Apparently I struck a nerve, so I’ll leave you all to your stories and move on.
I genuinely wanted to learn how negative depreciation is structured. Both my leases this year had little to no depreciation and I was told they couldn’t be negative. I believe its possible just curious how its done. How do they show it on the deal?
When I see all these post with negative depreciation and not one has a lease contract its strange and frankly pointless. If we just want to tell great stories that’s ok, just make that clear.
“Are you
butthurt that there are better deals than yours? You keep posting the same
thing in all Hummer threads. Get a life.”
Don’t be shy internet warrior. You should try standing up to people that upset you in real life. Would do wonders for your insecurity. Go ahead and keep telling stories in here about how great a lease hackr you are if that’s what makes you feel important.
I”m happy with my deals, I just was curious how others were structured with negative depreciation and realized there are no lease contracts posted which seemed strange for a forum about lease deals.
Negative depreciation occurs when the adjusted cap is less than the residual value which doesn’t make one bit of sense for reasons described below. Think about it. If the adj. cap = residual value, then you’re only paying interest each month so that the adj cap always equals the residual throughout the term of the lease which means the lease balance will always be the same regardless of when you exercise your purchase option.
What do you think would happen if the adj. cap were less than the residual at lease inception? You could end up with a positive or negative monthly payment that, in either case, is insufficient to cover the interest and depreciation charge each month. As such, the lease balance will increase each month meaning that the earlier you exercise your purchase option, the cheaper the buyout. The adjusted cap grows each month until it equals the residual at the end of the lease term. Imagine paying off a mortgage loan where the earlier you pay off the loan, the cheaper it will be. That’s because the monthly payment is insufficient to cover the principal and interest payments each month. Ditto for a lease as stated above.
There isn’t a fund provider on the planet that will fund a lease with negative depreciation. That’s why you’ll never see a lease contract where the adjusted cap is less than the residual value.
I think it’s possible that they are claiming negative depreciation, but I don’t believe that they actually entered into a lease agreement that reflects negative depreciation as it would never fund. They probably have no clue what negative depreciation is or how depreciation is calculated. Or they could be lying.
Example: dealer has $20k trunk cash and is willing to give $10k to the customer. But the contract will not fund due to negative depreciation of $10k. So, the contract shows a few $$ over adj cap cost and customer gets a check for $10k.
