Does it matter how lease is structured if same monthly

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1

Hi, last lease negotiation i contacted many dealerships and over 3 weeks worked down to a monthly payment that I felt was the lowest I could get based on similar deals I saw posted on this forum and the fact that the dealerships that remained stopped coming down. With those dealerships I got more into the details such as discounted price, incentives, and MF. At the very end, I contacted the closest dealership that I had previously contacted that wasn’t close to the lowest quote I received and just threw out the best monthly payment quote I received and they matched, but not at the base MF but more of a discount on the car (the best quote I received was base MF but less of a discount).

My question is once you believe you’ve reached the best deal based on monthly payment you’re going to get, does it matter how a lease deal is structured?

2

This is all that really matters.

… but knowing how you get to the monthly is more for educational edification. For example, incentives and APR change periodically and RVs may differ for same model but different years.

For me at least, I wouldn’t be able to know if I got the best deal possible until I understand the composition.

3

Not really… doesn’t matter if $500 DAS is going towards DMV costs or $500 in cap cost reduction as everything else is being rolled into the cap cost in the end.

No matter what, you want to know the details so you can confirm every aspect. Every finance guy may structuring it slightly different so no “right” way to do it.

4

sometimes depending on how the dealer works the numbers, they would rather give a steeper discount and mark up the MF, and your payment actually is cheaper. Ultimately it comes down to the payment, but understanding how you got there can better help you gauge what is an appropriate number. This is especially important because tax, incentives, and sometimes even MF, can vary by location. So it is difficult for the community to assess a lease based on payment only, if that makes sense.

5

When comparing leases last time around I simply multiplied monthly $ X months then added DAS / months to calculate my monthly.

6

I agree with everyone else above – you definitely don’t care how the monthly payment was derived, whether from different discounts, MF, etc. What most of people on LH use is the calculator, as noted above it’s for educational purposes for the most-part.

What you may consider is if there is a significant difference in the DAS amounts. For me, if less than $1500 difference, I simply spread over the lease as @jim2527 suggests. If the amount is different by significantly more then I add an adjustment for after-tax potential earnings on that money (assumed rate x half of the lease term since it’s paid down / saved linearly in the payments),

For example, if I assume I could make 4% after tax on the money for a 36 month lease, I’d load 6% to the difference in the DAS amount. So for a $1,500 difference, I’d add $90 for lost earnings on a 36 month lease (average of 1.5 years x 4% x $1,500). As you can see, $90 over a 36 months is $2.50 per month, so you can see why I wouldn’t bother at that point.

If in evaluating MSDs, I’d use the full lease term to approximate a comparable payment, since those aren’t paid off during the lease. So putting down $5k of MSDs theoretically costs me 3 years of return on that which is $600 ($5,000 x 4% x 3 years), which is about $17/month. Usually the MSD reduction far exceeds that, so it makes sense to pay them.

FWIW, usually the marked up MF isn’t in either party’s best interest as the leasing company only shares part of that with the dealer. I found some documents from a few years ago that showed that Chrysler Capital gave the dealer 50% of the increased payment. The rest covers Chrysler Capital for paying it to the dealer up front, the contingency that the lease don’t go to fruition, and of course for them having their hand in the cookie jar. So if I’ve squeezed everything I think I can out of the deal, I would offer for them to give me the base factor and make the payment the average of the base & marked up payments (i.e., increase the car price by half of the difference in the payment), so it’s a wash for the dealer and I save a few bucks. So here, the structure could matter and might save you another $10 - $20 a month…

7

I think you got this backwards. The reason everyone here says don’t judge a deal by payment, is because you can only know based on how a deal is structured. That comes with a lot of research and knowing what kind of pre-incentive discount is considered aggressive in your area. Also, keep in mind that everyone qualifies for different incentives. Someone who has BMW loyalty is going to have a better monthly compared to someone who doesn’t - even with the same pre-incentive discount and drive offs. You cannot say the person with the loyalty got a better deal - it’s the same deal.

If you know you’re getting a smoking discount, a marked up MF is fine. If you’re getting a lame discount, you should know that a marked up MF is a no-no. The monthly will fall in line once you’ve structured a deal properly.

8

If monthly payment is the same, (not total out of the pocket at lease end), then no it doesn’t matter

9

When leasing, you are essentially doing a long term rental. All I care about is my total cost.

Having said that, it is always better to have a low residual/low MF vs a high residual/high MF…reason being is you have more equity in the event of an early trade in/lease end buy/totaled vehicle.

10

This distinction doesn’t matter