Do you think my salesman is trying to pull a fast one?
05-08-2003, 06:36 PM
#1
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Do you think my salesman is trying to pull a fast one?
Ok, so I went to see the salesman today at the local Honda dealership from whom our family has bought 3 of the 8 Hondas we own/owned. He's a pretty cool guy and I guess I have built some trust with him but I'm always wary of car salesmen in general (I guess you can't blame them, it's part of their job). I told him I've weighed the buying/leasing dilemma and said I'd rather buy since I know I would want the car for the long haul despite the fact that the monthly payments would be higher and would border on spending a good percentage of my earnings. He tells me, no, I should lease the car since the buyout at the end of the lease term won't be much. I was kinda in a rush and didn't ask him to clarify but that's pretty much what he said. Is there some truth to this? If it depends on certain conditions, then what are they? I don't think he would be bs'ing since I don't think he would get a larger commission if he is able to get customers to lease rather than buy - I'd actually think he'd get more if he made a sale, if anything. You think he's actually trying to help me out here or do salesman get more commission if they get people to lease?
Please correct me if I'm wrong but allow me to present a scenario. Say I do a 5 year lease from a negotiated price of $30k. The residual after 5 years is said to be $10k which would mean I'd be paying $20k over 5 years. Then if I want to buy the car afterwards, say I finance the car for another 5 years, so $10k for the next 5 years. Would this in effect be like financing the car for 10 years (since you already know from the beginning that you are going to keep the car)? I guess when people say they are losing out on leasing (iff they buy at the end), they mean basically that you are just paying more apr/money factor for a longer period - am I correct? TIA for your inputs.
Please correct me if I'm wrong but allow me to present a scenario. Say I do a 5 year lease from a negotiated price of $30k. The residual after 5 years is said to be $10k which would mean I'd be paying $20k over 5 years. Then if I want to buy the car afterwards, say I finance the car for another 5 years, so $10k for the next 5 years. Would this in effect be like financing the car for 10 years (since you already know from the beginning that you are going to keep the car)? I guess when people say they are losing out on leasing (iff they buy at the end), they mean basically that you are just paying more apr/money factor for a longer period - am I correct? TIA for your inputs.
05-08-2003, 07:09 PM
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5 YEAR LEASES SUCK!, better to go 72 or 84
month purchase. do a 3-4 year lease, any longer is just too damn much invested.
BTW, I am a finance mngr and have a 3 yr lease on mine.
matt
month purchase. do a 3-4 year lease, any longer is just too damn much invested.
BTW, I am a finance mngr and have a 3 yr lease on mine.
matt
05-08-2003, 07:42 PM
#3
Thread Starter
Thanks for your suggestion.
Though, can you explain the flaw in my reasoning? I just want to know why I'm wrong. If you lease with the intent to buy, why would it matter how long the lease period is? Wouldn't the buyout just be the residual (plus interest)? And is my reasoning that a 5 year lease/5 year finance kinda like a 10 year finance flawed (the numbers are just hypothetical)?
Anyone else wanna comment on my salesman's suggestion and do you think he has ulterior motives? TIA.
Though, can you explain the flaw in my reasoning? I just want to know why I'm wrong. If you lease with the intent to buy, why would it matter how long the lease period is? Wouldn't the buyout just be the residual (plus interest)? And is my reasoning that a 5 year lease/5 year finance kinda like a 10 year finance flawed (the numbers are just hypothetical)?
Anyone else wanna comment on my salesman's suggestion and do you think he has ulterior motives? TIA.
05-08-2003, 07:47 PM
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well, the way I see it is that if you do negotiate a buyout at the end, they might give you an insane interest rate because you'd be bound by contract to either pay it or give the car back...and leases are designed for the dealership to make money, remember? I say buy it outright, or don't buy it at all...leases=dangerous. too much fine print.
There was an article recently in my local paper detailing several times where the leasee got burned because of the way the system is designed...it's not in the consumer's interests because in the end it'll cost you more money. Lease is ok for people who move from car to car often and never deal with the residual....if you plan to keep it for the long haul, buy it.
Quick2K
There was an article recently in my local paper detailing several times where the leasee got burned because of the way the system is designed...it's not in the consumer's interests because in the end it'll cost you more money. Lease is ok for people who move from car to car often and never deal with the residual....if you plan to keep it for the long haul, buy it.
