor has an advantage that automatically means a disadvantage for the lessee. In his world, there’s no such thing as mutually beneficial. Again I get that for his target audience that’s the safest assumption to make, but for the rest of us, we know better.
The average lease is in the $450-500 a month range. And that doesn’t even include down payments and up front fees
Considering the average car has an MSRP in the $36-37K range you can see why lucky dealership owners are amongst the richest dudes in any given Burg or Ville in America
So yes the average leasee with an average income is getting fleeced
This is actually incorrect. New Car Purchases are usually the most profitable means from the OEMs perspective. Most manufactures buy down the interest rate and pay to bump up/inflate residuals. Leasing is a way for companies to push volume - not profitability. Buyer is on the hook for depreciation with a purchase, not the bank or financing arm of the OEM (they are when they lease a car to someone). An aspect that is overlooked in your argument.
There are a lot of “facts” in that statement that aren’t always the case.
There are plenty of leases with an MF that is lower than the available APR on interest.
There are plenty of leases with extra lease incentives that more than cover the acquisition and disposition fee delta.
There are plenty of leases where the lessor gets hosed on resale. The RV on my S90 lease which is almost up is about $15k higher than market value.
Lol I know, I wasn’t trying to be rude or ignore the fact that this is all hypothetical. I was just saying that I don’t think it is possible to ponder this hypothetical scenario in detail as the events that would result in such dramatic shift in consumer habit will be based on the Macro economic trends and it is not possible to foresee what those events will be.
I was talking about a “Normal” Lease offer (like advertised on Sunday news paper flyer with $200/month with $3k down) or transaction on a typical auto, not talking about a special promotional MF, or out off ordinary RV etc on a one of model or a leasehackr transactions.
We can’t compare transactions found on this forum with the fundamentals of a lease transaction. We all know or are trying to find those exceptions and that’s why we believe that a lease can be an option and are not in the “Dave Ramsey” camp.
I get the gist of what you’re getting at, but I don’t think any of those are good examples as to why. Vehicles having better lease incentives that cover acquisition costs or lower MF than apr aren’t some bizarre freak occurrences that people here are capitalizing on; they’re fairly common things that apply to even the non-LH crew.
Personally, I think the biggest issue with leases and people getting taken for a ride is that most people have no idea how a lease is structured and dealers go out of their way to confuse the numbers so they don’t negotiate nearly as much. The financial side of things (RV/MF/Incentives) is just a coin toss as to if it’s better or worse than purchasing at a given point in time.
True but they’re not as well advertised or readily available for a normal consumer who sees a Honda commercial for a base Civic for $199/month (with 3k down in fine print) on their local TV channel vs 0% Finance on All New 2020 Civics…
Agreed. That’s why a normal consumer may find it easier to negotiate the sell price of the new car and just get “low” Apr financing (assuming good credit) then to worry about getting fleeced.
