Hi - I am researching between a lexus and a toyota (rx vs rav4) and when I look on edmunds the MF for lexus is less than half of the one for a similar rav4
I would have thought this rate would be more tied to your credit score rather than the make/model of the car so I would love some insight on why there would be such a difference? It’s oddly making these 2 different tiered cars a very similar price even in spite of a significantly better RV for the rav4
are all these comparables done assuming top tier credit? I assumed since I have that I would find similar and competitive interest rates between the two choices
Different brands incentivize their vehicles differently. Some do it through large rebates/allowances, some buy down the mf to make it lower, some inflate the residual value.
In this case, the rav4 is a better seller and new on the market, so it isn’t being incentivized as much. The rx is much more dated and needs help against the competition to get them out the door, so lexus incentivizes more.
To get a lease you already need to have a prime or near-prime credit score. No leases for sub-prime or very poor credit. So in a sense the MF is binary depending on your credit score.
Some of the OEMs have lease programs for sub-prime but they pay a whole lot more
There’s always differences on MFs between manufacturers. But there’s a huge difference between tier 4 and tier 1 on a Toyota. So if you’re looking at the same car, credit does matter. You just might not get base MF with top tier credit, even if you qualify in the captive’s point of view - dealers don’t care if you have great credit if you unknowingly take a marked up rate.
And for many manufacturers, there are different MFs for different models, and sometimes different trims.
Toyota isn’t necessarily competing against itself. The leasing company BUYS your leased car and rents it to you, and the money they use to buy your car isn’t free (despite what most think, or what the Fed funds rate is). That’s their cost of capital. Sometimes they mark it up to make a profit on the interest, sometimes they subvent and buy the rate down.
The captive decides model by model what the car will be worth at disposition (residual), and how much rent to charge you. If the car is selling well, MF isn’t subvented (and may be marked up).
This is all before you step into a dealership. Your good-excellent credit should unlock leasing (at all) and hopefully Tier-1, the lowest rate the captive will lease to you yet, without being marked up by the dealer (bumped).
I assure you that since all programs drop at the beginning of the month, no competing captives are comparing money factors on cross-shopped models. Read all the threads on Palisade/Telluride/XC90.
The reason why people do not often think of lower tier MF rates is because it gets punitive as you step off of tier 1/1+. So in terms of credit distribution you see less tier 2 or below for lease than you do for finance. But as others mentioned they do have MF rates for lower tiers.