Quick2K
05-08-2003, 08:00 PM
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IMO Quick2K was going down the wrong path, but his last sentence saved him 
and I agree. If you know you are keeping the car for a long time, purchase on the longest term you can (if lower payments are necessary). Todays interest rates are so low, it's tough to go too wrong.
Having said that, we lease both of our cars and have for the last four that we've owned. Honestly, if someone had explained a lease to me sooner, we would have been leasing earlier. I don't want to own a car, I don't want equity in a depreciating asset and I don't like repair bills. I also like shifting the "risk" of unknown resale value to the lender.
But my reasons are not yours, and you sound like a purchase customer (as long as the payment line up). IMO, the only ulterior motive was the thought that he'd have a chance to sell another car in 3-5 years instead of 8-10 years. Good luck with your decision.
and I agree. If you know you are keeping the car for a long time, purchase on the longest term you can (if lower payments are necessary). Todays interest rates are so low, it's tough to go too wrong. Having said that, we lease both of our cars and have for the last four that we've owned. Honestly, if someone had explained a lease to me sooner, we would have been leasing earlier. I don't want to own a car, I don't want equity in a depreciating asset and I don't like repair bills. I also like shifting the "risk" of unknown resale value to the lender.
But my reasons are not yours, and you sound like a purchase customer (as long as the payment line up). IMO, the only ulterior motive was the thought that he'd have a chance to sell another car in 3-5 years instead of 8-10 years. Good luck with your decision.
05-08-2003, 08:43 PM
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who gave you a $10k residual? Anyway, if the lease program is good at this time (and they change monthly!), as in your payments are lower, this usually means one of two things or both. the money factor is low, like a low apr, and/or the residual is artificially high, making the buyout higher. If it is set up correct you could make out ok, if it is set up poor, you will be crushed for 5 years, with no hope of getting out early if you chose to. Rates are low now, but I see your reasoning. You can negotiate the residual, but in five years, this car is going to be a 10 year old design. Imo, do a 4 year or a 3 year if you can handle it. the whole point of a lease is to get a new car often with as little out of pocket as possible and get a new car often. Anything over 20% down on a Honda lease is a bad decision, and you should go to a purchase then. We all have budgets.
A wise man once said, " If it appreciates buy it, if it depreciates lease it". Do not ask me who
because I do not know.
Matt
A wise man once said, " If it appreciates buy it, if it depreciates lease it". Do not ask me who
because I do not know.Matt
05-08-2003, 09:47 PM
#7
Thread Starter
Thanks guys for the helpful replies - I'll probably finance the car over 6 years. Also, I have a question about interest rates (APR) - I always assumed it depended solely on the buyer's credit history but now I guess it is a combination of that and the economy, right? Is it the dealer who sets the interest rates or Honda? And I guess that varies according to your credit as well? Also, on a related note, what are the disadvantages (if any) of refinancing once your credit improves? It's not that I have bad credit, just not a long one and I guess I should close out CC's that I don't use (I have 5) and decrease the balances before the interest rates get determined for financing.
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05-09-2003, 03:50 AM
#9
You don't have to finance through the dealership. It's best to shop around for the best rates. Colin is right about the credit cards. The best thing you can do is never be late or miss a payment on anything that will end up on your report.
Your dealer may have been honest with you, believing lease is a good deal. A lot of SUV lesees got pretty good terms on their vehicles in the past because the residual was set so high, that it would have cost them more overall to buy the car and sell it a few years later. If you truly intend to keep the car, a lease makes no sense. You have a set amount of miles you can use, and you are tied to making a decision exactly 5 years later. If someone runs into you and you don't want to keep it, you don't have many options. A car purchase has much more flexibility, will cost you less in the long run, and will give you equity in the car which will keep you out of the lease rut (you know, since you don't have a down payment, you keep leasing your next car because you can't afford to do it any other way).
Your dealer may have been honest with you, believing lease is a good deal. A lot of SUV lesees got pretty good terms on their vehicles in the past because the residual was set so high, that it would have cost them more overall to buy the car and sell it a few years later. If you truly intend to keep the car, a lease makes no sense. You have a set amount of miles you can use, and you are tied to making a decision exactly 5 years later. If someone runs into you and you don't want to keep it, you don't have many options. A car purchase has much more flexibility, will cost you less in the long run, and will give you equity in the car which will keep you out of the lease rut (you know, since you don't have a down payment, you keep leasing your next car because you can't afford to do it any other way).
