Interesting / Disturbing

[Rickerbucks]

Leasing questions / concerns

I spoke to TWO dealers yesterday about leasing today (I spoke to 2 because I was sure that the first one MUST be wrong). What I should first point out is that I'm in Canada and things may be different in the US, that I have leased vehicles before, I'm very aware of the lease / buy argument, and that I'm able to write off my car to some degree.

For me the primary attraction to a lease is to potentially finance the car over a longer period of time. i.e. a four year lease and then finance a four year loan for the residual.

Well I'm stunned at the results.

Here in Canada - interest rates are generally the same as yours in the US, they calculate the lease rate at 10.75% interest (mass market car lease rates are often at 6%-7%) and the four year residual is an unbelievable 35%.

CLEARLY GM is saying that they absolutely do NOT want people to lease these vehicles but then the next question is WHY? Given the extremely low residual, are we to also infer that GM has a very pessimistic view of the future value of these cars?

I'm really stumped as to why GM is not interested in financing these cars.
Are there any experienced car guys that can add some insight as to what are the factors considered to arrive at these numbers?

As it is, with these numbers I think I'll lease a 300C for three years and then possibly buy a 3 year old CTS V.

For comparison. The 300C has a lease rate of 5.8% interest and 52% in four years.

[miscreant]

Originally Posted by Rickerbucks

Leasing questions / concerns

I spoke to TWO dealers yesterday about leasing today (I spoke to 2 because I was sure that the first one MUST be wrong). What I should first point out is that I'm in Canada and things may be different in the US, that I have leased vehicles before, I'm very aware of the lease / buy argument, and that I'm able to write off my car to some degree.

For me the primary attraction to a lease is to potentially finance the car over a longer period of time. i.e. a four year lease and then finance a four year loan for the residual.

Well I'm stunned at the results.

Here in Canada - interest rates are generally the same as yours in the US, they calculate the lease rate at 10.75% interest (mass market car lease rates are often at 6%-7%) and the four year residual is an unbelievable 35%.

CLEARLY GM is saying that they absolutely do NOT want people to lease these vehicles but then the next question is WHY? Given the extremely low residual, are we to also infer that GM has a very pessimistic view of the future value of these cars?

I'm really stumped as to why GM is not interested in financing these cars.
Are there any experienced car guys that can add some insight as to what are the factors considered to arrive at these numbers?

As it is, with these numbers I think I'll lease a 300C for three years and then possibly buy a 3 year old CTS V.

For comparison. The 300C has a lease rate of 5.8% interest and 52% in four years.

There is a completely easy answer to this.

Almost ALL leases these days are "incentivized" by the manufacturer - which means the lease rates are low and residuals are typically inflated to encourage you to lease that vehicle over another - JUST like a rebate or special interest rate like 0%.

However, banks that are NOT the manufacturer tend to have worse rates and residuals because they do not have a vested interest in selling the car...

So this leads to the XLR and CTS-V leasing - not real good at all. The leases are not subsidized/incentivized by GM because they don't have to be for the car to sell.

You certainly cannot compare the V sales performance to the 300C. The V is substantially more "specialty" than the 300C.

[Rickerbucks]

Hmmm I can see that GM does not NEED to assist sales with financing concessions, but what is the story with a 35% residual? Surely the car is to be worth a lot more then that in 4 years? Why not give a better residual? So what if they get the car back? They'll be able to sell it no problem

I can personally borrow money at 3.75% floating rate or at 5% for 5 years but that crimps my cash flow a lot more then I'm comfortable with. As it is the car costs about $85k or $1600 for 60 months - taxes in - versus $970 for a 300C three year lease. Basically I don't like the idea of having cash flow pinched that much.

I was hoping that a four year lease with GM followed by a three year loan to pay it off would work out to about $1100 - $1200 month if the interest rate and residual were in line from GM leasing department for the next 7 years which I can live with.

Basically, I guess they don't want to sell to guys like me, they want guys like you that can write the check.

Note: ALL numbers are $CDN

PS: Rest assurred, I appreciate that the 300C and the CTS V are not remotely in the same league.

