Car lease question (dealer-add points to money factor) (1 Viewer)

superchuck500

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So I'm trying to my wife a car and she finally picked the one she wants - and I wanted to lease it for her because I think that makes the most sense under the circumstances. She's easy on cars, doesn't drive a lot of miles, and she gets bored easily (so new car in 3 years).

Anyway, I have been working off of the published money factor from the manufacturer's finance company (which will be the leasing company) - but now the dealer is telling me that they add a point on top of the money factor so they make money too. When I said "you make money on the margin on the sales price, right?" He said "yeah, but there's also the back end, if the car comes off the lease and we can't sell it for enough, we lose money there so the point is to offset that."

I have researched it and apparently it's something they can do, but as a buyer, I'm calling shenanigans. Basically they're taking the equivalent of a 3.5% rate from the maker finance company and raising it to an equivalent of 5.9%.

I figure if they don't like the deal they're making or if they don't trust the residual value that the experts at their lending company are determining, then fine - don't sell me the car. But I'm not gonna pay the dealer another 2.4% to buy his risk of a bad deal.

Anybody familiar with this practice of dealer-added points on the money factor?
 
I've heard of alot of dealerships that do this.. I know for a fact certain ones will add 1-2% onto your rate, because any extra money paid in interest gets kicked back to the dealer..

Not sure how it works with leases thougb
 
tough beans if she gets bored quickly..so does mine.I dropped out of leasing after the tahoe..always having to pay to rent got old...2 November's ago in dropping time i said no more.she shopped..I had the salesman come to my house to show me the vehicle..bought her the then new buick suv..loaded.i didn't watergate anything..told her to enjoy for ten our so years...I win....no..I don't win..she's already notching about the color (white).p.s.-here is a little know secret..if you have a GM product you can refinance at the end of the agreement..meaning a full buyout on the value..a balloon payment.
 
also..that salesman is full of you know what...and don't put anything down..not even for registration.
 
Call their closest competitor. I bet they would be happy to lease you a new car with no added points.
 
Its not that common (at least not in the shreveport/dallas markets) and I would consider it a shady practice.
 
Its not that common (at least not in the shreveport/dallas markets) and I would consider it a shady practice.

Yeah, my first reaction was that it was shady. But in fairness, he didn't try to hide anything - he explained it all. I suspect many customers don't fully understand lease financing anyway and they might get away with it. But I'm just gonna tell him I'm not paying the dealer additional finance cost on top of what I'm paying the lender.
 
So I'm trying to my wife a car and she finally picked the one she wants - and I wanted to lease it for her because I think that makes the most sense under the circumstances. She's easy on cars, doesn't drive a lot of miles, and she gets bored easily (so new car in 3 years).

Anyway, I have been working off of the published money factor from the manufacturer's finance company (which will be the leasing company) - but now the dealer is telling me that they add a point on top of the money factor so they make money too. When I said "you make money on the margin on the sales price, right?" He said "yeah, but there's also the back end, if the car comes off the lease and we can't sell it for enough, we lose money there so the point is to offset that."

I have researched it and apparently it's something they can do, but as a buyer, I'm calling shenanigans. Basically they're taking the equivalent of a 3.5% rate from the maker finance company and raising it to an equivalent of 5.9%.

I figure if they don't like the deal they're making or if they don't trust the residual value that the experts at their lending company are determining, then fine - don't sell me the car. But I'm not gonna pay the dealer another 2.4% to buy his risk of a bad deal.

Anybody familiar with this practice of dealer-added points on the money factor?


There is a reason Dave Ramsey calls a lease a Fleece.
 
There is a reason Dave Ramsey calls a lease a Fleece.

Yeah, you have to fully understand each line of the closing statement - and make sure they aren't playing games.

But leasing does make sense for some applications, as long as you get the right deal.
 
So I'm trying to my wife a car and she finally picked the one she wants - and I wanted to lease it for her because I think that makes the most sense under the circumstances. She's easy on cars, doesn't drive a lot of miles, and she gets bored easily (so new car in 3 years).

Anyway, I have been working off of the published money factor from the manufacturer's finance company (which will be the leasing company) - but now the dealer is telling me that they add a point on top of the money factor so they make money too. When I said "you make money on the margin on the sales price, right?" He said "yeah, but there's also the back end, if the car comes off the lease and we can't sell it for enough, we lose money there so the point is to offset that."

I have researched it and apparently it's something they can do, but as a buyer, I'm calling shenanigans. Basically they're taking the equivalent of a 3.5% rate from the maker finance company and raising it to an equivalent of 5.9%.

I figure if they don't like the deal they're making or if they don't trust the residual value that the experts at their lending company are determining, then fine - don't sell me the car. But I'm not gonna pay the dealer another 2.4% to buy his risk of a bad deal.

Anybody familiar with this practice of dealer-added points on the money factor?

Are you trying to lease a very popular model with no nearby competitors? It's sounds like they aren't very motivated.
 
Are you trying to lease a very popular model with no nearby competitors? It's sounds like they aren't very motivated.

Yeah, it is a popular model (they even brought it in just to sell to me - but they did it without a deposit because they know they'll sell it) - and there are no other dealerships of this manufacturer unless you drive four hours away.

I'm actually okay with the price we have negotiated, it's just this component of the financing that I don't like. I can always just set it up as a loan with one of my banking relationships and go buy it. Then they don't get anything other than their profit on the sale.
 
I leased a car for the first time recently, and was very surprised at the method they use to calculate interest payments.

For my calculations, I converted their money factor to an interest rate and ran an amortization schedule. I couldn't make my numbers match theirs exactly. They were close enough, but not exact, and it was driving me nuts. Researching it online, they apparently use a different method. They add the residual value to the capitalized cost and then multiply by the money factor to find the interest payments.

I can't grasp the logic of this. Why would you add the residual value to the final sale price?

edit - the oddest thing about using this method is that the higher the residual, the more you pay in interest charges. That's crazy to me.
 
Yeah, it is a popular model (they even brought it in just to sell to me - but they did it without a deposit because they know they'll sell it) - and there are no other dealerships of this manufacturer unless you drive four hours away.

I'm actually okay with the price we have negotiated, it's just this component of the financing that I don't like. I can always just set it up as a loan with one of my banking relationships and go buy it. Then they don't get anything other than their profit on the sale.

It's clearly just a move to make more money, because they can. If you don't buy it, someone else will. I'd view it the same way I would them not budging off the price. Either you accept it or you don't.
 
It's clearly just a move to make more money, because they can. If you don't buy it, someone else will. I'd view it the same way I would them not budging off the price. Either you accept it or you don't.

Maybe. It's a new car - not a Van Gogh. I don't mind flying to Charlotte or Atlanta and driving one home.

But really, I'll just buy it through a banking lender. Screw them
 
3.5% is too high anyway. I know it depends on the dealer and the model of car, but for comparison sake I just got a money factor of .0047 which is like 1.1%.
 

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