Leasing in Michigan - a bit of confusion

[TMarotta87]

Hello everyone!

If I haven't dropped this in the right spot, I apologize, but I'd just like to get some thoughts on this sort-of odd situation.

So, a little background:

I'm currently sitting on a leased '17 F-150 that is due for turn-in late this year/early next year, whenever the early turn-in period kicks in. Naturally, I still owe on the lease and when the Gladiator started popping up I knew what my next vehicle was going to be - I always wanted a Jeep, but I just can't give up the pickup truck versatility. Only time I did in the past was when I had my '08 Nitro a few years back. Miss that toaster. Enter the Gladiator.

As of right now the option that makes the most financial sense to me is to lease, probably for 3 years. I built a Gladiator Sport S with a handful of options, came to between $43,000 and $46,000 basically, depending on if I added a few extras I didn't really feel I needed. I was trying to get my monthly costs as far down as possible, and using Chrysler's payment calculator right on the build website, was able to get some good base-line payment options (just a little over $300/month with about 5K down - i prefer to do things this way to control monthly costs).

Understanding that this payment calculator isn't 100% accurate, of course, but also seeing that it didn't factor in special discounts or anything like that and having talked to a few dealers, they were comfortable that this number was reasonable. Probably slightly low, but not much.

It's interesting that the financing/calculate payment buttons have disappeared from the build tool now, and perhaps this next bit has something to do with that...

Now, having consulted with my dealer of choice, the actual numbers came in:

I won't be putting $5K down on a $43,000 Gladiator and getting it for about $320/month.
I'll be putting between $7600-8600 down and getting it for $400+ per month, according to the dealer. This is just based on an inquiry and not on any credit checks or anything like that.

I spoke with the salesman and he went over the pricing and numbers and showed me that the dealer is not marking up the truck, as I feared they might. But the jump to double the previously advertised deposit amount, and the considerably higher payment, surprised me.

Is anyone else running into this? Or should I shop around and have a few dealers run numbers for me?

They explained to me that since the vehicle is new the banks basically have no data to realistically set prices, so they're jacking the cost way up, in so many words. I'm not sure I buy this exactly, and I unfortunately didn't have a ton of time to look really deep at it.

Just curious if people have been seeing this same thing come up.

I've also been reading that a lot of people have had luck finding pretty good discounts at a handful of dealers in the midwest - is there any hope that anyone's found any in the metro Detroit region? All the calls I've made put everyone at or slightly above MSRP.

Thanks everyone, and sorry for the novel!

-Tony

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[Epb1981]

I have leased in the past. It is not for me. But from my experience. I can remember I went in to get a Honda crv on lease. The Honda website had a special of say 199 a month. the sales rep told me double that. I then said hey honda Is advertising 199. So he scrolls down on the computer in front of me and shows me all of these very expensive lease deals. I said well if I can't get advertised price then I don't want it. He then miraculously finds the advertisement
Bottom line. Dealers are in it to make as much money as possible. So expect them to try and get you in a more expensive lease. And secondly check your buy out on your current lease. If it is more then the kbb. You can use that as a trade and have the jeep dealer buy it. In case you were not aware.

 

[john94si]

Do your own. All you need is residual and money factor. https://leasehackr.com/calculator
These can be found @ edmunds .com Also NEVER put any money down on a lease. Only tax and other fees if you like.
Standard MF maybe .00225 and 76% / 71% / 68% residuals

other quote found
Sport Model: 24 month residual, 10K year miles 86% residual, MF .00135
Sport S Model: 24 month residual, 10K year miles 80%, MF .00135

based on sportS

 

[steffen707]

Bottom line. Dealers are in it to make as much money as possible. So expect them to try and get you in a more expensive lease. .

Most dealers might be but not Kent, Travis or @spenchey

 

[Epb1981]

Most dealers might be but not Kent, Travis or @spenchey

But are their gladiators plywood rated? Lol

 

[spenchey]

But are their gladiators plywood rated? Lol

Thanks for the kind words

 

[steffen707]

But are their gladiators plywood rated? Lol

@spenchey, are your gladiators plywood rated?

@Epb1981, I'll be driving home a plywood jeep crate. Does that count?

