What should I know before I sign any lease papers?

[grampi]

It looks like my daughter will be leasing a new vehicle soon, and she will need me to co-sign for her because of her lack of credit.

I know certain things to look for; vehicle purchase price, interest rate, residual amount owed at lease end, payment amount, ask if there will be any acquisition or disposition fees, etc, however, I don't know which of these things are negotiable and not negotiable, and I don't know what would be good or bad with many of these numbers.

I've delt with the vehicle purchasing process enough times to know that you can trust a car salesman, or pretty much any of the people who work at the dealerships about as far as you can throw them. They are in the business to make as much profit from each and every sale as possible...period. No matter how savy you think you are in terms of knowing how to deal with these people, they are always one step ahead of you. They're continuously coming up with trickier forms, and more and more ways to twist and fudge the numbers in ways so you don't know youre getting screwed.

What I need to know is how to know which numbers are negotiable, and which ones aren't, other than simply taking the word of the sales person.

What would be considered a good ineterest rate on a lease, and what would be a bad one?

Is there a certain percentage of the original vehicle cost I should look for in a residual amount owed at lease end?

Is there anything else I should be looking for? I want my daughter to get the best deal possible as she lives on a very limited income.

Also, I this thread was started in the wrong section, please move it to the correct one. Thanks.

 

[ARCOgraphite]

As one who has tried to lease a car a few times: Do NOT co-sign, Do not lease!!! Do NOT put any equity money down when you ignore me and lease anyway! Leave that money IN THE BANK OR ROTH IRA! The Capitalised Cost is negotiable as is any new car purchase - expect 15% discount on a "commodity" car of the upcoming model year- DO NOT LEASE A LEFTOVER MODEL 2010!

Realize you have to pay for all damages at lease end and they can add up. A leased car is a "accident - bad luck magnet".

Alterbnatively, You can go to a credit union and take a "balloon loan" which would be same terms as a lease. Low payments (~40% of retail) for 3 years and calc a residual amount due at month 37. You will have to refi the car as a "used car" sell it at this time though - but you will be WAY BETTER OFF in most all cases.

How old is you daughter and is she too young to have credit or did she mess up her credit?

How many miles will she drive in a year? Note car insurance may cost MORE than lease cost/annum.

 

[gathermewool]

It bothers me when people do what I'm about to do; post with out simply answering the question. But, I've got to ask why you decided to lease new. With her limited income, buying a well-maintained used car with an extended warranty might make more economic sense.

Also, the interest rate will depend on your combined credit - whether she has very little credit history or whether she has terrible credit, mainly. I know some think making a large credit purchase like a car loan will help them build credit, but, IMO, it doesn't make financial sense. I used my CC for almost all of my purchases since I was 18, paying it off every month, so by the time I bought my first car when I was 21, I had pretty good credit.

Sorry I couldn't answer more of your questions.

 

[Papa Bear]

Originally Posted By: ARCOgraphite
As one who has tried to lease a car a few times: Do NOT co-sign, Do not lease!!! Do NOT put any equity money down when you ignore me and lease anyway! Leave that money IN THE BANK OR ROTH IRA! The Capitalised Cost is negotiable as is any new car purchase - expect 15% discount on a "commodity" car of the upcoming model year- DO NOT LEASE A LEFTOVER MODEL 2010!

Realize you have to pay for all damages at lease end and they can add up. A leased car is a "accident - bad luck magnet".

Alterbnatively, You can go to a credit union and take a "balloon loan" which would be same terms as a lease. Low payments (~40% of retail) for 3 years and calc a residual amount due at month 37. You will have to refi the car as a "used car" sell it at this time though - but you will be WAY BETTER OFF in most all cases.

How old is you daughter and is she too young to have credit or did she mess up her credit?

How many miles will she drive in a year? Note car insurance may cost MORE than lease cost/annum.


Everything ARCO said .....

 

[HBCALI]

FROM AN EXPIERENCED FINANCER:

DONT! I hope that isn't too forward. You need to remember that a vehicle lease is always wieghted in favor of the lender. Do you want to put your daughter in that position?

Rarely (if ever) is there anything in the contract that puts the ball in the lessor's court. Apart from a lower monthly payment, leasing a vehicle for your daughter (who already has little credit) can be a very poor financial decision in the long-run.

Compared to a purchase, a leased vehicle has lower monthly payment mainly becuase you're only financing a portion of the vehicle. You'll find the remaining MSRP on the "residual" (back-end of the lease). Also, your payment is generally not based on APR like a purchase. Stop thinking like that. A lease generally comes with a set APR from the lender - take it or leave it. Aurguing about a "lease APR" with the dealer will show inexperience.

