# RV and Leasing with Ally bank

Not new to leasing but I’ve never leased with an outside financing source. Messing around looking for deals I came across the Ally bank lease program.

Im a little confused on how this works. I found the residual values I guess they use:

Some of the RVs were very close for the cars I was looking at, others were way different

IE 2017 Toyota 4runner. Ally looks like for 15k for say 36 months you are looking around a 73-74%RV for the mid to bottom trims. Compare that with what you can find on Edumunds, you are looking at a 64-65% RV.

Are the money factors way higher with Ally? What am I missing here?

@tlow Ally created their “Smart Lease” product which is really just a different equation to calculate the monthly payment. In that guide there is a table of rates for each term alongside a net cap cost factor and a residual factor. So if the customer qualifies for the 7% rate on a vehicle (I am not sure where to find their credit tiers and corresponding rates), then you would look up the net cap cost factor and residual factor and plug them into their monthly payment formula.

Net Cap Cost x Net Cap Cost Factor = Net Cap Cost Payment
RV% x MSRP x Residual Factor = Residual Credit

Monthly Payment = Net Cap Cost Payment - Residual Credit.

You can almost match the monthly payment when you convert the rate (7% in this example) into a MF by dividing by 2400. So 0.00292.

This is a simpler way to calculate monthly payments but Ally is building a lease business model with much higher rates and much higher RV%s. The end result is a monthly payment close to the other lenders but they are doing so with a much higher residual risk level and a much lower credit risk level. As long as they are reserving the profit from the higher rates to cover their losses on the higher RVs, they are fine. But when you increase the RV and are taking higher actual losses, the return rates go way up so they will be getting a much higher portion of their leases back that they have to remarket.

Ok makes sense. So how does this work on the customer end. Taking the Toyota example, do I go into the Toyota dealer and ask to compare the Ally vs toyota financial lease options?

Since we are talking indirect leasing, a dealer has to have a signed agreement with a lender in order to do business with them. You would need to find a dealer that is signed up with Ally in order to use them.There is no way to look up that information but if you call the dealer and talk to someone in the finance dept, they should be able to tell you if they currently work with Ally.

Ally, US Bank and various Credit Unions would be your option for 3rd party lenders that are doing leasing.