[DarkKn1ght]

I was at a dealer tonight looking at a 2019 Ram 1500 Big Horn and the finance manager said that the incentives on leases are usually higher and that the monthly lease payment plus the buyout at the end will end up being less than financing due to the higher incentives. Has anyone heard this before? Is there any truth behind it?

 

[Tred]

Never been a fan of leases myself. They look good from the beginning, but most have some type of big payment in the end. But, I have never done one, just heard stories. I do tend to put a lot of miles on my vehicles, so a lease isn't viable for me. Good luck with your decision.

 

[Beagleman]

Lease / Buy

I'm leasing my new 2019 for 3 years, cost $9800.00 Residual at the end of 3 years is $21300.00 Cost of truck on the lot if I bought it and financed it would have been $39900.00 First payment due at signing, followed by 35 equal payments, no balloon payment at end.....
My plan is to buy at end of lease and will pay cash verses finance. All the figures are rounded for easier typing. Hope this helps you out .....

 

[14Hemi]

I leased my '16 Ram for 3 years with the intention to buy at the end of the lease. I modified my truck and was over mileage by 15,000 miles when my lease was up, so even if I didn't want to buy it, it would have been absurd not to. I essentially used the lease to extend my financing to make the truck more affordable monthly.

The buyout at the end of the lease was super easy; no haggling on price and I got financing very easily as the residual was competitive with market value.

Financial folks tend to say that leasing is good if you're writing off lease expenses for business, but otherwise you're renting a vehicle and wasting money. In my situation, it worked out great.

 

[Biga]

I have not leased before, I know people that have. I drive the high side of miles for a lease and I don't want to have to worry about driving my truck and putting to many miles on it. I bought my 2014 Ram for 35K and traded it for 22K after 4.5 years. worked out to about $250 a month to own it for that time period. Granted I paid cash for that truck so no financing costs but cheaper then a lease.

 

[rockyko]

i leased my 2013 and my 2017 im really thinking of buying my 17 lease has about 7 month left truck has been great to me i have 26,000 miles on it and buyout is 24,000 and ill keep it til i retire in 6 yrs ill get an extended warr for the electronics my wifes is a lease so at this point i dont need a brand new truck now.

 

[bspRAM]

I don't know about current offers, but this past summer the factory incentive for a lease on 2018's like mine was about $8250, while the cash purchase incentive was $5000.

I was having troubles working out why a lease would get a higher incentive, until I realized most lease interest rates would be in the range of 4.5% to 5%. At those rates, a one year lease (minimum lease time required by FCA) would eat up 30 to 40 percent of the added $3250 incentive. A two year lease would eat up about 70 percent or so, and for a three year lease, the lease interest would consume more than the added incentive. Leases can be prepaid to avoid the interest, but the money is tied up, and it's possible the title and the money are held by the same financial entity - this might or might not be a problem.

I mention this because at first I wondered why FCA would give a "better deal" to folks who didn't just pay the cash and buy the truck. Whenever something seems illogical, there is usually a back story that explains it.

The take home is that each of us will have different circumstances regarding the truck we need/want and how we will pay for it. The situation will almost certainly vary, with interest rates changing all the time and differing miles driven per year. So do the math all the ways possible ! The option best for you could be to pay cash, the option best for me might be to finance through my credit union, and the the option best for my neighbor down the road might be a lease.

bspRAM

2018 Laramie CC, SB
Peragon bed cover; Rhino sprayed bed liner w Bed Rug; Mopar bed lights & underhood light, Mopar wheel-to-wheel side steps

 

[95Adjutant]

I leased my '16 Ram for 3 years with the intention to buy at the end of the lease. I modified my truck and was over mileage by 15,000 miles when my lease was up, so even if I didn't want to buy it, it would have been absurd not to. I essentially used the lease to extend my financing to make the truck more affordable monthly.

The buyout at the end of the lease was super easy; no haggling on price and I got financing very easily as the residual was competitive with market value.

Financial folks tend to say that leasing is good if you're writing off lease expenses for business, but otherwise you're renting a vehicle and wasting money. In my situation, it worked out great.

This is the first arguement I’ve EVER heard that makes sense for a lease. I’ve always avoided them because the miles I put on my vehicles.

 

[Hemi395]

Leasing is mainly a good deal if you have excellent credit. You get a better interest rate for leasing versus financing most of the time. Just avoid the balloon payment leases and the ones that require thousands due at signing.

We're leasing my wifes 2017 Grand Cherokee Limited which will have a residual of 24k. We planned on financing it but the deal to lease and then finance the residual at the end was actually cheaper in the long run due to a better interest rate for leasing.

Also don't forget every lease is different and the ones they advertise on TV are sample on usually base level versions of the vehicle.

