Leasing Advice: 07 Tacoma

[mshu7]

Ok, the wifey emailed me the numbers. Although, I didn't get some of the numbers I know I should have gotten. Here's what I do have though:

MSRP: $30,229
Negotiated Price: $27,840 + 6% sales tax ($1,670.40)
Doc fee: $98.20
Tire Tax: $1.25 (each?)

36 months $309.08, $3589.33 due at signing, 15 k/year, $18,439 residual

48 months $311.75, $3591 due at signing, 15 k/year, $15,719 residual

*The lease payments already have all tax & fees figured into them.

Again, I didn't get the APR but she said it's based on Tier-1 credit.

Ok, on to the experience of the test drive and the dealership...

I normally hate going to any car dealership, no matter what manufacturer it is. I always feel like there's some one trying to screw me out of my money.

When we got there we met Carol the lady that I had been emailing back and fourth. Within 5 minutes my wife & I had the keys to a truck similar to the one that we were looking for (only difference was that it was an extended cab and I'm looking for a crew cab). The only crew cab model they had with the options we wanted was sold. They let us check it out and sit in it but we had to drive the extended cab version that wasn't sold yet. If we buy from them, they said they'll have to do a dealer-trade to get the truck for us, but they have 5 that match our criteria w/in 175 miles I believe.

I was very surprised to have them say they weren't going on the test drive with us. I'm glad that they didn't, but never in the past have we been able to do a test drive by ourselves.

The test drive went good. The truck drove nice, had good smooth power, shifted well, etc. Interior seats were comfortable. I've read some reviews that said it had an awkward driving position but I think I liked it. Entry into the vehicle was somewhat difficult due to where I like the steering wheel (low and as close to me as possible; I have short arms). I really couldn't find any faults with the truck on the test drive.

Once back at the dealership, we spoke with another lady (Kathleen). She was the leasing manager I believe. Both Carol & Kathleen were very nice, but not so nice that they were sucking up to us. They seemed to be very upfront with us on most things. They talked about how they pride themselves on not trying to hide fees and play other tricks like that.

Overall, I was very happy and very impressed with the entire experience. It was a definite change from what I had experienced elsewhere in the past. Maybe it was because we dealt with two females....I don't know. It was just a good experience.

Anyway, I hope they were being honest when they told us about not playing games, etc. and stuff. I'll be very disappointed if the numbers I posted don't work out correctly.

Let me know what you guys think.

 

[CaspianM]

So the dowm payment went down to about $3600.
Well, I still try to lower the downpayment.
That is the finance charges collected at the begininig of the term. It is a good deal imo assuming that is the car you want. 36 months seems a better deal than 48 months.

 

[mshu7]

The down payment is $3000. The other ~$600 is first payment, security, etc.

36 months is really what I'm looking at. I included 48 just for comparison.

 

[CaspianM]

The bottom line is that this is it and whether you can get the downpayment lower or not should not make a significant change but would be nice.

 

[Merkurwwu]

Ok, so we have:

27840+1670-18439-3000 = $8701 = lease capitalization
8701 / 36 = $242 a month on the depreciation

$310-242 = $68 rent charge

Caluclating money factor:
(24840 + 18439)* X = $68
X = 0.00157 X 2400 = 3.75%

These are a little rough because I'm not sure exactly if I include tax in the money factor but HOLY COW, if this is indeed true, this is an AWESOME lease. 3.75% APR? Toyota must be putting some other incentives in on it or subsidizing the lease- you'll never know though, unfortunately

I wish I could love any of the vehicles that have high residuals. BMW, Honda, Toyota, VW all have really high residuals that bring the price of a lease into the bargain-basement category. My S60R that stickered at $45000 had only a 43% residual after 3 years ($19708). Without the huge incentives it would have cost MORE to lease per month than to buy it!

One last note about leases. Most lease companies require you to carry heavier insurance coverage than most people normally carry. Wells Fargo requires $100/$300/$100, so factor that into your purchase decision.

As long as you KNOW you'll be able to afford the lease for 3 years, including insurance, and you know you won't go over mileage, this is a VERY good deal... As far as leases go!