 

[TMarotta87]

Do your own. All you need is residual and money factor. https://leasehackr.com/calculator
These can be found @ edmunds .com Also NEVER put any money down on a lease. Only tax and other fees if you like.
Standard MF maybe .00225 and 76% / 71% / 68% residuals

other quote found
Sport Model: 24 month residual, 10K year miles 86% residual, MF .00135
Sport S Model: 24 month residual, 10K year miles 80%, MF .00135

based on sportS

So, this is helpful info, and I appreciate it. I just have the feeling that for some reason the dealer I selected was jacking some prices way up in the background as the base price was right on the money with MSRP, basically, plus my options.

That said, I'm not sure why I should never put money down on a lease - if financially, the higher down payment and lower per-month cost (this helps when work slows down in the early part of the year), it works out better that way...what am I missing? A deposit plus $300/month is easier to swallow long-term than $560/month across the entire lease term.

I actually had a conversation with the CDJR dealer right around the corner from my office, and they looked at the numbers the other dealer ran and compared with their own, and basically told me that the other dealer was out of their mind to quote a price like that.

So...I guess I'm still investigating. We'll see - might drop in there tomorrow and get some more details.

-Tony

 

[Chance_P]

That said, I'm not sure why I should never put money down on a lease - if financially, the higher down payment and lower per-month cost (this helps when work slows down in the early part of the year), it works out better that way...what am I missing? A deposit plus $300/month is easier to swallow long-term than $560/month across the entire lease term.

People that don't understand how auto insurance works spread this misconception due to the "totalled and insurance won't reimburse you" theory.

If you put 5K down on a 40k vehicle on lease and the vehicle depreciates 5k when you drive it off the lot, and total it the next day, insurance says it's worth 35k and that's what they give you. You're out 5k.

If you lease a 40k vehicle and put 0 down, it depreciates 5k, and you total it the next day, it's still only worth 35k and that's what Insurance will pay. Leaving you on the hook for..... Drumroll please...... 5k.

Gap insurance protects you from depreciation, regardless of lease/loan/downpayment

 

[Rover_boy]

For leasing, watch that money factor (MF). That's equivalent to your APR. Based on JL, Jeep lease is not the greatest. $299 for 48 months lease with $3K down? If you deal directly with the dealer. You might find a better deal getting it through an auto broker.

 

[TMarotta87]

People that don't understand how auto insurance works spread this misconception due to the "totalled and insurance won't reimburse you" theory.

If you put 5K down on a 40k vehicle on lease and the vehicle depreciates 5k when you drive it off the lot, and total it the next day, insurance says it's worth 35k and that's what they give you. You're out 5k.

If you lease a 40k vehicle and put 0 down, it depreciates 5k, and you total it the next day, it's still only worth 35k and that's what Insurance will pay. Leaving you on the hook for..... Drumroll please...... 5k.

Gap insurance protects you from depreciation, regardless of lease/loan/downpayment

I don't think it's fair to assume that I don't know how insurance works. In fact,I didn't mention insurance because it's not an issue for me. I've leased vehicles before, I know how it works - I've just never been blindsided by a lease price quote that comes in at twice the estimate the same dealer worked up a week before, and how they didn't bat an eye at offering it to me despite the change. Passing it off as normal. Having spoken to a few other dealers today, two now have said this quote was wrong, with one saying "Yeah, they're nuts."

I think I just dealt with either a quote for the wrong vehicle, or a quote that was run incorrectly. Unfortunately I haven't traveled back to the dealer in question to grab the physical paperwork that goes into greater detail, but I'm going to have one a bit closer to my work do the same for me tomorrow.

 

[TMarotta87]

For leasing, watch that money factor (MF). That's equivalent to your APR. Based on JL, Jeep lease is not the greatest. $299 for 48 months lease with $3K down? If you deal directly with the dealer. You might find a better deal getting it through an auto broker.

I've heard of these services, actually did some looking. In my area, it seems they all exclusively deal in used cars, salvage vehicles, and if they deal in new cars at all, either don't handle leases or have review ratings in the 1 to 2 star range. I've heard people have gotten good deals, but nobody I've asked has had a specific recommendation, either.

 

[WXman]

The residuals on Gladiator are around 70%...same as Wrangler was a year ago before FCA flooded the market with them.

From my experience, I would bet my boots that the Gladiator will hold value better than Wrangler, so, the residuals will likely stay around 70% for the foreseeable future. This is for a 3 year lease.