 

[GTyankee]

I paid cash for my Ram & i took out a $10,000 auto loan for the Mods & work gear on the truck
Last month i was driving my Ram a minimum of 900 miles a week just doing work

I put on too many miles to make a lease work

I was told way back in the early 1970s, if you want to lease
Form a Corporation & then most of the cost gets written off

 

[Thunderhorse]

It depends on the deal really; different incentives and interest rates mean that one can be better than the other. I personally will not lease a vehicle for a couple reasons, one of which being that my truck has been driven 24,000 miles in a year (home), and its been driven 4000 miles in a year (deployed most of the year). I'd be paying for excess mileage or pay penalties one way or another since AFAIK there are not leases with variable mileage over the course of the lease-high mileage leases are expensive. I like to modify them too.

A vehicle is a depreciating liability until it is paid off, at which point it becomes a depreciating asset. A lease never becomes an asset unless you buy it out at the end. That may or may not make sense depending on the specific terms.

Some people will constantly lease vehicles and just get a new one every 3 years when their old lease is up. I'd rather put that money towards something else once its paid off (investments, retirement, etc...) and keep the same familiar vehicle for 15+ years. I think I keep my vehicles longer than a lot of members here; several of them are on their 2nd or 3rd Ram since I bought mine.

Your credit score will determine what kind of deal you get, unless you buy cash. If you have a bad credit score then you probably can't afford to buy a new vehicle outright

 

[14Hemi]

Another thing to consider: As I recall, the lease interest rate was under 1% on my lease. By not taking money out of investments to purchase the vehicle, my money was making money for me at an average rate of 8-10%; December was rough in 2018 and was a loss month,but, has rebounded astoundingly well since then. Even with the current used vehicle rate of 4.5%, I'm still making money by financing my truck rather than taking money out to pay cash, albeit reduced by the 4.5% I pay the bank, but it's still allowing my money to work for me and return a higher rate.

It feels good to pay cash for things and not have a liability or monthly payment, but is it actually costing you to do that?

 

[guy65]

buying- ether making payments or paying cash- don't matter- is the only way, not to throw money out of the window.


Leasing- lot of people don't understand, what it actually is: you "rent" a vehicle over a set time frame and agree, not to drive more than agreed amount of miles during the time. You also agree to all kind of stuff, similar to a rental car- this can be, that through lease contract, you can't even put a sticker on the truck.
Then you make payments- yes- it's nice- you make usually lower payments than if you would buy- but what happens is: at the end of the lease, you have nothing. And if you choose to buy it, you have to buy the book value, which is set before the lease- which is maybe just a few k bucks below new value- where you would be better off, if you would buy a used truck from the lot, than buying the vehicle, you paid for dearly throughout 36 months.
My sister in law made the mistake. She leased a 2013 RAM Express. She paid 36 months for it and choose to buy it. They charged her value $25000 for it- while the same truck was sold for just $3000 more new at the time. Now she's stuck with it.
Lease is only good for business. For private- it's absolutely a rip off.
If you make payments, you get at least something out after 36 months, if you choose to sell it- with lease- the money is gone, gone, gone.

 

[twodips]

For most people leasing is just the manufacturers way of making the unaffordable affordable or closer to affordable.

Of course there are those where leasing makes fiscal sense but that is NOT the general public not to mention most don't understand the two parts of a lease that are most important which are the money factor and residual and how the dealers manipulate them.

Either way the dealer WILL get their $$$ out of the vehicle.

 

[Jvander]

Since it's the first year of the 5th generation you don't have to worry about it being a lemon or depreciation if you lease.
If you go in with the right mindset it can be OK. No matter what you do, the vehicle depreciates.
I leased and I understand that I am renting. This is the first time I've had a vehicle where I don't really care if it depreciates rapidly or has mechanical problems. It's under warranty and it's a rental. Not my problem.
In three years time I'll treat it as any other used car on the market. If it's a good deal to buy it out, maybe I will.
It's like a three year test drive.

 

[OMW2SKI]

I leased a 2018 1500 Big Horn (CC, 4WD, 5.7) last summer. It had a few options and the MSRP was just under $50K.

With $0 down or out of pocket, my lease payment is $328.78 for 36 months. The total paid over 3 years is $11,836.08.

I drive way too many miles to turn in the lease after 3 years without a hefty fee. However, my plan all along is to purchase at the end of my lease.

The residual value, or amount I agreed up front to pay for the truck after 3 years, is $24K.

$24K plus $11,808 for a $50K MSRP truck is a fair deal. Part of the $11,808 is interest. I would have paid interest if I purchased with a loan too. The total rebates, incentives and dealer discounts were $15K. Part of this was a bonus for leasing. The incentives were a couple of grand less if purchasing.

