: Question for any Dealer...



MARKVIII
09-07-07, 10:27 AM
When a person leases a car off your lot how does the dealership get paid? do they get paid for the whole car from (gm) or just the term of the lease. in other words who owns the car when it is leased? the dealer? the manufacturer or the bank. and when the car comes off lease and back to the dealer who then owns the car? is it the dealers responsibility to resell the car or what?

i am confused but would like to know.

jjsocrazy
09-07-07, 01:03 PM
It's basically the banks car in terms of who "owns" the car. In terms of reselling the car there is a responsibility from the dealer to found out the value of the car and sell it in their used inventory.

MARKVIII
09-07-07, 01:09 PM
so your telling me that if i was to lease a car for three years off a lot the dealer gets paid in full from the bank? that makes no sense to me.

ncCADDYman
09-07-07, 01:18 PM
i just started here at a Cadillac dealership in charlotte and i'm not even sure how that works. let me see what info i can dig up ... but i can tell u that the BANK does in fact OWN the vehicle

MARKVIII
09-07-07, 02:16 PM
i just think its an interesting subject. nobody ever thinks about who actually owns the car and who gets paid what?

ncCADDYman
09-07-07, 02:24 PM
^ you're absolutely right. even on my end (sales), as long as we get a cut it doesn't really matter, does it?

05cts-v
09-07-07, 02:28 PM
In our lease, GMAC( VAULT ) owns the vehicle. You will get 2 registrations( 1 with VAULT(our case ) on it and 1 with your name on it ). If you fulfill the lease then you can trade vehicle in at any GM dealership( or at least thats what we were told ) as the vehicle would be considered paid on your part. Try to get out of it too early and it will cost you. I'm not sure how the dealership gets paid.

MARKVIII
09-07-07, 02:38 PM
okay so what i am ultimatly getting at here is how does (the dealer, the bank and the car company) make there money on a lease. if i am only "renting the car" and paying for the car for only the time i use it that means that everyone has to wait around until i bring it back and it gets sold for them to make there money. if that is the case then it would seem to me to be a bad business model. there are millions of cars that are leased every year. if i was the title holder i would have to outlay a lot of money and wait for a return years down the road.

malatu
09-07-07, 04:40 PM
I doubt the dealer is waiting around for you to return the vehicle to make their money. If the bank is the title holder, I would assume the bank pays everyone up front and makes there money on the lease (interest)payments. I'm sure there's more to it than meets the eye.

z06bigbird
09-08-07, 12:42 AM
I have leased several Fords thru Ford Leasing. Car goes back to dealer at end. Dealer can buy car if dealer wants it. Or it goes to a centralized point where any Ford dealer can go and buy cars coming off lease. If dealer buys it after end of my lease, dealer pays X + 1. If dealer buys it at auction, dealer can get it for highest bid. He takes a chance. Certainly, customer can buy it at end of lease for residual. After 36 mo, residual on a Taurus used to be about 37% of MSRP. BMW 530 used to be 65% at same time.

BMW price has come down after lease.

dkozloski
09-08-07, 02:33 AM
You can bet your @ss that the bank stands first in line to get their money, just like they do on any deal. I don't think the dealer ever owns a car. They're just a portal, a pass through. While it sits on the lot they are paying money to the bank. While the customer has it he's paying money to the bank.

MARKVIII
09-08-07, 11:25 AM
banks are not in the car selling business. i do not think the bank owns the car on a lease. i am sure someone here can come up with an explanation.

dkozloski
09-08-07, 01:13 PM
banks are not in the car selling business. i do not think the bank owns the car on a lease. i am sure someone here can come up with an explanation.
Banks are in the money lending business. When they loan money on a car you can bet your @ss they are holding the paper. The guy holding the paper owns the car. Dealers don't own cars. Everything on the lot is leveraged to the hilt so the dealer can get more cars to show on the lot. As long as anybody is making payments on a car the bank owns it. If the dealer originates a bunch of non producing car loan sales he makes payments to the bank called recourse money. The bank is never standing there with their @ss hanging out. There may be some 5+ year old used junkers on the lot. In the business world a 5+ year old car has no value. They are essentially a PIA to the bank and they hate'em.