Now that we have some real numbers, here's the part about leasing that really hurts and why I hymmed and hawed about leasing the Volvo for over a month:

Think of that rent charge as interest.

If you'd financed the $8701 at, say, 6% interest over 36 months your payment would be $264.

With the rent charge and the payment at $310, your interest turns out to be 17%! This is the nasty LONG leases like 60 months. You pay a standard 17% (mine is 24%) interest on a $45000 car that long, that's a BOAT LOAD of money. 36 months seems to be the sweet spot between getting a complete rip off and getting a nice car you can enjoy every 3 years.

If you want to play with the numbers some more, this loan calculator will help.

http://www.tcalc.com/tvwww.dll?CalcLoan

 

[Merkurwwu]

Real quick also.

A couple good websites for leasing info is
leasecompare.com as well as edmunds.com or kbb.com, etc. They'll at least give you a good overview. Education is king in this respect as there are alot of opportunities for the dealer to rip you off. Your terms are pretty straight-forward though...

 

[CaspianM]

"If you'd financed the $8701 at, say, 6% interest over 36 months your payment would be $264."

But he is not driving a $8700 car for three years and he is carrying the whole load of money unpaid until his lease term is over. To me that is the plus side of the leasing while he can get tax break and option to dump the car.

I leased a 03 Sienna for $260 for 60 months. My purchase price would be $10k and I paid $1500 down. The sticker was $28k. I couldn't do better with buying the car.

 

[Merkurwwu]

Sorry, I should have been more specific. I should have said "nasty part of long leases on vehicles with cr@ppy residuals like Cadillacs, ultra high-end luxury cars like big BMW's, Mercedes and Jaguar, my particular Volvo, etc..." $260 for a $28k van is an AWESOME deal too- and for that price you wouldn't hardly notice the payment in the 5 years. I get concerned about 60 (or 72) month leases to 23 year olds on Cadillac Escalades for $500 a month with 10k miles a year. They're just asking to get screwed and people that age don't understand what they're getting into. Yes, they're adults, but they have absolutely NO financial sense because they don't even get a basic personal finance course in high school OR college without being a business major- and chances are thier parents are in $10k of credit card debt too! *jumps off high horse!* ...sorry...

On my Volvo, without incentives, it would have been something like $600 a month for a 36 month lease. To purchase it would have been $800+ (excluding tax with Zero down for 60 months). At that point you might as well buy it and have "ownership" rights... I'm paying $375. For the $425 difference, I can wait 3 years before I have "ownership."

I think the BEST lease deal I've seen recently is either a Honda Accord for $219 a month for 36 months or a Saab 9-3 for $329 a month for 27 months. Both have low down payments. The Saab's residual is a good example of a "subsidized" lease because, unfortunately for such a fun car, the resale value blows and Saab is taking the hits at the auction to move cars...

Again, I didn't mean to offend

One last thing to mshu. Make sure there isn't a balloon payment at the end of the lease!

Kev

 

[mshu7]

Wow, you guys rock. I can't thank you enough for all your help with this!!!

I'm especially glad that you think this is a really good deal, merk!

I don't even want to think about the "rent charge". It's killing me enough already to know I'm going to be shelling out $310/month for basically a rental car.

One thing they mentioned last night...Kathleen said that she's heard from some people leasing Tacomas that they just sell them when they are at the end of their lease and come out ahead. She said recently one guy sold his at the end of his lease and made $2K at the end. She said it's all because of the fact that these Tacoma's (& Toyota's in general) hold their value so well.

Again, THANK YOU guys for all your input. I really would have been lost w/o your help. I think I'll bite on this deal

Oh, by the way, I called my insurance agent yesterday. I'm going to sell my '00 Grand Am GT to my nephew and replace it with this Tacoma. My insurance will only be $12 more per month than what my Grand Am is right now....and that was with enough coverage for a lease. My jaw dropped when he told me that. Right now I still have full-coverage on my GA.

 

[VeeDubb]

This is a great discussion on leases. You guys really know your stuff!

What are your thoughts about negotiating on leases that are offered as specials by manufactuers? For instance, VW is currently offering leases on passats for $249 a month plus $2400 down (MSRP is around $24k). Similarly, my brother in law is looking to lease a 2008 BMW 535xi. BMW is advertising a special of $659 per month with $3859 due at inception (MSRP is 52k). Is there any wiggle room to negotiate on these?