Also, as a previous poster commented, leases can be prepaid. If interest rates are favorable, I can buyout the lease before 36 months, and save money on the remaining rent owed. However, the interest rates on leases when I did my paperwork were very, very low already.

In the end, it was cheaper (monthly AND over the long term) to lease than buy, considering I was going to finance either way.

Also, in some instances, you may be able to negotiate a lower residual value at the end of the lease. I am not banking on this, but will certainly give it a go when the time comes!

 

[Hydrobluesport2018!]

Yes. Absolutely, unless you have a ton of cash to put down

 

[smiley3303]

The best way is not do either and drive a paid for rig. ?

Next best is to pay upfront for the vehicle.

Leasing is okay if you plan to buy (sometimes) that is the only way I could see it ever working but it isn’t about you when you lease it is about the dealer, then manufacturer and the bank. They all win and you don’t.

Best way to get the best payment though is just simple math. Get the price of the vehicle as low as possible the interest rate as low as possible and don’t get dragged into extras or the next trim up etc.

Always tuned into these discussions as it seems leasing is pushed very hard by those that profit from it.

 

[Jon's Ram]

You have four choices when you lease at the end and any finance person who fails to be honest I would walk away from that dealer
1: Turn in and walk away from vehicle, nothing owed.
2: Turn in and lease another new one BUT you have to start over with another big down payment.
3: Buy the vehicle meaning refi and you will not get a good deal as it is considered a used vehicle and you do pay full price.
4: Sell it.

I have leased many over the years for business but got tax write offs, not so for personal use.

I buy now, also shop your bank, credit union and others for best interest rates before doing anything.

 

[dbr2]

There is no free lunch in a lease. Cost is Cost

When you lease a car, a leasing company actually buys the vehicle from the dealer before leasing it out to you.
The leasing company expects to earn interest on the money they used to buy the car (just like a loan). They also know the car will be worth a lot less at the end of your lease and expect to be compensated for the depreciation.
Here are some terms you should be familiar with in order to calculate the lease:

Capitalized Cost - The cost of the vehicle after subtracting any down payment or trade-in allowance.
Residual - The amount the vehicle is worth at the end of the lease.
Depreciation - The amount the vehicle has lost in value during the lease.
Term of Lease - The number of months you will be leasing (usually 24, 36, 39, or 48 months)
Money Factor - The finance charge, usually expressed as a fraction. (To calculate the interest rate, simply multiply the money factor by 2400)

An Example
We're going to assume the car you will be leasing has an MSRP of $27,000 and you managed to negotiate the purchase price down to $25,000. To keep things simple, there is no down payment and you don't have a trade-in. You will be leasing the car for 36 months. The money factor is .0029, and the leasing company has predicted the residual value to be $12,500 at the end of 36 months.

Capitalized Cost - $25,000
Residual Value - $12,500
Money Factor - .0029
Term - 36 Months
Basically, all you need to know in order to calculate your monthly lease payment is the price of the car, the residual value, the money factor, and the length of the lease. Dealers should provide you with all of these numbers if you call them up and ask.
Now let's take a look at how each part of the lease payment is calculated

1. Depreciation
The depreciation cost is actually the largest portion of your lease payment. It's easy to calculate:

(Capitalized Cost - Residual) ÷ Term of Lease
Remember, Capitalized Cost is the negotiated selling price of the car. The leasing company doesn't care if you get ripped off or not, it's up to you to get the best deal possible to ensure the lowest possible depreciation cost.

($25,000 - $12,500) ÷ 36 = $347
$347 is your monthly depreciation cost

2. Interest
The next part of the lease payment is interest. This is where the leasing company makes a good portion of its profit. The other way it makes money is through a "lease acquisition fee" and a "disposition fee" at the end of the lease. The interest payment is calculated differently than what you would expect. The calculation is:

(Capitalized Cost + Residual Value) × Money Factor
You read that right, it's the Cap Cost PLUS residual value. It doesn't seem to make sense but it's actually an accounting method the leasing companies use to simplify things on their end.

($25,000 + $12,500) × .0029 = $109
$109 is your monthly interest payment

3. Taxes
The last part of your monthly lease payment is tax. In most states, you will need to pay taxes on both the depreciation AND interest payment. Here's the calculation:

(Monthly Depreciation Cost + Interest) × Local Sales Tax Rate

($109 + $347) × 7% = $32
$31 is your monthly tax payment

Add it All Together
Now that we have all 3 factors that make up your lease payment, we can add it all together to come up with the final:

$347 + $109 + $32 = $488 Monthly Lease Payment
See, it's not that hard to figure out the total monthly lease payment.