You are correct. The residual value of the car is the value after the lease is over whether it’s 12, 24, 36, months. The residuals are set by the manufacturer/bank (whomever is financing) but may change on a monthly basis. Generally, leasing a vehicle with a higher residual value will result in lower monthly payments. It’s public knowledge but here and the edmunds forums are my go to place for getting them.
Even if you are leasing, you want to negotiate the selling price of the car. The residual is based on the MSRP of the car, so anything you can negotiate below that will save you money.
You can pay off the lease early most of the time without penalty, but I’m not sure what advantage that would have. Sometimes pre paying the lease will save you some money on the interest rate, but you are taking a risk if something happens to the vehicle. It’s the same reason most here would say to never put money down to reduce the cap cost on a lease.
Interest rates are pretty low right now. They’ve been creeping up slightly lately. Multiply the money factor by 2400 to find the interest rate.
Good luck on your Cadillac lease. The people around here are really great.
my best move is to lease a new car, and get a new one in 3 years. no tires, brakes, radiator fluid, steer and brake fluid, trans. fluid, just change the oil. my friend will come with me, he is a SUPER negotiator. he got 7500 off my new caddy, and tons off 2 accords. he says NEVER put any money down on a lease. sounds right!
You are very welcome. Just be sure that maintenance is part of the lease. You will be under warranty, but only some manufacturers include standard maintenance in the lease. My BMW included it, but the Mercedes you have to pay extra for. Also, you may have to put tires on it at the end of the lease. The lease turn in inspection will have the allowable minimum tire tread. That being said, that “wear and tear” might be waived if you lease another car from them. It’s just good to know before you lease. Good luck on your lease
I think of the lease payment as the total of 3 parts
Depreciation Cost - this is the number between the selling price and the residual value and is the big chunk of your monthly lease payment. So you want this to be as small as possible then divide by 36 months.
To get this number as low as possible is to start with the “bottom” number. MSRP x Residual. Using your example $50k x 60% = $30k.
Next step is to get the MSRP down. Get your friend to negotiate the discount if he is good. Then ask this forum for whatever other rebates, offers, etc, that is available that you can stack up. Let us say he can get you $7,500 off to selling price of $42,500.
So, now your monthly will be $42,500 - $30,000 = $12,500
Then divide by 36 months = $12,500 / 36 => $348/mo (wow) for this first part
Interest Rate - super low right now, only way to lower this is with MSD but Cadillac with GM Financial does not offer this. Just make sure you have a good credit score (Tier 1) and while this number comes from the manufacturer (GM Financial), the dealer is allowed to mark it up. Use the Leasing 101 to calculate this “By Hand”. Specifically, this is called MF (Money Factor) that you mentioned is kind of public info but you should be able to ask from this forum in a couple of days or Edmunds.com
Taxes - can’t do much about this
So after all this, you should be around $410-420/mo including tax. Not bad for a $50k MSRP car.
Before you even go to the dealer, make sure you get your numbers down by using the calculator here so that you have an idea of what you are looking as your monthly payment. Most of the time, they will say “discount this, discount that” and voila - here is your super-low monthly payment. If you don’t know what you this was supposed to be, you may be tempted to go for it due to you “not wanting to fix dead cars”
There will be some drive-offs (even with $0 down) of around $1,500-2,000 like DMV, first month, acquisition, etc. so you should be able to put that on a credit card. If you think about this on a monthly basis, it is around $50/mo now that you have to do this every 3 years on lease.
If you want to buyout the vehicle before the end of the lease, the payout amount will be different than the residual value.
Can you give an example - whats the ballpark figure for a difference? I thought that I could always put in the RV at the end of the lease (and pay taxes on that) to get the vehicle (if needed) - what other costs factor in?
If you buy it at the end of the lease you pay residual + taxes. If you buy it out before the contract end date you must call the financial company to get a payoff because there will still be payments owed (so thus it is different).
What @BoardWalkNJsaid. If you are at the end of the lease, the RV and buyout price is the same. If before then, it’s usually RV + remaining payments.
Think about the buyout this way. If you lease a 50k car for 3 years with a residual of 30k and all you had to do was pay the residual value at any time to take ownership of the vehicle, everybody would choose that approach as the depreciation would have just vanished. Instead you need to payback some part of the depreciation in order to make the leasing company whole.
