Lease Economics Questions for New 2016 Explorer Platinum

[JCrew7384]

Hi,

I have been posted a bunch on this site as I work my way towards pickup up a new 16 Ex Platinum, upgrading from a 2009 Jeep GC that I fully own at this point.

I'm considering leasing as opposed to buying this time and had one big question that I have gotten conflicting answers from friends about and it relates to terms and pricing.

On one side of the argument is that when leasing I need to be concerned with the actual price of the vehicle, the money factor, the residual value at the end of the lease, and all of those aspects.

On the other side, my side, I am only concerned about the monthly payment, and getting that payment as low as possible, regardless of what other numbers change to make that happen.

My thought is if I have pretty low to zero intention of buying the car at the end of the lease, what does it matter what everything is valued at, as long as I am paying the lowest monthly cost as possible.

Also, side question, what is the lowest lease payment people have seen or would expect on a 16 Ex Platinum, with only enough money down to cover the upfront fees (I've also heard this is preferable as opposed to putting more down and having a lower payment)

Appreciate any and all comments and advice.

 

[peterk9]

As someone who has leased his last 6 vehicles, I would say that the 2 side you mention are related. One depends upon the other. I think I've mentioned this before but why not go to the Ford website and build a Platinum and then 'calculate your payments'. That brings up a screen where you can play with the figures to see how they affect you monthly payments. As mentioned several times, the only drawback of the U.S. site is that they don't show what the interest rate is that you are working with. The interest rate can be modified if you're willing to use the 'refundable down payments' route.

Peter

 

[JCrew7384]

As someone who has leased his last 6 vehicles, I would say that the 2 side you mention are related. One depends upon the other. I think I've mentioned this before but why not go to the Ford website and build a Platinum and then 'calculate your payments'. That brings up a screen where you can play with the figures to see how they affect you monthly payments. As mentioned several times, the only drawback of the U.S. site is that they don't show what the interest rate is that you are working with. The interest rate can be modified if you're willing to use the 'refundable down payments' route.

Peter

But that'ts exactly my point... Do I care what the interest rate is, and what the residual price of the car is after 3 years if I don't intend to keep the car? I can just negotiate down my monthly payment to a number that I am satisfied with right?

 

[peterk9]

But that'ts exactly my point... Do I care what the interest rate is, and what the residual price of the car is after 3 years if I don't intend to keep the car? I can just negotiate down my monthly payment to a number that I am satisfied with right?

The interest rate and residual value will definitely affect your monthly payment but if you can negotiate that to something you are comfortable with than it doesn't matter.
I've always said on here that if you're happy with the deal then it is a good deal for you. Regardless of what anyone else thinks. Everyone has their own financial situation to consider.

Peter

 

[Odrapnew]

But that'ts exactly my point... Do I care what the interest rate is, and what the residual price of the car is after 3 years if I don't intend to keep the car? I can just negotiate down my monthly payment to a number that I am satisfied with right?

As long as your terms(length and miles specifically) stay the same, I think you would essentially doing the same thing vs. negotiating the prices of the vehicle, interest rate..etc. Not sure which one is easier to do or the repercussions of each one though.

 

[JCrew7384]

Appreciate the comments

 

[K5OUN]

In a lease your monthly payment is calculated off the depreciation of the vehicle during the lease term, so the goal is the better the ACV (actual cash value) of the vehicle at the end of the lease, the lower the payment (less depreciation). Added in is your APR for the lease, on top of total vehicle cost-ACV at lease end. Technically a lease deal can be written for no money down depending on credit strength, just like financing but its not as easy and depends on how the deal comes together (this would also increase your monthly payment). Leases are a bit complex, but can certainly be advantageous. IMO leases make more sense in high end vehicles due to them maintaining more value by the lease end. I am unsure how Ford leases are put together, but most leases are based off of a 15k mile a year term. If you sign up for more than 15k a year in the lease you are simply buying extra mileage on the front end at a reduced rate. Also the ACV will usually not change between 36 months and say 39 months, so if you take the 39mo option, you don't lose any money but keep the vehicle a few months longer. In the end, its all about lowering your monthly payments and not being upside down if you would like to buy a new car every three or so years.

Why ACV is important, because if the vehicle depreciates 85% in the lease term, the lease is pointless. Your payment would not be much better than a finance and you would have equity in the vehicle if you bought it. If the vehicle depreciates 20% in the lease term, you are only paying for the 20% you had the vehicle for and the payment will be lower. This shows you how these deals can be very vehicle specific.