Again, a lease does not equate "ownership". The bank is merely allowing the lessor to "borrow" or "rent" the car for fixed term. Unless the vehicle is refinanced at lease maturity (36, 48 60 months, etc), YOU WILL NEVER OWN THE VEHICLE. With potentially still poor credit, your daughter will not be able to refinance at lease end requiring your co-signature yet again.

Refi rates at lease maturity can vary - leaving an unknown situation in the future. Can you simply return the vehicle at maturity - yes, but with possible penalties.

1. Excess mileage (usually over 10K a year)
2. Excess wear (defined by the lender, not you)
3. Dealer fees

So many more things...Just stay clear. Buy your duaghter a car suited for HER financial outlook and her season of life. Something used but reliable perhaps (Honda, Toyota, Nissan). Cars around 2006 had a changes to body style and can generally cost less than newer models. The 2006 vehicle year also rounds-out the "Certified Used" age limit for most OEM's.

 

[The_Jeff]

I'd look over the contract to see what deductibles they make you carry on the comp/collision insurance.

Also sometimes there's a form where you agree to return to sign any other paperwork in case of typos. I'd crinkle that one up and throw it at the salesman, see what happens.

Go over with your daughter ahead of time your secret "let's leave" code, which one is for real and which one is for show. I saved my BIL $1000 on his new used car by dragging him out of the closers office "for a smoke".

 

[grampi]

Originally Posted By: ARCOgraphite
As one who has tried to lease a car a few times: Do NOT co-sign, Do not lease!!! Do NOT put any equity money down when you ignore me and lease anyway! Leave that money IN THE BANK OR ROTH IRA! The Capitalised Cost is negotiable as is any new car purchase - expect 15% discount on a "commodity" car of the upcoming model year- DO NOT LEASE A LEFTOVER MODEL 2010!

Realize you have to pay for all damages at lease end and they can add up. A leased car is a "accident - bad luck magnet".

Alterbnatively, You can go to a credit union and take a "balloon loan" which would be same terms as a lease. Low payments (~40% of retail) for 3 years and calc a residual amount due at month 37. You will have to refi the car as a "used car" sell it at this time though - but you will be WAY BETTER OFF in most all cases.

How old is you daughter and is she too young to have credit or did she mess up her credit?

How many miles will she drive in a year? Note car insurance may cost MORE than lease cost/annum.


Some of what you said is a little hard to folow, but I'll try to respond.

There is no money to begin with to leave in the bank or an IRA. Also, the lease she's been looking at requires no downpayment.

I have leased a car myself and I know about being responsible for the damages at lease end.

Don't know about the "ballon loan" thing. Wouldn't they require some kind of downpayment?

Why is it an absolute no no to lease a 2010 model?

Also, I don't share your view that a lease is always a bad thing, or there are always better ways to go. For example, my sister never buys her vehicles, but always leases them instead. She likes getting a new vehicle every 2-3 years, and leases have lower monthly payments than purchases. The lower payment and no downpayment aspects of a lease also fit my daughter's needs better than the terms of a purchase. She also is the type of person who will probably end up wanting a new vehicle every 2-3 or three years as well, which makes leasing a better option. For me, leasing makes no sense as I keep cars until the wheels fall off.

My daughter is 21 and has bad credit. That's why she needs me to co-sign.

I believe there are such things as good leases, I just need to make sure I know what I'm looking for so my daughter isn't taken to the cleaners...

 

[HBCALI]

READ MY ABOVE POST (HBCALI)

Listen, your daughter's financial situation is not the same as your sister's or even your's. A lease may work for you but not for her. You said your daughter has poor credit. And if she's the average young-lady at 21, she's either a student carrying debt or has a low paying job (probably both). Perfect storm for a predatory lease contract...Be careful

 

[grampi]

HBCALI

The one thing about your post that stands out to me in particular is the part about my daughter still not establishing credit at the end of the lease. How does making 36 lease payments NOT establish credit?

 

[bradepb]

Cosign a Lease for someone with poor credit and low income? Not me , but I can relate with 3 kids myself.
Even if money is not a problem for you it would seem better to buy a used car for her and see how that goes, have her pay you back and then you dont have to worry about turning back in a beat up car.

 

[grampi]

Originally Posted By: HBCALI
READ MY ABOVE POST (HBCALI)

Listen, your duaghter's situation is not your sister's or your's. A lease may work for you but not her. You said your daughter has poor credit. And at 21, she's either a student with debt or has a low paying job. Perfect storm for a predatory lease contract...Be careful


What would be an indication that my daughter was being predatorized during the lease process, but before any paperwork has been signed?

 

[HBCALI]

Originally Posted By: grampi
HBCALI

The one thing about your post that stands out to me in particular is the part about my daughter still not establishing credit at the end of the lease. How does making 36 lease payments NOT establish credit?



