First time poster here. We put down a deposit on a '24 Mazda CX90 Preferred Plus and its coming out to $590/month all in. We are in PA (outside of Philadelphia).
Market Value - $44,350
Dealer Disc. - $2,088
Vehicle Price - $42,262
Residual - $25,279
The deal is coming out to $0 down for 36 months and 10K miles / year, with a monthly payment of $590 (6% sales tax included).
This seems to pretty much match the national deal on the Mazda website and several dealers were right around this number.
Thank you. Couldn’t find the exact trim but I went to one of the brokers websites (Auto Ninjas) to check the offer. Should the deals in the marketplace be about the same what they have listed on their websites, or its something special for LH community?
@delta737h , if you are so inclined, take a shot at trying to measure this ratio that max_g is talking about… and somehow qualify bands of the ratio as terrible, bad, ok, good, and awesome. The LH public needs your math-brain!
I thought there was some objective way to help someone understand that financing to own this vehicle (presumably for X number of months before selling it) would be better than than the proposed 36 month lease term. But my approach doesn’t seem very good…
Unfortunately I don’t know if there is an “easy” math for this, and I’m at a loss how to make this easy.
In the meantime, we have a subjective rent:price ratio that seems to have a lot of traction on LH.
Don’t know what a rent:price ratio is. Is it the ratio of the total cost of lease financing to the total cost of purchasing (financing). What period of time? Holding period? If so, what if the holding periods are different? What costs are included? Both common and direct costs? Front-end costs + total periodic payments+ back-end costs? If so, what’s meant by back-end costs? Just some things to think about.
This ratio is much too broad of a concept and needs considerable clarification. I don’t have a subscription to the KISS principle because it can be misleading. I would be hard pressed to find a one size fits all index. You would need cross-sectional data if you’re looking at different brands, models, trimlines, etc. That is a butt-load of work. So, I’m not really amused or inclined to take on such a project. The problem is further compounded by the fact that cost of money, residuals, pricing, etc. are very dynamic and are changing frequently and so, the indices would have to be updated often. That’s very labor-intensive and may require some outside assistance by knowledgeable people. Yup, something that innocent-looking can be a big deal.
For the ratio… he’s just taking the numerator to be the lease’s total 3 year lifecycle cost (inceptions, fees, 36 monthly lease payments, disposition) of $21k. The denominator of the ratio is the MSRP of $44k.
$21/$44 = 47.7%. And Max says this is a terrible lease because of this simple ratio.
From what I understand, the reason Max thinks any ratio near 50% is bad because in his mind if two leases are entered into consecutively each with a ~50% ratio, then the lessee will have paid 100% of MSRP over two leases.
But since lease residuals over 36 months are usually around 55% of MSRP, I feel like any lease without mega discounts will have a ratio near 50% due to the rent charge, inceptions, etc. Which is probably why max hates almost all ICE leases so much.
Well, I’m sure a lot of economists would disagree with that approach as it doesn’t capture TVM or opportunity costs. If the vehicle is traded at lease-end, there will be equity and so, there wouldn’t be a disposition fee. Almost every leased vehicle I’ve had, I traded at lease end. The dealer cut me a check for the equity. So, calculating a rent:price ratio at inception can be misleading as it would require some assumptions that may or may not pan out. You just don’t know what will happen at the back end. The MSRP is measured in today’s dollars and is why the periodic payments and back-end costs would have to be transported (present valued) to the present using an appropriate discount rate to preserve an apples-to-apples comparison. After “present valuing”, the numerator would definitely be smaller and so, the ratio wouldn’t be as bleak as it initially appeared before being time valued. Remember that a ratio is a comparison of two numbers by division. And what is required for a valid comparison?
Yup! There is a shit load of intangibles to consider. Many lessees place a high value on driving new relatively maintenance-free new car every two or three years. They like the lower payments enabling them to drive a new car for less and use the difference between buy and lease payments for other worthwhile pursuits. But they must do their homework before they buy or lease. Know how to negotiate sell price and calculate payments and not leave money on the table.
I haven’t checked in the past weeks, but I think you may find something like a XC90 PHEV very close to that monthly payment (even though programs have gotten worse since December).
Lol I want to see a monte carlo simulation showing all the likely outcomes and expected total “cost” of someone leasing this CX90 or financing the CX90 and selling it at month 48.
Yeah, well, there are potential statistical problems with Monte Carlo experiments. The random sample has to be large, and the distribution of points has to be uniformly distributed otherwise, the estimates generated can be useless. It has been years since I’ve done Monte Carlo Simulations and so, I’m not up to date on the recent literature in the field.
