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maplewoodlax2020 said:

OK Guys, a couple things:

In NJ gap insurance is required by law, and included in all standard LEASE contracts. Purchasing gap for a FINANCE contract is optional, and a very good idea, but that's another discussion.

The annual mileage on a lease varies by manufacturer. I have personally seen leases for as little as 7500 miles/year. Leasing makes sense for people that don't do a lot of driving...If you stay under your miles, strictly on a monthly payment basis, leasing is a much more affordable alternative to financing, since your payments are based on the "portion of the car you are using". Miles are also much cheaper if you buy them in the beginning, than if you have to pay extra for them in the end. Every mile you take in your lease at the beginning, relates to roughly a cost of 10 cents. If you have to pay for them at the end, they will cost 20 or 25 cents, depending on the manufacturer. So if you're not sure, go for the higher option.

On that note, PeteGlider gave excellent advice...Manufacturers will subsidize the leases to make them more attractive payment-wise. The banks use an algorithm to calculate the value of a car after a certain period of time. This is called the "residual value". It is a percentage of the MSRP. To stimulate sales of a certain vehicle, a manufacturer will add a couple points to this residual value. If a car's residual value is 55%, The lease payments are calculated on the balance of the car, or in this case 45%. If the residual is artificially raised to 60%, then payments are calculated on a smaller percentage of the car's price, in this case 40%, and therefore lower.


This brings us to the down-side of leasing...You are basically locked into that contract for the full term. If you need to get out of a lease early, it will most certainly cost you money. The banks calculate a lease payoff by adding together the residual value, which is stated in the contract, and the total of the remaining payments. It is virtually impossible to be in an equity position under this formula. On the other hand, leases are generally 36 months, whereas most finance contracts are 60 (or 72!) months now. Your commitment is less time-wise, and you can walk away from a lease at the end of the term with no further obligation. (Lease disposition fees are still around in some cases, but are no longer commonplace.) Also, you can lease a car with little or no money out of pocket. It is best to put as little down as possible when leasing. While we are on the subject, when you see a commercial on TV advertising a "no money down", or "sign and drive" lease, what they really mean is around $1200-$1500 down. The fine print always states that taxes and fees are not included. You can roll these back into the payment, which will add $30-40 bucks per month. Conventional wisdom is every $1000 in sale price is equivalent to $27 in monthly payment in a lease situation.

Other advantages to leasing have already been noted above...keeping up with current technology is a big one, especially with all the new safety features and improvements in gas mileage.

Another disadvantage was also noted above...Lessees are responsible for excessive wear and tear. All manufacturers have different definitions of what qualifies as excessive. Generally you have to mess up a car pretty bad to incur charges for this. Previous collision repair, as long as it is done to acceptable standards, is considered normal wear and tear. You can also purchase wear and tear protection for your lease...It would add something nominal to your monthly payment, and give peace of mind.

I am a former auto industry executive, and I currently am leasing one car, and financing another. It really depends on how you use it. One of the best investments you can make is to finance/purchase a car and keep it for 10 years.

As you can see, I don't have a lot on my plate work-wise today, I'm happy to answer any questions!

Question for mapleWoodlax2020

We are looking to lease before the end of this month. I have the general guideline for determining lease payments but there are some parts that are confusing.

1. If I put $1000 down to reduce the cap cost is this $1000 taxable?

2. What should I consider as "standard fees"? I am seeing Bank Fee, Doc Fee, NJ License, and Tire Tax.

3. I have a template I downloaded from Edmunds to determine the lease payment. I realize that there might be a small difference but shouldn't I be able to use plug in the numbers the dealership gave me to get something fairly close to what they are quoting?

If you go through Costco, please keep posting here. My partner and I are interested in how it works for you. We love Costco and my Jeep is nearing it's end of days (I tend to drive it till' it drops), so any info shared is appreciated.

weather has kept me from going to the dealerships to"try the cars on for size" but I will post re Costco

@maplewoodlax2020

Hi. Almost all 'conventional' finance wisdom on the interwebs heavily denounces buying a brand new car. You're paying for new car smell, 20% of its value is lost right off the lot, etc etc. I'm on my 2nd car, first was new, 2nd was slightly used. Honda and Toyota resoectively. I kept the 1st for 10 years. Nowadays, from what I've seen, there doesn't seem to be much difference in price between a brand new and very gently used certified car once you add in the warranty. Sometimes as little as $3,000. Is there ever a case to be made for buying new from a financial standpoint? I tend to keep my cars for long. My first one was totaled or I'd have kept it for 5 more. Thanks.

I used the Costco service when I bought my last new car in 2015. It's hard to know for sure, but I felt like we did as well as or better on price than if we had just tried to "bargain" with the dealership and I am not very good at that kind of negotiating. I was pleased with the service and would do it again.

My experience with Costco was that they had no deals on the cars I was interested in. I did my own research and made my own deal, and I think did fine.

I got my car for about $2500 under the Costco price. Also, the dealer that they worked with was awful (and I reported that when I was surveyed about my experience).

still haven't gotten to a dealership but I was so surprised to see that Honda HRV that I had liked is a two door.

I can only think about how difficult it was in the good days, when we had one, clambering into the back seat! I was much younger, too

Back to the drawing board, I guess.

You just called my attention to the existence of the HRV. I hadn't heard of it or noticed it on the road. (I don't drive a car much any more.) Very nice, though I understand it's not right for you. It might be great for my wife. She loves Hondas.

It actually has four doors. http://www.gardenstatehonda.com/blog/does-the-honda-hr-v-have-four-doors/

mtierney said:

still haven't gotten to a dealership but I was so surprised to see that Honda HRV that I had liked is a two door.

I can only think about how difficult it was in the good days, when we had one, clambering into the back seat! I was much younger, too

Back to the drawing board, I guess.

PetuniaBird-- I can't thank you enough! I am in love again. As soon as there is nicer weather and I can get a day when I have health care coverage for my husband, I plan to hit the bricks and mortar stores.

updated situation

Be sure to read the reviews - Consumer Reports and similar. I seem to recall some negative feedback re the HRV (vs other Hondas which mostly get glowing reviews.) Good luck in your car shopping.

I hope you're not going through a terribly difficult situation, and if you are, I hope you find relief soon.

thank you, Tom