It won't establish credit like you think. You're a co-signer which means you carry the burden of the debt - not your daughter. The bank could easily view your daughter's loan as "protected" and not "stand alone". So the return could more negative than you think. Besides if she defaults becuase of anything (she's 21, fill in the blank) your credit WILL TANK.

Loans can become predatory when they're sold to people like your daughter. She has no financial ability, history or assets to secure the purchase of a $20,000 vehicle. A lender who sells the loan to her knows that. Why then would they still sell it if they didn't get something big in return? In turn, the contract is written in overwhelming favor for the lender. Don't put your daughter in a precarious situation.

 

[grampi]

Originally Posted By: bradepb
Cosign a Lease for someone with poor credit and low income? Not me , but I can relate with 3 kids myself.
Even if money is not a problem for you it would seem better to buy a used car for her and see how that goes, have her pay you back and then you dont have to worry about turning back in a beat up car.


We did just that with her current vehicle. However, she lost her job at the same time she was going to trade school and got way behind on her bills, which ruined her credit. That vehicle is now paid for, but is a total beat-down piece of [censored] that's falling apart and is worth basically nothing. It's still gets her around, but I don't know for how much longer. She wants a new vehicle, I want her to have something that's in better shape, and I want the loan/lease to be in her name so she can get her credit re-established.

 

[grampi]

Originally Posted By: HBCALI
It won't establish credit like you think. You're a co-signer which means you carry the burden of the debt - not your daughter. The bank could easily view your daughter's loan as "protected" and not "stand alone". So the return could more negative than you think. Besides if she defaults becuase of anything (she's 21, fill in the blank) your credit WILL TANK.


I thought lease paperwork was setup so there is a primary and secondary signee, and as long as my daughter is the primary, she gets the credit for making the payments. I understand my risk as a co-signer and the defaulting part...

 

[Jeepster_nut]

Typical BITOG thread. Guy comes in looking for lease information, winds up with self centered opinions from members, and unsolicited opinions against his daughter and her finances/income situation.
My advice would be to go with what works for her in her current situation and help her as best you can. Good luck

 

[HBCALI]

Originally Posted By: grampi

I thought lease paperwork was setup so there is a primary and secondary signee, and as long as my daughter is the primary, she gets the credit for making the payments. I understand my risk as a co-signer and the defaulting part...



Who told you that, the dealer trying to sell the car? Man, that chaps my hide! The dealer is not a Finicial expert. In fact, ask the "Finance Officer" at the dealership where he got his accounting degree. They probably only have high school diploma or at best has a a college degree completely unrelated to their position! Hardly quals for handling your daughters financial future. The Finance Officer is usually just another sales-man packaged differently. Remember that.

Look, I know you're going to lease the car - I can just tell. You're set on getting your daughter the "best" car she can have. I'm a dad too, I know what you're thinking. Just be careful and research all you options. This is an oil website, what kind of advice are you going to get from most of these guys? IMHO, you got lucky to run into a finance guy like me...

 

[rshunter]

This is where the lesson about the difference between a "want" and a "need" is important. You'd both be better off with her buying a CPO car. She'll still get a warranty (perhaps an even better one) and it will be looked upon as a purchase.

The reason you don't want to lease a leftover 2010 model is the effect on the residual value. The difference between a 2010MY and 2011MY at the lease end date is likely to be greater than the discount given at signing. That means you'll pay more for the older car, and how does that make any sense?

 

[grampi]

Originally Posted By: Jeepster_nut
Typical BITOG thread. Guy comes in looking for lease information, winds up with self centered opinions from members, and unsolicited opinions against his daughter and her finances/income situation.
My advice would be to go with what works for her in her current situation and help her as best you can. Good luck



I haven't taken any of the responses that way.

 

[rshunter]

Originally Posted By: Jeepster_nut
Typical BITOG thread. Guy comes in looking for lease information, winds up with self centered opinions from members, and unsolicited opinions against his daughter and her finances/income situation.

You mean he came here for advice and fellow members wanted to ensure that he was fully informed on his options, based on the situation? Wow, what a bunch of jerks! This place really sucks...

 

[IndyIan]

I can't say I've leased a car, but if I did, the main number I'm interested in is the total cost to me.
All the fees, taxes, down payment, sum of the monthly payments, and any exit costs.
I'd shop for a lease that way, if the sales guy can't work that way then walk away and find one that can.
Given equal total costs I'd favor a small downpayment and larger monthly payments, put the downpayment in the bank or pay down high interest debt.
In any case, I suspect you'll find that total cost for leasing is pretty expensive compared to outright ownership of a 3 year old used car and a loan from your bank.