Miata Mailing List: September 1996, Message #0017
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   From: Jason Powell 

Subject: Re: Leasing & Mods...here's some figures

   Date: Sat, 31 Aug 1996 10:28:25 -0500



At 12:09 AM 8/30/96 -0400, blawrence wrote:

>Jason Powell wrote:

>

>> At the end of your lease you have typically 3 options:

>> 1) drop it off and walk away...paying for any access mileage and wear/tear

>> over $300

>> 2) finance the car through a bank, the dealership where you bought the car,

>> or another dealer.  NO mileage penalty, NO wear/tear penalty.  Then turn

>> around and sell it if you want a diff car.

>> 3) trade your leased car in on another car.  Again, NO mileage penalty, NO

>> wear/tear penalty.

>

>Option #2 is a possibility but I can see no good reason to lease THEN

>finance.  Think of your lease as a $20000 loan with a $13000 ballon

>payment at the end.  Appreciating investments are sometimes financed

>this way for specific reasons, but not a car.   During the lease you are

>financing the depreciation, plus paying interest on the UN-depreciated

>portion of the car.  Even worse if the residual value was set too low as

>in your scenario.  At the end when you go to finance the now "used" car

>you can't usually get a 5 year loan so you will have much higher

>payments than the lease has gotten you used to.  In any case you took 6

>years or longer all told to own the car, and hence paid more interest,

>especially since the average daily balance was higher than on a straight

>6 year loan.

>

>On a 4 or even a 5-year loan you would have acquired a fair amount of

>equity in a Miata 3 years into the loan.  Yes the loan payments were

>more than lease payments, but that can be accounted for by considering

>the difference in equity.  Now factor in the "cap reduction" fee usually

>charged at lease inception.  Amortize that fee and add it to the lease

>payments and they aren't quite as cheap any more.  I think there are

>also some sales tax issues but I don't remember for sure.

>

>Option #3 is unattractive because you now have no leverage with which to

>negotiate the next price (or the money rate, etc., etc.) of the second

>new car you wish to lease.  

>

This data is from 2 weeks ago when we traded our leased 94 Blazer S-10 Tahoe

on a 97 Saturn SL2 fully loaded.



MSRP on the Blazer:  $25,000...I rounded this figure down since I don't

remember how much over 25k it was

Total we paid for 2 years: $10,000 which includes everything...we should've

done 12k mi per year to make this lower.

residual value: $15,150

Saturn bought it for: $16,300...of course it's now on their lot for $20k

We got our deposit back: $350

So we paid 10,000 and got back 16,300-15,150 and $350 which means we paid

$8500 to use the Blazer 2 years.  Dividing into 24 months and we're talking

$350/mo...excellent for teachers on a budget :)



Now the trick:  In order for this to work out to our maximum advantage, the

following accured.   Saturn decides they'll give us $16,300 for the Blazer.

We pretend to "drop" the keys off at Saturn as if we were just through with

it.  Saturn called GMAC and buys the Blazer for it's residual value of

$15,150.  Saturn gives us a check for the difference between 16,300 and

15,150.  We give the check back to Saturn as downpayment, first and

security.  We drive home without putting any extra money into the deal and

wont start making our $270/mo payments til next month.  My only gripe...you

can't haggle over the price of a Saturn....grrr.  What you see is what you

get.  



For us, leasing is a viable way of driving new vehicles that are very safe

and under warantee.  

I'll agree that the BEST way would be to pay cash for the car...who can do

this though?  Even 5 year financing at 8% is more than we want to bear.

So we do the leasing thang.

Welp, there ya have it...my 2 cents be it good or bad  :)

*********************

Jason Powell

Red 96 Pop w/AC...FIZZX 1

Physics Dept

ZionBenton HS

Kenosha, WI

"...the truth the symbol of a dove, will unmask the maker of your plans..."

King'sX - Out of the Silent Planet

















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