 

[Merkurwwu]

Mshu, my insurance on the Volvo is $90 cheaper per half than my 4 year old Explorer worth probably $13000. Gotta love statistics...! In my case the Explorer will do considerably more damage in an accident. The most expensive car I've insured was a 2002 Miata. Even on a low-mileage policy (less than 7500 miles a year), it was still MORE to insure than the Explorer at the same time. AND it was the only "average" car my agent had seen where the collision coverage was almost as much as the liability (the car was INCREDIBLY expensive to repair after an accident!).

As for VeeDubb, your question I'm not sure about. I've truthfully never bought a car on a national or regional lease "special." My car interests are usually in weird stuff nobody wants

Can't hurt to try though. The dealer will also have other banks that will lease the vehicle. If the other banks can't come close, you're probably looking at a subsidized lease that is probably, more-or-less not negotiable. Also, be VERY careful with those special leases. They're often times relatively low mileage, 10k or 12k per year, or on a version of the car that is maybe not what you're looking for (say a base model Passat with an automatic). If you're like me and spread your mileage out over 3 vehicles, the mileage doable but if its your only car, you're going to need more miles and that could get you out of the "SPECIAL" lease and the number will jump considerably... But again, it can't hurt to try to negotiate I suppose.

Just go in there acting indecisive and see if they'll sweeten the deal- and don't mention leasing until you're acting more serious about the car and "worried" about the payment. Let them bring it up, get your info, and go in for the kill...!

 

[mshu7]

Insurance can definitely be mind-boggling sometimes. I'm just glad it's going to work out favorably for me this time around.

 

[Da Game]

Thanks guys I also learned alot from this topic. I'll have to run the numbers to make sure I understand it. Please keep the info coming.

 

[CaspianM]

MerkurWWU is a great poster and has been around the block.
The deal on the PASSAT looks very good as well but not the BMW.
I have seen good national lease going around but have not been in a position to get one.
One is the Benz C-class going for $300 and the other BMW 330 for the same rate. I guess they are fighting for the same market segment.

Well it is time to bring that 07 Tacoma home. Oh what a feeling.

 

[VeeDubb]

Caspian,
Why don't you like the BMW deal? The monthly payment fits within your parameters of being less than 1.4% of MSRP. Is it the high inception payment? And would you negotiate this deal with the dealer even though it is a BMW subsidized national offer? Thanks.

 

[Merkurwwu]

Quote:

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Thanks guys I also learned alot from this topic. I'll have to run the numbers to make sure I understand it. Please keep the info coming.

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This really is about it. There isn't much to it. There are variations state-to-state like discussed but it's quite a simple thing.

Leases got a bad name and people poo-poo them or don't think of using them because of "open-ended" leases. Basically you concockted a lease and made up your own payment. At the end of the lease, if you hadn't paid down enough, you got a big balloon payment. Yes, those were bad deals, and even though I bet they're still around, they're not common. Also, leases got bad names due to the signer's own irresponsibility. Do you think they're kidding when they say $0.30 a mile over the contract mileage when you turn it in? Do you think thier kidding when they say you still need to maintain the vehicle like its your own? I had a friend who went 20,000 miles over mileage in three years. That was a $6000 hit! He ended up buying what was basically a worthless car at the end of the lease for more than it was worth to avoid the hit. He now swears up and down that leases are the worst thing in the world, by his own, completely avoidable mistake. Whatever.

Ultimately leases are the more expensive way to go. But I think they have thier place. They allowed me to buy a NEW car I wouldn't otherwise have wanted to afford, that I've been lusting after since I first saw one in 2004 at the auto show, in its final year of production. If I wanted one- I had to get one NOW. Sucks to be in that position as I usually try to pay cash for vehicles but in this case it'll work out. Plus, if the car pukes after 3 years and becomes a warranty disaster, I can just walk away!

To help Mshu feel better about "renting" the car- just think about it as paying a somewhat steep interest rate on the "borrowing" of your down payment which will get applied when you buy the car at the end. Looking at it that was only "sorta" works for me

Take care, glad to help!

