Question 1

Is it ever a good idea to put money down on a lease?

Accepted Answer

No, it is almost never a sound financial decision to make a down payment (Capitalized Cost Reduction) on a lease. Because you do not own the vehicle, any money put down simply pre-pays the depreciation to lower your monthly payment. If the vehicle is stolen or totaled in an accident shortly after signing, your auto insurance will reimburse the leasing company for the value of the car, but your down payment will not be refunded. You should always structure a lease to roll all taxes and fees into the monthly payment, keeping your cash safe in a high-yield savings account.

Question 2

Can I buy my leased car at the end of the term, and should I?

Accepted Answer

Yes, virtually all closed-end consumer leases include a purchase option at the end of the term. The purchase price is exactly the Residual Value established on the very first day of your contract, plus a small purchase option fee. Whether you should buy it depends entirely on the current open market. If your contract states the residual value is $20,000, but the used car market has exploded and the car is retailing for $25,000, you absolutely should buy it—you have $5,000 in instant equity. If the car is only worth $15,000 on the open market, you should hand the keys back and let the bank absorb the $5,000 loss.

Question 3

Why do dealerships multiply the money factor by 2,400 to get the APR?

Accepted Answer

The number 2,400 is not an arbitrary fee; it is a mathematical constant used to convert the lease finance formula into an annualized percentage rate. The lease finance fee formula adds the Cap Cost and Residual Value to find an average balance, which effectively halves the principal (dividing by 2). Furthermore, interest rates are annual, but lease payments are monthly (dividing by 12). Finally, APR is expressed as a percentage, requiring a conversion from a decimal (multiplying by 100). The combination of these mathematical operations (12 months * 2 for the average * 100 for the percentage) equals 2,400.

Question 4

What is a subvented lease and how do I find one?

Accepted Answer

A subvented lease is a lease offer that is artificially subsidized by the vehicle manufacturer's captive finance company (e.g., Toyota Financial, Ford Motor Credit) to stimulate sales of a specific model. The manufacturer will deliberately inflate the residual value above market reality, or slash the money factor to near zero, or both. These are the incredible "$299 a month, $0 down" deals you see on television. You find them by checking the "Special Offers" or "Incentives" page on the manufacturer's official website at the beginning of each month, as these programs are dictated by corporate headquarters, not the local dealership.

Question 5

Does buying a car always beat leasing over a 10-year period?

Accepted Answer

Mathematically, yes. If you compare a 10-year timeline, a buyer will pay off a 5-year loan and then enjoy 5 years of driving with zero monthly payments, only covering maintenance and insurance. A lessee will have to sign three consecutive 36-month leases, meaning they will have a perpetual monthly car payment for the entire decade. Even when factoring in the cost of major out-of-warranty repairs for the buyer (such as a transmission replacement), the total cash out of pocket for the buyer over 10 years will almost universally be tens of thousands of dollars lower than the lessee.

Question 6

What happens if I drive over my allotted lease mileage?

Accepted Answer

If you exceed your contractual mileage limit (e.g., 36,000 miles over 3 years), you will be charged an excess mileage penalty at the exact time you return the vehicle. This penalty is explicitly stated in your contract and usually ranges from $0.15 to $0.30 per mile, with luxury brands charging even more. If you know you are going to go over your mileage, it is often cheaper to "pre-buy" extra miles from the leasing company midway through your lease at a discounted rate, or to simply buy the vehicle at the end of the lease, as purchasing the vehicle completely waives any excess mileage or wear-and-tear penalties.

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