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Source: http://forums.vwvortex.com/zerothread?id=794813

With so many leasing questions, I thought I would make a seperate post with the lease info from the Car Buying FAQ's. I have also attached my trusty lease calculator for those who still need it.

Calculating a lease payment is not difficult, once you have all the
information you need. The lease payment is based on the difference between
what you pay for the car and what the car will be worth at the end of the
lease, plus interest.

When it comes to leasing, here is the lingo:

Capitalized Cost - This is the selling price of the vehicle.

Capitalized Cost Reduction - This is simply a down payment.

Residual Value - This is what the car will be worth at the end of the lease
(usually stated as a percentage of the MSRP).

Money Factor - This is the interest rate. It is always give as a decimal
figure. While it is not necessary to know the actual percentage rate when
calculating the lease, you can figure it out by multiplying the money factor *
2400. This number is used no matter what the term of the lease. For example, a
money factor of .0025 would be an interest rate of 6%.

Inception Money (or Get In Money) - This is the amount of money that you have
to come up with at the start of the lease (not including any Capitalized Cost
Reduction). The inception money usually consists of the first month's payment,
a security deposit (usually equal to one month's payment rounded to the
nearest $25 and a bank fee. It can also include the dealer documentation fee,
tags and sales tax on the any Capitalized Cost Reduction (more on that later.)
It is important to have all of these costs broken down so you know exactly
what is being covered.


Now, here is how we calculate a lease. First off, you need to have several
things: the MSRP (or sticker price), the selling price (Capitalized Cost), the
residual value (as a percentage) and the money factor.

Let's use the GTI 1.8T as an example. Adding in the 17" wheels, luxury and
leather packages, it will have an MSRP of $22,000. The residual value for a
36-month lease (with 15K miles/year) is 57%. Usually a 12K mile/year lease
will have a residual value 2% higher (or 59% in this case). The money factor
for 36 months is .00250. Now that we have our figures, we can calculate the
lease. This may seem complicated, but take it step by step and it is quite
easy.

First we calculate the lease cost. Take the MSRP ($22,000) and multiply it by
the residual value (59%). This gives us $12,980. Now, take the Capitalized
Cost (what you pay for the car) and subtract the residual value from it. Let's
say we pay $21,500 for this car. $21,500 - $12,980 = $8520. Now, we take that
$8520 and divide it by the lease term of 36 months. $8520 / 36 = $236.67.

If you didn't have to pay any interest, this is what your monthly payment
would be . Unfortunately, few banks lend money without charging interest . To
figure out the monthly interest you take the sales price ($21,500) and add it
to the residual value ($12,980) and multiply it by the money factor (.0025).
$21,500 + $12,980 = $34,480. $34,480 * .0025 = $86.20. So, you are paying
$86.20/month in interest. You add that to the monthly lease cost of $236.67
and you end up with a monthly payment of $322.87. But wait, there's more. Your
state needs to collect their part of the deal in the form of sales tax. If
your sales tax is 8.25%, you would multiply the monthly payment by 1.0825 for
a grand total of $349.51. This is your monthly payment.

Now, what about putting more money down in the form of a capitalized cost
reduction. You would simply deduct this amount from the capitalized cost
before you run the numbers. For example, if you put $1,000 down, your monthly
payment would drop to $316.73. Now you are probably asking yourself, why not
put more money down? First off, you have to pay your 8.25% sales tax on that
$1000. But that is no big deal. The bigger problem is that if the car ever
gets stolen or totaled, the insurance will pay off your lease, but you will
never see that $1,000 again since it was paid up front. Also, think of it this
way. If you were leasing an apartment and the rent was $750/mo, but the
landlord said, "Give me an extra couple of thousand up front and I will lower
the rent to $650/mo." Few of us would actually do that. Leasing your car is
just like renting. If you can't afford the payment without putting more money
down, I would suggest taking the money you would put down and put it in the
bank to earn interest and then deduct an amount every month to cover the
difference.

One more bit of advice. Never lease a car for a longer term than the
manufacturer's warranty. If you do and something breaks past the warranty
period, it will be your responsibility to get it fixed and pay for it
yourself. Since you will give the car back at the end of the lease, you are
basically paying to fix someone else's car. So while generally longer lease
terms will give you lower payments, don't lease past the warranty period.
Also, don't lease longer than you will think you will want your car. Breaking
a lease early can be very expensive.

Updated Lease/Loan/Balloon calculator added (thanks GTakacs).
 

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For an individual for personal use the least expensive approach is to pay cash. Leasing is good for a business with vehicles that have a less than 6,001 lbs. GVWR as the entire lease payment can be written off against income. The Traverse however, does qualify for Section 179 treatment and a company can write off the entire purchase price in the year it was purchased. It is about the only tax break that a small business owner gets.
 

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I have always paid my cars cash. Certified cheque from the bank and this is it. Its mine. I would never lease. Would feel the vehicle is not mine.same with my house. Nothing to pay for years to come.
 

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I have always paid my cars cash. Certified cheque from the bank and this is it. Its mine. I would never lease. Would feel the vehicle is not mine.same with my house. Nothing to pay for years to come.
X2

The dealers LOVE leases; that's why they push them. They focus purely on the "monthly payment," and sucker people into buying more car than they can afford. The problem is that they end up at the end of 3 years with no car and they have to lease another one. So they basically end up with car payments for life. If you buy with cash or a short (3 yr) loan, you'll be more apt to buy a car you can truly afford. Leases only make sense if you can get the taxpayer to help (i.e., business expense). Any time you rent something, the real owner expects to recoup HIS purchase price, PLUS make a profit on top of that. Guess who's paying that profit?? (And don't get me started on 72 month loans!)