 

[VeeDubb]

I agree that leases have their place. I used to be a "must-own" guy, but now that my Passat is getting up there in mileage and I simply don't have time to do my own maintenance with a new baby (heck, barely have time to wash my car!), I'm realizing how much its going to cost me to own the passat over the long term. We're talking $1000 for timing belt changes, and $2300 for new control arms. $200 every 20k and $500 every 40k for routine service.

If I leased, I never hit the first major service, never have to do the timing belt and am never out of warranty. If I find a killer lease deal, it will be cheaper than owning unless I own the car for 15 years. I don't know if I can hang with one car for 15 years.

 

[Merkurwwu]

Quote:

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Caspian,
Why don't you like the BMW deal? The monthly payment fits within your parameters of being less than 1.4% of MSRP. Is it the high inception payment? And would you negotiate this deal with the dealer even though it is a BMW subsidized national offer? Thanks.

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Sorry, I'll chime in too! I agree with Caspian.

I should start this with a
*SPECULATION ALERT!*

It seems that cars over $40k or so PLUMMET in value. There are some exceptions, however, like Lexus. Even the best performers in this price range in resale value, compared to less expensive cars, still have bad resale value. And the worse the resale value, the lower value of leasing.

BUT, I think what's happening here is there's a bit of a numbers game going on. In the case of my Volvo, the residual was listed as 43% of base MSRP. Well say an Accord is the same (it's actually much better), and the base MSRP is $20k. The owner is then only paying down $8600, which in 36 months is about $240. On the BMW, with a base price of, say, that $52k, they're paying about $22000 which is about $620 a month over 36 months. Then you get into rent charges which are calculated by taking:

(lease capitalization + Residual value) X money factor

So, as you can see, the higher the lease cap and residual value, the more you're going to pay as a rent charge. Comparing the BMW to the Accord, there is a HUGE difference in the rent charge because the base price of the BMW and the residual are both worth more than the Accord new.

This *MAY* be a good lease as far as leases go for this particular BMW, but compared to other deals out there, I don't think its that great only because of the resale. If you're already paying $600 a month, why not just shell out the extra $200 a month and BUY the car? That's where I think leases are good, if they're less than half what it would cost per month to buy, then go for it. Otherwise, serioulsy consider purchasing. Plus, when you're up in this range, if an extra $200 a month is going to kill you, I think you're buying too much car...

Does this all make sense? (This is one of those "I understand but I don't know if I can communicate or explain it well.")

Sorry to take Caspian's thunder!

 

[VeeDubb]

Merk,
Great explanation. Here's the situation with my brother-in-law. His company is giving him an allowance of $800 a month to lease a "luxury" vehicle. They will not let him purchase. He wants an Audi or BMW. Since there are no Audi lease specials right now, an A6 would cost about $850 per month whereas the BMW subsidized lease is much lower. If he can cut his payments, he can use the money he saves for other expenditures. So he has an incentive to save money. But at the end of the day, none of this will affect his personal pocketbook.

 

[CaspianM]

Leasing is good as long as you do your homework and know if the dealer is up to something or not while signing.
One aspect of a good lease is that you can always avoid buying it if there are little issues or simply do not like the car. Selling a car is time consuming and stressful specially if there is lean on it.
With lease you can drive your dream car and pay for it later. That is the difference. Money has always higher value today than later.
Another thing about leasing which I like is the amount you will pay at the end of the term, so called residual value.
That is never never written on the stone. My 06 XLE Camry had a residual of 15k with Chase. I negotiated hard with them and bought the car for $10k. Now that was a steal. It may not work with every bank and car but my point is that even then there are rooms for negotiation and getting a good deal. Banks much prefer to sell the car to than auction it off later.
Also when you lease the discount they give you is meaningless. In fact the discount is to the bank not to you. All you should care is monthly payment, duration, mileage limit, RV and ballon if any.
As a general rule if you score 1% of MSRP you have beaten them. That is practically leasing with zero money factor or zero interest.
VeeDubb the BMW deal is on the upper side of the %. I would only go for it if that is the car I have been eying or can't get a better deal on it. 1.4% for an expensive car will be costly but then again BMW is not about bargain prices.