Leasing Advice: 07 Tacoma

[mshu7]

Hey guys, I need your help! I'm looking to lease a mid-size truck for my mobile detailing business. It came down to either a Frontier LE or a Tacoma TRD Sport (both V6, crew, & 4x4). While I haven't driven either vehicle, I'm leaning towards the Tacoma, even though it seems that you get just as much with the Frontier for about $2-3K less than the Tacoma.

I've contacted a couple of new car dealers and have received a couple quotes. The one I'd like help on is the one for the Tacoma. Here is the information they have given me:

"We can get you a double cab, V6, 4x4 Tacoma in either Indigo Ink Pearl or Silver Streak Mica, with an MSRP of $30,229.
Your Internet Price, which is good for 3 days, is $27,840 plus tax and doc. (98.20 plus 1.25 tire tax). In addition to all the standard features this truck will have sport suspension with Bilstein shocks, 17" alloy wheels, limited slip differential, 115 volt power point in the truck bed, fog lamps, power windows, door locks, mirrors, remote keyless entry, cruise control, compass, temperature gauge, sliding rear window, privacy glass, lumbar support, leather steering wheel and shifter... nice features on a super tough, super durable truck.
When you purchase your Tacoma from us, you will also receive our Rewards Pass and Butler Bucks Coupon book worth over $1,000 in value (two oil changes inside) FREE."

I then responded by telling them I wanted a 36-month lease, 15K miles/year. Their response:

"Lease plans are very customized. Our leasing manager will do an outstanding job of securing the right lease for you. So, the following is a very rough estimate.
This estimated lease payment is for 3 years, 15,000 miles, tier one credit, with $3,000 down (as opposed to $3,000 at signing.) Your estimated montly payment could be around $310, including tax. You'll have approximately $3,600 due at signing.
The residual value on this truck is very high--over 50% of the MSRP, by the way. Another proof of the outstanding value of the Tacoma."

Obviously, I don't have all the details of the lease calculations but I'll work on getting those from them with my next conversation.

I would greatly appreciate any advice from anyone that has experience leasing and/or experience with Toyota sales people. If I bite on this truck, it'll be my first Toyota. Thanks in advance for any help!

 

[cousincletus]

I did a lease on a 1999 Jeep and it actually was cheaper for me to lease to own than buy outright, since Chrysler gave me an additional 1200 bucks off for leasing. I had more choices, too. I could just turn the Jeep in after 3 yrs, continue to make pymts, or trade for the residual value. It all depends on the lease, and at the time Chrysler had a good deal on theirs.

 

[JTK]

That lease payment isn't bad, but $3600 down sure takes a bite.

Tacos are nice trucks without a doubt, but $28K nice? Not nice enough for a cheapo like me.

Joel

 

[JHZR2]

$310 a month with $3000 down and $3600 due at signing?!?!?

That is $17760 after 3 years, total shelled out.

MSRP of $30229, with payments of $17760 equals $12469 left for paying this vehicle off. Therefore, youve paid out 58.8% of the MSRP, so the question of value is what the delta between what youve paid and what the residual MSRP is.

There is interest related to leasing - sometimes the deal is better, sometimes it is worse. You need to determine your goals for ownership vs. replacement, and see which gives you the best value for your dollars paid.

Generally if you cant pay cash, you cant afford it. Keep that in mind -if you have to finance/lease, youre paying interest, etc., and should consider downgrading the amenties on the vehicle to the level of one that is more affordable.

JMH

 

[mshu7]

The $3600 due at lease signing INCLUDES the $3000 down. Sorry for the confusion.

With what's due at lease signing and 35 monthly payments of $310 it comes to $14,450. That subtracted from MSRP of $30,299 is $15,779.

Looking at Edmunds.com, a 3-year old Tacoma with 45,000 miles (similar options) would sell for $20K. So, with that said, the numbers they gave me look just pretty bad. It sounds like I need to get them to give me all the details of their lease calculations so I can see what value they are using for the residual.

As far as reasons for leasing...The truck will be used for business so there are more tax advantages to leasing vs. buying. Plus, if I can lease a new truck for $250-$300/month or buy an older truck for the same amount (lower insurance of course), I'm going with the new truck. For what I'm using it for, truck condition is very important.

Anyway, thanks to those that have posted their input. Please, keep it coming.