When I bought my 2009 Mazda6, I had saved the cash. They offered me a 3 yr loan at 3%. I put the cash in a 3 yr CD at 5% and still made 2%. And I haven't made a payment on it for the past 6-1/2 yrs. (You can keep putting those "payments" in the bank for your next car!)

Allowed me to pay cash for my 2017 Traverse.
 

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I have always paid my cars cash. Certified cheque from the bank and this is it. Its mine. I would never lease. Would feel the vehicle is not mine.same with my house. Nothing to pay for years to come.
Cash it is - it is not your car unless you pay cash. It is the finance company or other lean holder's car not your until the last payment.

Easily proved who really owns the vehicle- Say the car is involved in an accident and severely damaged but not enough to total it. Then:

Leased car - Insurance adjuster estimates the damage and you say give me a check for the amount of the damages minus the deductible....... Insurance agent says Uh-uh! It is up to the first lienholder on the title to approve all repairs to the vehicle and although you may want to choose the repair shop the vehicle must be fixed and the repairs approved by the lienholder. The insurance company will then write a two party check (not cashable by you alone) to cover the cost of mandatory repairs and the owner gets to ride around in a Spark for a month or so until the heap is puttied up and put back together and once finished the "owner" gets to drive around in a Frankenstein kludge until the termination period of the lease, praying the he doesn't get into another accident only to find out the junkyard replacement airbag (if one was even replaced) didn't work quite as well as the factory one in the first accident.

Cash purchase car - Insurance adjuster estimates the damage and you say give me a check for the amount of the damages minus the deductible....... Insurance agent says, Uh-uh! It is up to the first lienholder on the title to approve all repairs. And you say, Uh-uh I am the sole owner listed on the title, gimme the check.... I may fix it, I may not, I may choose to stick it in the rear yard and use it as a planter, my choice, my decision......I paid for the insurance and suffered the damages pay me my claim. You are obligated by law to pay me for the damages, it is your choice to refuse future repairs of any damages not properly made to the same vehicle or to refuse continuance of the insurance coverage should the car not be repaired. Next day insurance agent says, Here is your check sir and the deductible portion will be forwarded as soon as we collect it from the other party's insurance company. Then you walk into the new car showroom and bargain on a brand new vehicle. Once the price is agreed upon advise that your old damaged pile of crap is being repaired in his body shop for trade along with the insurance check to be credited as KBB excellent condition (which of course it will be once repaired in his excellent body shop) against the new car. Less than 48 hours later it's tail lights down the road in a replacement vehicle instead of a crapo loaner while they try top reconstruct the leased Humpty Dumpty.
 

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Cash it is - it is not your car unless you pay cash. It is the finance company or other lean holder's car not your until the last payment.

Easily proved who really owns the vehicle- Say the car is involved in an accident and severely damaged but not enough to total it. Then:

Leased car - Insurance adjuster estimates the damage and you say give me a check for the amount of the damages minus the deductible....... Insurance agent says Uh-uh! It is up to the first lienholder on the title to approve all repairs to the vehicle and although you may want to choose the repair shop the vehicle must be fixed and the repairs approved by the lienholder. The insurance company will then write a two party check (not cashable by you alone) to cover the cost of mandatory repairs and the owner gets to ride around in a Spark for a month or so until the heap is puttied up and put back together and once finished the "owner" gets to drive around in a Frankenstein kludge until the termination period of the lease, praying the he doesn't get into another accident only to find out the junkyard replacement airbag (if one was even replaced) didn't work quite as well as the factory one in the first accident.

Cash purchase car - Insurance adjuster estimates the damage and you say give me a check for the amount of the damages minus the deductible....... Insurance agent says, Uh-uh! It is up to the first lienholder on the title to approve all repairs. And you say, Uh-uh I am the sole owner listed on the title, gimme the check.... I may fix it, I may not, I may choose to stick it in the rear yard and use it as a planter, my choice, my decision......I paid for the insurance and suffered the damages pay me my claim. You are obligated by law to pay me for the damages, it is your choice to refuse future repairs of any damages not properly made to the same vehicle or to refuse continuance of the insurance coverage should the car not be repaired. Next day insurance agent says, Here is your check sir and the deductible portion will be forwarded as soon as we collect it from the other party's insurance company. Then you walk into the new car showroom and bargain on a brand new vehicle. Once the price is agreed upon advise that your old damaged pile of crap is being repaired in his body shop for trade along with the insurance check to be credited as KBB excellent condition (which of course it will be once repaired in his excellent body shop) against the new car. Less than 48 hours later it's tail lights down the road in a replacement vehicle instead of a crapo loaner while they try top reconstruct the leased Humpty Dumpty.
When it comes to the insurance paying for repairs on a car, it all depends on the state you live in. Each states insurance laws are different. In Michigan everything you have stated is false (big surprise). In Michigan if you have a claim regardless of lein the insurance company deals directly with the owner which is the person who is paying the bills. They don't have to ask the bank for approval. When it comes to buying or leasing everyone has an opinion, but the only opinion that truly matters is the purchaser, because they are the ones forking out the cash. Leasing definitely has it's advantages, if you need that new car smell every 2-3 years or need to impress the neighbors. Buying if you keep a vehicle more than 4-5 years or put a ton of miles on them. Of course, I prefer to buy used. My daily commuter is a 12 Equinox I bought used in 14. It works great and I saved a ton of money by purchasing used and it's been very reliable.
 

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Buying used would be my last option. You dont know how this car was maintained and on the lot they make them looking new with pressure washed underneat, highly polished and all the rest. After it is yours. You may be lucky or you may regret for a long time after that you bought a car that needs tons of repairs .
 
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