Leasing a Mini : Different flavors = different payments
4th Gear
Joined: Dec 2007
Posts: 543
Likes: 8
From: Raleigh, NC
Another item to consider is sales tax of lease vs. purchase.
When I leased a car in NC I only paid the 3% sales tax with each payment.
http://www.edmunds.com/car-loan/leas...fferences.html
When I leased a car in NC I only paid the 3% sales tax with each payment.
http://www.edmunds.com/car-loan/leas...fferences.html
6th Gear
Joined: Aug 2005
Posts: 1,258
Likes: 3
From: H-town
Best general info I've seen on leasing can be found at bimmerfest.com's Ask A Dealer forum. They've got a sticky about how to calculate a lease. Leases are pretty much always the same, with the exceptions of a few states like Texas that charge sales tax on the whole purchase upfront. I would go out on a limb and say that in the US, BMW probably has the highest percentage of leases issued of the car companies selling here. It's been a business model of their's for years to offer subvented leases (subsidized), thus putting more cars into customer hands, and also giving them low mileage lease returns to CPO and sell again. They have not really followed that model on the MINI line...yet....
Dealers like leases because there are no Truth in Lending disclosures required disclosing the interest rate APR. There are also no calculations required showing the method used to calculate the payment. At the end of the day, it can be a "catch as one can" situation and leads to higher gross profits. It is a lot easier to argue about $20 a month on the payment than what the discount should be.
In your case, if I understand correctly, your money factor was .0018 + .00035 = .00215. If you multiply x 2400, that will give you a percentage rate of interest of 5.16%. By agreeing to let them add the .00035, they added .84% to the interest which is pure profit to the dealer.
You can calculate a lease payment manually if you know three items. You need the sale price, the residual price, and the money factor used. You will pay three components on a lease: depreciation, finance fee, and any sales taxes imposed in your State. Keep in mind as well, most leases will contain a "lease fee" added up front to the sale price of the vehicle. This fee generally runs from $495 to $995 and drastically changes both the actual interest rate and yield of the lease.
To calculate the monthly depreciation, subtract the residual value from the capitalized vehicle cost ( sale price plus any lease fee) and divide by the lease term. To calculate the finance fee, add the cap cost and the residual together times the lease factor. You add the two together not because you are paying on the total of the two but simply a way to calculate average amount financed without using complicated constant-yield annuity formulas.
In addition, you will pay sales tax on the lease which is generally added to the monthly payment. There are a large number of ways different states make this calculation and can be substantially different from each other in both method of calculation and cost. There are some states where the taxation on a lease can make leasing almost impractical.
To make this entire thing even more complicated, some lease companies express their rates in actual interest numbers and not money factors. I do not know of a simple way to calculate those with out the use of financial charts that most people don't have. The Long and short of it, shop a number of dealers when leasing because there could be a substantial difference in the payment offered!
In your case, if I understand correctly, your money factor was .0018 + .00035 = .00215. If you multiply x 2400, that will give you a percentage rate of interest of 5.16%. By agreeing to let them add the .00035, they added .84% to the interest which is pure profit to the dealer.
You can calculate a lease payment manually if you know three items. You need the sale price, the residual price, and the money factor used. You will pay three components on a lease: depreciation, finance fee, and any sales taxes imposed in your State. Keep in mind as well, most leases will contain a "lease fee" added up front to the sale price of the vehicle. This fee generally runs from $495 to $995 and drastically changes both the actual interest rate and yield of the lease.
To calculate the monthly depreciation, subtract the residual value from the capitalized vehicle cost ( sale price plus any lease fee) and divide by the lease term. To calculate the finance fee, add the cap cost and the residual together times the lease factor. You add the two together not because you are paying on the total of the two but simply a way to calculate average amount financed without using complicated constant-yield annuity formulas.
In addition, you will pay sales tax on the lease which is generally added to the monthly payment. There are a large number of ways different states make this calculation and can be substantially different from each other in both method of calculation and cost. There are some states where the taxation on a lease can make leasing almost impractical.
To make this entire thing even more complicated, some lease companies express their rates in actual interest numbers and not money factors. I do not know of a simple way to calculate those with out the use of financial charts that most people don't have. The Long and short of it, shop a number of dealers when leasing because there could be a substantial difference in the payment offered!