 

[Merkurwwu]

This lease looks ok. Find out what the money-factor is and multiply it by 2400. That'll be your interest rate, more or less. I just leased a car and got a money factor of 0.00227 which equals about 5.5% interest. If it's up around 6 or 8%, you could do better going through Wells Fargo or some other bank instead of Toyota Credit. (mine is through Wells Fargo)

Next, find out if this is a "market value" lease. If you decide to buy the truck at the end, see if they will sell it to you for the residual or if they'll sell it for the greater of the wholesale value or residual. In a rediculous example, say Toyota stops making the Taco for no reason- I dunno, the plant burns down

. Those trucks are still desireable and their wholesale values will go up considerably. If it was a market value lease, you might have to pay the wholesale value of $20k even though you've paid the truck down to $15k. At that point you just walk away and lose $15k or you buy it and take a hit of $5k. Neither are good deals... (my lease is a market value lease, but I bought a Volvo and I can't see any reason why my residual will go up!)

In the lease payment you're not just paying down the loan. There's also a "rent charge" for the portion of the car you're not paying for so your payments won't necessarily add up to just paying down depreciation. Plus, there is probably about $1000 worth of fees just for initiating the lease.

30229-(est 55% * 30229) = 16625 residual.
30229-16625-3000 @ 36months @ (.00227mf*2400) = $320 a month. Something is missing here, however. There is no rent charge! I'm thinking, however, since this is an estimate and I'm guessing on alot of the numbers that this lease is probably in the ballpark. Toyota may be subsidizing the leases as well to move the Tacomas while gas prices are high and the Tundra is taking some sales away. Who knows...?

Also, there is still some price negotiations in the truck's price. Get on Edmunds and pay either thier TMV price or try to negotiate further. You negotiate a lease price just like you negotiate a purchase. I'm sure they're quoting you pretty close to sticker (I don't know for sure). There's probably up to $3000 in wiggle room for the dealer. Try to get it out of them- or make it easy, just give them $500 over invoice and they'll most likely take it to make it quick. On my Volvo, between my worthless trade and getting them to discount the car, I got my whole down-payment covered on the special they'd advertised.

Finally, if you can afford a fat monthly payment, try to put as little down as possible and buy gap insurance. One bad thing about leases is if the truck gets destroyed, the insurance company undoubtedly will not give you enough cash to pay off the truck unless you've put down a big down payment. But if you put down that big down payment, the insurance company's money will pay off the truck- but you're out that down payment completely. To avoid that loss, put as little down as possible, in this case, that extra $3000 will only raise the payment by about $100 a month. Put that money away, pay the one-time $300-$500 for gap insurance and motor on.

Yours sounds like a decent deal though as far as leases go. Leases are rarely a good deal. In my case on my Volvo it was a good deal because there was $11000 in lease incentives, plus dealer incentives, etc so in the end it was $15000 off the price of the car when on a purchase it would have been only $8000. Since you're using it for business you can write off a good portion of the lease. In my case I just pay through the nose on interest for 3 years and give back about $3500 of those awesome incentives, but I still come out way ahead than on a purchase... In your case, you'll come out probably even with tax deductions have a smaller payment in the interim.

Kev

 

[CaspianM]

$310 for a vehicle that is about $32k after tax is considered extremy a good deal.
As a rule of thumb, a good lease payment is about 1.15~1.5% of the MSRP depending on the duration of the lease.
Dealers caps either on the lease payments or donwn payments. So if the payments are within a good range, try to lower those intitial out of the door expenses if you can.
Again, if you like the truck, $310 is hard to beat and I would be surprised if any one can beat that.

 

[mshu7]

Wow, thanks for all that great information Merk. Never leasing a car before, it's totally new to me. I'm going to have to read through your post a few times to make sure I understand all those important details.

CaspianM, thanks for the input. It's good to hear multiple opinions on this.

 

[mshu7]

OK, here's what I just got back from the dealer:

Thank you for your emails. Let's see if I can truly help you and not hinder you.
Mike, the residual value on a lease is based on the MSRP--not your purchase price. So, first and foremost, the truly important question is--how much will I pay for this truck? I don't think you can dispute we're giving you a phenemonal price on the truck.
Your lease payments are based on 3 things: the purchase price of the truck, the mileage and length of term of your lease, and your actual credit rating (down to the exact score--10 points can make a difference.)
Some leases have gap insurance figured into the lease (very important insurance). Some do not. Some lenders put the truck at a higher residual value than others. Our leasing manager explains why a certain lease would be the best way to go and not another. And, lease rates change every single day.
This is why lease estimates over the phone or via email are always so "rough". And, why a customer can loose out on a great deal on a vehicle when they try to hammer out things that are not yet factual details.
If you want this truck, and you think the price is right...then you and our leasing manager will discuss what is absolutely the best for you. Yes, we want to sell you a Tacoma--but it's in our best interest as well as yours to do what is best for you. That's how this dealership became the largest, #1 ranked Toyota dealership in Indiana.
What step do you need to take next?

 

[mshu7]

Forgot to add:

Suggestions on where I should go with this deal in particular.