[miscreant]

Originally Posted by Rickerbucks

Hmmm I can see that GM does not NEED to assist sales with financing concessions, but what is the story with a 35% residual? Surely the car is to be worth a lot more then that in 4 years? Why not give a better residual? So what if they get the car back? They'll be able to sell it no problem

That's a risk GM is not ready to take, especially when they don't have too. I would imagine once the market is defined, GM will probably up the residual, as GMAC tends to make more money, atleast frontend, on leases. We all hope the CTS-V will be worth loads in 4 years, but GM also has seen the Hummer H2 craze drop considerably...

One last point concerns the fact that the V is such a specialty vehicle, and leases generally indicate someone plans to *use* the vehicle - in that, if you lease a vehicle at 4 years / 15k miles per year, the vehicle's value will be defined on what a CTS-V with 60K miles will be worth - - - compared to the typical V which will probably be low mileage. I'd bet that most V's four years from now will have probably 20k miles average when they enter into the sale market...A 60k or even 48k V will be worth substantially less. This GMAC has to take into consideration.

PS: I'm wondering where you got the 52% residual at 48 months? The 300C residual at 48 months at 15k miles per year is 47%. The 300 Touring is 52% at 48 months / 12k miles per year. Just FYI.

[b4z]

This is not the news I wanted to hear either.
I was hoping to write a check in the Fall and pay off the remainder of my SRX lease which would get rid of it's $520 mo. payment.
(SRX lease includes the upside down portion on my Impala trade-in.)
Then I was going to either lease a "V" or a STS V8 w/ Sport Package.
I was thinking the lease payment would be in the $6-800 range.
Depending on whether I went 36 or 48 months.
Looks like my numbers are way off from reality on the "V".
I have a friend who is leasing a $60K '04 BMW 545i and his is in the $800 range.

[dmn8]

I just leased a new V, great company car!

I shopped 5 dealers in two different states and finalized a 4 year lease with a residual of 46%. The payment is just below $700 with no money out of pocket. One thing that I discovered was that the GMAC money factors are very high which will definitely affect your payment. Have the dealer check other banks.

[DgtalPimp]

Originally Posted by b4z

This is not the news I wanted to hear either.
I was hoping to write a check in the Fall and pay off the remainder of my SRX lease which would get rid of it's $520 mo. payment.
(SRX lease includes the upside down portion on my Impala trade-in.)
Then I was going to either lease a "V" or a STS V8 w/ Sport Package.
I was thinking the lease payment would be in the $6-800 range.
Depending on whether I went 36 or 48 months.
Looks like my numbers are way off from reality on the "V".
I have a friend who is leasing a $60K '04 BMW 545i and his is in the $800 range.

My 2002 5 series lease was in the $550 range, and the 2004 CTS-v (with upside down 5 series in it) is close to double. The Banks would not lease at all. I tried my credit union where I got great rates beofre, the only issue they had was the dollar amount. :madtalkin The way the numbers worked out if I didn't have my upside down bemmer I could have leased it through my credit union.

Dgtal

[urbanski]

i'd call credit unions you may belong to/be eligible to join...they usually have good lease rates, or offer various "lease-like loans". I found one 60mo, 18Kmi, 51% residual, 4% APR.

[miscreant]

Well, I have more info. Unless GM Canada is completely different, the CTS-V numbers you were given are incorrect. Here are the lease residuals on the 2004:

24 months: 60% (15k) / 62% (12k)
30 months: 55% (15k) / 57% (12k)
36 months: 51% (15k) / 53% (12k)
48 months: 42% (15 or 12k)

Also, the top two tiers carry about 7.95% interest to 8.95% interest rate. The 48 month isn't that great, but it's probably based on my "mileage" explanation above. However, since the Lease rate is not incentivized, it will be completely based on credit and how much you are trying to carry.

[drdsgolf]

I leased my CTS-V about three months ago. It came in at about 44% on the residual value. I have leased cars through my business for a long time. There are considerable tax advantages in leasing through a business, so I am not very concerned with what the residual value is. I have not yet bought a car out of a lease. On the other hand, a lower residual would make it easier to purchase the case at the end of your term.

ds