4th Gear
Joined: Dec 2010
Posts: 391
Likes: 0
From: Bergen County, New Jersey
You don't! There is a lot of mis-information on this thread. You are paying interest on the entire residual balance for the entire time period you lease for. You are paying interest as well on the declining balance between purchase price and residual. You never pay the residual amount and therefore always pay interest because you will owe it until you turn the vehicle in or purchase the vehicle.
The best time to lease a vehicle will be at model year introduction. If you lease a new model year vehicle at that time, not a last year model, the residual will be at the highest point. As the model year progresses, the residual is lowered to account for the depreciation cycle. If you lease at the end of the year, your vehicle will be another model year older when the lease matures. The only thing that changes that formula would be if the manufacturer subsidizes the lease to move over stocked inventory.
The cost of a lease is variable based on two factors...purchase price and interest paid. The residual is going to be a fixed amount unless the manufacturer artificially inflates it and guarantees that value to the lease company. In that case, the subsidy would normally be the same for all dealers On a lease, the purchase price is negotiable and should be fixed before the lease calculation is made. The larger the discount, the lower the payment because depreciation is lowered. Most dealers have an option to charge a higher rate as a money factor and keep the difference. This markup is usually not disclosed to the purchaser and can usually only be discovered with comparison shopping between dealerships.
Properly utilized and researched, leasing is normally the least expensive way to take possession of a vehicle. While you are not building equity, you also do not have any equity when you finance the purchase either until four plus years of payments are made on the typical sixty month or seventy-two month term conventional financing. The largest problems with leasing are the mis-information passed from one consumer to another and the lack of understanding of how it actually works.
The best time to lease a vehicle will be at model year introduction. If you lease a new model year vehicle at that time, not a last year model, the residual will be at the highest point. As the model year progresses, the residual is lowered to account for the depreciation cycle. If you lease at the end of the year, your vehicle will be another model year older when the lease matures. The only thing that changes that formula would be if the manufacturer subsidizes the lease to move over stocked inventory.
The cost of a lease is variable based on two factors...purchase price and interest paid. The residual is going to be a fixed amount unless the manufacturer artificially inflates it and guarantees that value to the lease company. In that case, the subsidy would normally be the same for all dealers On a lease, the purchase price is negotiable and should be fixed before the lease calculation is made. The larger the discount, the lower the payment because depreciation is lowered. Most dealers have an option to charge a higher rate as a money factor and keep the difference. This markup is usually not disclosed to the purchaser and can usually only be discovered with comparison shopping between dealerships.
Properly utilized and researched, leasing is normally the least expensive way to take possession of a vehicle. While you are not building equity, you also do not have any equity when you finance the purchase either until four plus years of payments are made on the typical sixty month or seventy-two month term conventional financing. The largest problems with leasing are the mis-information passed from one consumer to another and the lack of understanding of how it actually works.
Thank you as well. I leased my 2011 at the introduction of the 2011 model year, (I did it in Nov of 2010), and I got the $199/month for 36 months lease deal with 12k miles/year. This lease was advertised for a less expensively equipped mini, with 10k miles/year. Not only did I get my car with more equipment and more miles/year, but the dealership knocked off $1900 off of the $24,100 sticker price. I knew what I wanted when I went to the dealership and they really helped me out. I put $2k down in cash, and they gave me $2k for my trade in, so $4k as a down payment including tax, title and registration. All I'm paying now per month is the $199. Normally, I would think that for the long term, buying is better, but in this case, it was cheaper for me to lease for 3 years at the $199 special and buy out at the end. The mini select program is similar to the lease, however, my payments had I gone with that at the time, still would have been higher. Granted, my balloon payment at the end would be lower, however I'm in college but have a part time job as well, so I thought the lease would be the best way for me to start out. My buyout at the end of the lease is $16,100, which I still think is really good, considering how the mini's keep their value. Depending on what the finance rates are at that time in 3 years, my payments could either go up, or remain relatively the same(which I'm hoping for
). I think its good to shop around, depending on your circumstances, leasing can be better.
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