 

[CaspianM]

I would go over and say you want to ride the truck. They will check your credit to finalize the payment amount.
Don't be surprized if they up the payment. May be not depends on your credit as well. If you have higher than 650 score which is the boarder line to get a decent deal on lease, you should be OK. Get a print out of his emails and take them with you. Have fun and good luck.

 

[mshu7]

Thanks Caspian. My pretty is pretty good (over 700) so I should be cool there. I think I'll head to the dealership tonight and test drive one.

 

[Merkurwwu]

Like Caspian said, I think your next step is to go to the dealer and do the credit app and work up the numbers and be up front saying I AM NOT BUYING TODAY and that you need time to figure out with the business what the best course of action is... Get the numbers out of them including:

Sticker price
Lease Capitalization
Residual value (either a dollar value or % of MSRP)
money factor
# months
Mileage
ALL, and I mean ALL fees including lease inception fee, taxes, licensing, etc.

If you want to post the numbers here, we'll help you out.

And again, DON'T FORGET ABOUT SALES TAX! Depending on your state this can help or hurt you. In Washington, you pay sales tax on each payment. Some states add sales tax into the transaction of the car and you pay for all $30k of tax, which you're screwed out of if you walk away from the car in the end. Oh- and make sure there isn't an absorbanent lease end disposal fee. If I don't buy the car I have to pay them $400 at the end. No big deal, but still irritating...!

I was very lucky and worked with an incredibly professional Volvo dealer in Seattle. They were more than happy to answer my questions about thier leasing programs, they over-nighted me a copy of the lease contract to my office so I could look it over which included the worked up a copy of the actual numbers including tax, and they offered to drive the car to the office so I could test-drive it! (which I didn't take them up on) I get the feeling you won't have quite the luck I did with the Toyota dealer as far as being low-pressure but you can get the info out of them before you buy- it may just take a little strong arming

 

[mshu7]

Thanks again for the great info Merk. I just emailed my salesperson to setup a test drive tonight. I already informed HER that funds for a down payment wouldn't be available until later this week so buying tonight isn't an option. I'm going to jot down all these things to ask before I go.

One question, what is lease capitalization?

Thanks for all the help guys! I really appreciate it.

 

[Merkurwwu]

Lease (cap)italization is the difference between what price you finally negotiate and the residual value; basically what you're financing. You can often add your fees and such into the lease cap (in my case they'd rolled the $700 inception fee into the lease cap). It'll raise your payment but you get into what we talked about earlier with gap coverage and minimizing your loss in case something happens and the vehicle is destroyed. Good luck!

 

[Merkurwwu]

Just another FYI you mentioned you were in the 700ish range and that is a good credit score. You may need to get above 750 to get the *BEST* rates. Luckily, with leases, since the terms are only 36 months, it doesn't matter much per month.

 

[CaspianM]

Leasing can be complicated and stressfull for first time leasers. But you don't have to get worked out if do not care to understand every detail. If your final payment is right around 1.15 to about 1.5% of MSRP you are fine. It covers all the hidden charges and so forth.
I have leased many cars and leasing is the way to go IMO and can be cheaper and more convenient if deal is right. If you end up paying more 1.4% of MSRP a flag is raised meaning you might have been oversold. But even then that depends on the car as well. Toyota offers incentives to dealers based on numbers they score. Not all would do the same thing and often more expensive.
Try to bring those early pays to $2K or whatever you can. That is where you need to zoom in and if they do it lock the deal tonight and get the money tomorrow/later rather than the other way around. Merkurwwu has made lots of excellent points with his insight.

 

[mshu7]

You guys have been a huge help. If you were in central Indiana, I'd offer ya both a nice discount on my detailing services at least.

My wife & I are going to head to the dealer tonight. I'll let you know how it goes.

 

[Gary Allan]

The residual value on this truck is very high--over 50% of the MSRP, by the way. Another proof of the outstanding value of the Tacoma."


This doesn't sound right. The residual value is what will be owed at the end of the lease, not what it's worth. The residual value on my lease was 45+/- % of the finalized price after 5 years. I added my $2000 off of MSRP payments up ..and aside from having to pay 9% sales tax on each payment instead of 6% on the total, I came out a few hundred worse off than buying it outright in total costs.

I'll assume that the upfront fees are the dealer's interest in the transaction. That's typically what I interpret "3500 due at lease signing w/ payments of $363/month" type sales campaigns.

 

[mshu7]

Hey guys, I went to the dealership last night. It was a great experience. Although, I forgot to bring the numbers with me to work this morning. My wife is going to email them to me here sometime this morning. Once I get them from her I'll post them up and go into some more details about the dealership experience and the test drive.