Hope this makes some sense.

 

[peterk9]

In a lease your monthly payment is calculated off the depreciation of the vehicle during the lease term, so the goal is the better the ACV (actual cash value) of the vehicle at the end of the lease, the lower the payment (less depreciation). Added in is your APR for the lease, on top of total vehicle cost-ACV at lease end. Technically a lease deal can be written for no money down depending on credit strength, just like financing but its not as easy and depends on how the deal comes together (this would also increase your monthly payment). Leases are a bit complex, but can certainly be advantageous. IMO leases make more sense in high end vehicles due to them maintaining more value by the lease end. I am unsure how Ford leases are put together, but most leases are based off of a 15k mile a year term. If you sign up for more than 15k a year in the lease you are simply buying extra mileage on the front end at a reduced rate. Also the ACV will usually not change between 36 months and say 39 months, so if you take the 39mo option, you don't lose any money but keep the vehicle a few months longer. In the end, its all about lowering your monthly payments and not being upside down if you would like to buy a new car every three or so years.

Why ACV is important, because if the vehicle depreciates 85% in the lease term, the lease is pointless. Your payment would not be much better than a finance and you would have equity in the vehicle if you bought it. If the vehicle depreciates 20% in the lease term, you are only paying for the 20% you had the vehicle for and the payment will be lower. This shows you how these deals can be very vehicle specific.

Hope this makes some sense.

You can chose the annual mileage figure for your lease from a list they have. It is available on the Ford website when you "build and price". Of course a higher mileage allowance will affect the end value.

Peter

 

[peterk9]

As long as your terms(length and miles specifically) stay the same, I think you would essentially doing the same thing vs. negotiating the prices of the vehicle, interest rate..etc. Not sure which one is easier to do or the repercussions of each one though.

Lease rates are not negotiable as they are set by Ford Financial, not the dealer. You can only change the rate with Multiple Refundable Security deposits as I mentioned in my previous post.

Peter

 

[Forddealz]

Some states don't allow for MRSD and if a leaser has a good credit, it will not save them that much, if anything at all. As a customer, personally I would not put any money down on a lease except for tax, registration because it is not customers car, but banks car. If a customer leases a car, gets the car wrecked and has a total loss, don't expect any of your deposits or down payments reimburse the customer. Finding a vehicle of the same specs that customer chose could take a lot of time. I would put as less money down as possible.

 

[Forddealz]

In a lease your monthly payment is calculated off the depreciation of the vehicle during the lease term, so the goal is the better the ACV (actual cash value) of the vehicle at the end of the lease, the lower the payment (less depreciation). Added in is your APR for the lease, on top of total vehicle cost-ACV at lease end. Technically a lease deal can be written for no money down depending on credit strength, just like financing but its not as easy and depends on how the deal comes together (this would also increase your monthly payment). Leases are a bit complex, but can certainly be advantageous. IMO leases make more sense in high end vehicles due to them maintaining more value by the lease end. I am unsure how Ford leases are put together, but most leases are based off of a 15k mile a year term. If you sign up for more than 15k a year in the lease you are simply buying extra mileage on the front end at a reduced rate. Also the ACV will usually not change between 36 months and say 39 months, so if you take the 39mo option, you don't lose any money but keep the vehicle a few months longer. In the end, its all about lowering your monthly payments and not being upside down if you would like to buy a new car every three or so years.

Why ACV is important, because if the vehicle depreciates 85% in the lease term, the lease is pointless. Your payment would not be much better than a finance and you would have equity in the vehicle if you bought it. If the vehicle depreciates 20% in the lease term, you are only paying for the 20% you had the vehicle for and the payment will be lower. This shows you how these deals can be very vehicle specific.

Hope this makes some sense.

Leases don't always make more sense for higher end vehicles. Look at a 2013-14, 70K BMW 550XI or X5. 3 year old car you can get for almost 50% off from MSRP. The lessee paid close to 50% of the cars value in about 3 years. They are selling the CPO'ed ones in a range of 35-40K, depending if it is CPO'ed.

 

[peterk9]

Some states don't allow for MRSD and if a leaser has a good credit, it will not save them that much, if anything at all. As a customer, personally I would not put any money down on a lease except for tax, registration because it is not customers car, but banks car. If a customer leases a car, gets the car wrecked and has a total loss, don't expect any of your deposits or down payments reimburse the customer. Finding a vehicle of the same specs that customer chose could take a lot of time. I would put as less money down as possible.

