Sorry guys, but can you guys explain what Some of those terms mean? Cap cost, money factor, Res value?
I have always purchased, but I am interested in how leases work.
I have never leased as I commute 60 miles a day and would blow away the ususal 12,000 /year miles, but I hear you buy the car after?
EDIT: OK, so google works LOL
So Cap cost is basically the cost of the car, money factor is basically your interest rate? Residual value is what it will cost to buy at the end of the lease?
If you buy the car at the end of the lease, do you just pay taxes on the residual value?
You got it.
With a lease, you finance the depreciation of the vehicle essentially. But, there are things you can do to help improve the numbers.
Cap cost - starting price. This does NOT have to be MSRP. Negotiate it like you would a new car.
Money Factor - interest rate. Just like with a new car loan, a better MF will cost u less. Better credit > better MF but be aware of it because shady dealers might let a higher rate go unnoticed because they get a kick back from the bank for it.
Residual Value - the ESTIMATED value of the car at the end of your term. Depreciation might be estimated to be 55% and the value is say $20,000 after 3 years. But maybe thereís high demand for your vehicle in 3 years and $22,000 is more accurate. You can sell the car on your own, pay off the lease and pocket the equity. Likewise, if the value is only $18,000, you lucked out and the back eats the difference.
If you opt to buy the car at the end of the lease, itís like buying a used car. You pay taxes, fees, etc....