So, on a $45,000 Gladiator, your residual would be around $31,500. So, you'd be paying on $13,500 divided by 36 payments, which is $375/month. Now, that doesn't take into account taxes, dealer fees, etc. so the payment will vary a little bit. But with no money down you should be in the high 300s on a payment. With $3,000 down you should be closer to $300 even.

Don't let dealers screw you. I called my dealer today and got lease specs on Gladiators and Ram 1500s and I'm headed over there tomorrow to try and put something together. I'm in a lease that isn't at it's end yet just like you....but it can be done. Just find a dealer who is honest.

 

[Chance_P]

I don't think it's fair to assume that I don't know how insurance works. In fact,I didn't mention insurance because it's not an issue for me. I've leased vehicles before, I know how it works - I've just never been blindsided by a lease price quote that comes in at twice the estimate the same dealer worked up a week before, and how they didn't bat an eye at offering it to me despite the change. Passing it off as normal. Having spoken to a few other dealers today, two now have said this quote was wrong, with one saying "Yeah, they're nuts."

I think I just dealt with either a quote for the wrong vehicle, or a quote that was run incorrectly. Unfortunately I haven't traveled back to the dealer in question to grab the physical paperwork that goes into greater detail, but I'm going to have one a bit closer to my work do the same for me tomorrow.

You must have misunderstood me. I'm in the same camp as you, I DO think putting down a larger payment up front in exchange for lower monthly is the way to go.

The conventional "wisdom" is that it is a poor idea for the reasons I outlined above.

 

[Dietruck]

People that don't understand how auto insurance works spread this misconception due to the "totalled and insurance won't reimburse you" theory.

If you put 5K down on a 40k vehicle on lease and the vehicle depreciates 5k when you drive it off the lot, and total it the next day, insurance says it's worth 35k and that's what they give you. You're out 5k.

If you lease a 40k vehicle and put 0 down, it depreciates 5k, and you total it the next day, it's still only worth 35k and that's what Insurance will pay. Leaving you on the hook for..... Drumroll please...... 5k.

Gap insurance protects you from depreciation, regardless of lease/loan/downpayment

Gap covers the outstanding loan or lease above value. Aka does not cover your big down payment on a lease, loan or cash

The more you put down the less you need gap.

New car replacement covers value drop from driving off the lot.


https://www.google.com/amp/s/www.allstate.com/tr/amp/car-insurance/new-car-insurance.aspx

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New car replacement coverage. This coverage may help pay to replace a new car that's totaled. With this coverage, your policy may allow you to replace the totaled vehicle with a new one of the same make, model and equipment, or it may specify whether a similar model or certain dollar amount would be available.

Repair provision coverage. Some policies may also cover the cost of repairs should there be only a partial loss to your new vehicle, regardless of its actual cash value. Repair provision coverage may help pay for repairs to a damaged vehicle on a replacement cost basis without deducting the depreciation in its value. Remember, however, that coverage limits still apply.

Loan or lease GAP coverage. According to the National Association of Insurance Commissioners, Guaranteed Asset Protection, or GAP coverage, may help pay the difference between the amount owed on an auto loan or lease and the totaled car's actual cash value. Even if your car can no longer be used, you're still responsible for any remaining loan or lease payments. So if the reimbursement check from the insurance company is not enough to cover what you owe, GAP coverage may help pay for the remaining amount on a loan or lease — so you won't be stuck paying for a car that is now in the scrap yard."

https://www.nerdwallet.com/blog/insurance/new-car-replacement-car-insurance/
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New-car replacement vs. gap insurance
While new-car replacement insurance can help you buy a new car, gap insurance is designed to make sure you can pay off the old one.

If your car is totaled or stolen and your collision or comprehensive insurance doesn’t cover what you owe on the car’s loan or lease, gap insurance pays the difference minus any deductible. Prices vary, but generally gap coverage costs a few dollars a month, according to Esurance.

Before you buy gap insurance or new-car replacement coverage:

• Understand the terms and conditions. Depending on the insurer, gap coverage might be available for more years than new-car replacement coverage — beneficial if you have a loan.
• Get quotes to compare the costs of gap insurance and new-car replacement coverage, especially if you owe more than the car is worth.
• If you skip gap or new-car replacement coverage, make sure you have enough in savings to both repay a lender if the car is totaled and make a down payment toward another car.

If you do opt for new-car replacement insurance, be sure to cancel it once your car is over the age limit or mileage specified by your insurer. Otherwise, you might end up paying for expired coverage.



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