I don't know about the laws of some states but the MRSD is offered by Ford Credit, not the dealer. The maximum reduction you can get here is 1.5% and the refundable deposit is written into the contract. My insurance covers a write-off with full original vehicle value. Also by leasing I don't have to pay the 13% sales tax on the full value of the selling price. Planning my next lease to be a 2018 Platinum depending on what the redesigned one looks like.

Peter

 

[Odrapnew]

Some states don't allow for MRSD and if a leaser has a good credit, it will not save them that much, if anything at all. As a customer, personally I would not put any money down on a lease except for tax, registration because it is not customers car, but banks car. If a customer leases a car, gets the car wrecked and has a total loss, don't expect any of your deposits or down payments reimburse the customer. Finding a vehicle of the same specs that customer chose could take a lot of time. I would put as less money down as possible.

That's a great point. People get tied up on monthly payments. While you may pay a few extra bucks in the end if you don't put any money down, you also don't risk losing your down payment if you total the vehicle early on in the lease. Just make sure there's gap coverage.

No down payment goes the same for purchasing(assuming financing) as well as long as you have gap coverage. If you have good credit, you don't have to put money down.

 

[JCrew7384]

Is there anyone here that can help understand if this sounds like a good deal on a lease for a 2016 Explorer Platinum

Term: 39mo
Miles: 12k

Monthly Payment: $674
Purchase Price: $29,000

Due on Delivery: $2,100 (includes first month, fees and insurance 87.50, and upfront taxes 1,340)

Basically no money down except to cover the upfront costs. I am trading in an older car so will cover those fees and then take away a check for the rest. And this is for purchase in NY dealer with delivery to me in NJ.

Any initial thoughts? I'm pretty new to this.

 

[K5OUN]

Is there anyone here that can help understand if this sounds like a good deal on a lease for a 2016 Explorer Platinum

Term: 39mo
Miles: 12k

Monthly Payment: $674
Purchase Price: $29,000

Due on Delivery: $2,100 (includes first month, fees and insurance 87.50, and upfront taxes 1,340)

Basically no money down except to cover the upfront costs. I am trading in an older car so will cover those fees and then take away a check for the rest. And this is for purchase in NY dealer with delivery to me in NJ.

Any initial thoughts? I'm pretty new to this.

Pretty high payment, are you going down the lease road so you can walk away at the end of 36mo and buy a new vehicle? If that is the case, I think the payment isn't great, but you wont be upside down on the trade.

 

[JCrew7384]

Pretty high payment, are you going down the lease road so you can walk away at the end of 36mo and buy a new vehicle? If that is the case, I think the payment isn't great, but you wont be upside down on the trade.

The lease road was just so we could upgrade in 3 years to a newer car, and one that might fit our growing family better. This is our first venture into a 3 row car, and first Ford, so thought we'd test it out first.

If I use the Ford.com lease calculator, I see roughly the same numbers for the monthly payment, with less due at signing.

Also just want to confirm with people here that it makes sense not to apply any of my trade towards the lease down payment, just enough to cover the upfront costs.

 

[K5OUN]

If you apply more upfront, the payment will just be lower on the lease. I hear on here about folks concerned with putting money upfront, then the vehicle gets totaled, and all that money is lost. Realistically in any GAP insurance claim that would be the case, lease or not. If you put so much money down upfront as to have equity in the deal in the first three years, not sure as a lease would be the best financial option.

If your lease payments would be the same with 0 down vs 5k down, then by all means put nothing down. I think you will find this may be where the online payment calculators fall short though.

 

[fwrogg]

Seems like a high payment amount, low purchase cost (maybe do to the length of lease), and low miles. Keep in mind that 39 months is a long time and things change, that we would not always think would.

 

[K5OUN]

Seems like a high payment amount, low purchase cost (maybe do to the length of lease), and low miles. Keep in mind that 39 months is a long time and things change, that we would not always think would.

Sounds like the depreciation is what is killing the payment. A shorter lease term would help, this is where a lease becomes more complex. I still say, leases are very vehicle dependent.

 

[peterk9]

Bottom line is whether you use a down payment to reduce the monthly cost or no down payment and pay higher monthly costs, the total amount of the lease is predetermined so you'll pay that amount one way or the other in the end.

Peter