Help understand the Lease Agreement of a Car

[danalovesjesus]

Hi Everyone, we got a lease agreement from a dealership (Los Angeles based) and I wanted a little help in understanding the numbers. We were happy with the monthly payments, but the dealership said they had made a mistake and the old contract "expired" and a new one needs to be signed ASAP. The car is with us, but we're trying to make sense of the new numbers before signing anything new. Disclaimer, I know alot of posts say not to put a big down payment, but there is gap insurance with the lease. The car comes with 9500 Dealership/Hybrid Rebates and it would be roughly 6500 down 330/month. Please see below:

A. Gross Capital Cost - 48,161
B. Capitalized Cost Reduction - 15,555
C. Adjusted Capitalized Cost - 32,606
D. Residual Value - 26,282
E. Depreciation and Amortized Amount - 6,323
F. Rent Charge - 4,430
G. Total Base Monthly Payments - 10,754
H. Lease Payments - 36 months
I. Base Monthly Payment - 299
J. Monthly Sales - 30
L. Total Monthly Payment - 329

Now they have sent a new updated document with the following:

A. Gross Capital Cost - 45,554
B. Capitalized Cost Reduction - 13,524
C. Adjusted Capitalized Cost - 32030
D. Residual Value - 28,266
E. Depreciation and Amortized Amount - 3,764
F. Rent Charge - 7,010
G. Total Base Monthly Payments - 10,775
H. Lease Payments - 36 months
I. Base Monthly Payment - 299
J. Monthly Sales - 30
L. Total Monthly Payment - 329

Now How can the numbers vary so much and it comes to the same monthly payment? It seems like the residual value went up, so for them to keep the same monthly payment, the raised the charges on the car and are pushing to have it signed asap. Someone, please help us understand.

 

[ihatethehsc]

@danalovesjesus They increased the residual by $2k. Given you’re quite likely NOT to return the car (and even if you do, you can monetize a lower residual when doing so), they’re taking away roughly $2k from you.

Do not sign. If they ask why, tell them you won’t sign something with the same payment but higher residual. Also ask them why they think it’s ok to try to steal $2k from you.

 

[danalovesjesus]

@ihatethehsc Thank you for that. It's the 2k higher residual and they changed the cap reduction for me for another 2k. Let's say that they did calculate the monthly payment incorrectly and the interest rate went from 5% to 7.75%, it still should be less based on the new residual and Cap cost reduction.

 

[jacobtherunner]

@danalovesjesus You do realize how bad of a financial choice leasing is, right?

 

[kemar]

@jacobtherunner In this case, sure, because he is paying 15.5% interest

But whether leasing is bad or not entirely depends on the numbers. If the MF is zero and Residual equals Capitalized cost it is a great lease.

 

[danalovesjesus]

@jacobtherunner Help me understand why outside of the down payment that most folks say I shouldn't pay. Out of all the advertised deals for this car (and similar), this seemed to be the "best" deal with a down payment. The dealer charging me 7k for the heck of it is what gets me on the fine print, but I couldn't find a cheaper deal for this car anywhere else.

 

[jacobtherunner]

@danalovesjesus You are getting stuck into a forever car payment. Cars last a lot longer than three years, but in three years you’ll have paid $18,400 and you won’t have anything to show for it. The alternative is that you buy the car outright with a loan and keep it for 10 years. You’ll pay a lot less than continuing to lease.

 

[danalovesjesus]

@jacobtherunner Thank you for your feedback.

 

[kemar]

@danalovesjesus You shouldn't put down a penny on a lease, car gets wrecked you lose your entire down payment.

Ask them what the money factor is (MF), looks to me like they substantially jacked the interest rate in the updated documents to 15.5% (24 x MF = interest rate)

They be robbing you

Depreciation is the difference between Adjusted Capitalized Cost and Residual

REnt is the equivalent of interest and is the average of Adjusted Capitalized Cost and Residual times the number of months times the Money Factor

 

[danalovesjesus]

@kemar The deal comes with gap insurance and the MF looks to be 0.00209 on a previous paper, which would be roughly 5.14%.

 

[kemar]

@danalovesjesus That is about the interest rate I got from the first set of numbers but the second set gives me 15.5% which is consistent with the much higher rent charge

You lose your down payment, gap insurance doesn't protect you from that. Your car is totalled the lessor gets paid out by your insurance and you get nothing,. Your down payment is gone