Airlines don't own planes. Banks hold the paper on the planes. Banks own planes.

MARKVIII
09-08-07, 01:52 PM
i understand all that. let's say the bank owns the car on a lease. the lease comes back after three years. now according to you the bank now owns a three year old off lease car. now the bank has to wait around for this car to be sold so they can get paid? because they certainly did not get ALL the money they laid out for the car on a three year lease. something here is not making sense to me. or maybe i am loopy?!?!

dkozloski
09-08-07, 05:09 PM
It's just like borrowing money to buy a building to lease to a tenant. You "own" the building and the bank holds the paper. You lease the building to tenants, collect the rent, and make payments to the bank. The tenant moves out at the end of the lease but you still owe the bank and make payments to the bank out of your pocket. If you default the bank gets the building because they own it. The dealer leases the car that the bank holds the paper on. At the end of the lease the bank still owns the car and the dealer makes the payments out of his pocket. If the car still holds a sufficient value he can sell it to you and you make the payments directly to the bank. All the fancy writing and small print in the lease sgreement assures the dealer and the bank that they will bleed enough money out of you that when it's all over they are ahead of the game and you are standing there holding the bag with an old car that has all the goody sucked out. If the dealer holds the car he dumps it as quickly as he can because it is an alligator with interest payments eating him alive. He wants whatever value there is left in the car to be working for him and not sitting on the lot. He may discount it to a broker, sell it at auction, find a fish to buy it. The dealer is paying the bank in lieu of the lease holder paying the dealer who pays the bank. The bank loaned the dealer the money on the car. That never stops. The bank never waits for their money. You can be damn sure of that. The dealer may have possession of the car but the bank owns the car and has title. If you don't think the bank owns the car just let the dealer stop paying and see what happens next.

MARKVIII
09-08-07, 05:20 PM
thank you now i understand. so basically a dealer would rather sell a car then lease a car anyday of the week.
i always felt leasing was for suckers (not for me) . i leased an explorer many years ago and never felt ownership of the vehicle. and when i gave up the lease i had nothing for a down payment. plus i keep my cars a minimum of 4 years.

dkozloski
09-08-07, 05:57 PM
The details of the lease agreement determine how sweet the situation is for the dealer. Think in terms of a long term rental. The bank puts up the money to get the car in the system. The customer makes payments to cover the dealer and the bank. The bank never loses or waits. If there's a snag somewhere the dealer makes up the difference or the bank leans on him hard. If you drive the car into the ground you're going to pay. If you damage the car you're going to pay. The details outline all the contingencies that could affect the bottom line for the deal and how you're going to take it in the shorts. Never forget that if the bank and/or the dealer don't make money they go out of business. Your money is going to keep things going. With a sale the dealer makes his money up front and the bank handles the paper. If the bank gets stung by the dealer habitually, the bank comes after them for recourse money. With a lease the whole thing is dragged out and the customer makes up the difference over time. He is bound to get less value for his money because he's supporting the dealer and the bank simultaneously. Interest mounts up. Once the bank advances the money to the dealer the payments continue one way or another until the vehicle is purged from the system. The dealer may close things out with the bank but then it sits on his lot going to hell. He has to have the value of the car leveraged to make money. Nobody runs a car business on a cash basis like a kid selling lemonade. It all slides along on the banks money on the skids they have greased with your sweat.

z06bigbird
09-08-07, 08:18 PM
I have leased several Fords thru Ford Leasing. Car goes back to dealer at end. Dealer can buy car if dealer wants it. Or it goes to a centralized point where any Ford dealer can go and buy cars coming off lease. If dealer buys it after end of my lease, dealer pays X + 1. If dealer buys it at auction, dealer can get it for highest bid. He takes a chance. Certainly, customer can buy it at end of lease for residual. After 36 mo, residual on a Taurus used to be about 37% of MSRP. BMW 530 used to be 65% at same time.

BMW price has come down after lease.

I meant to say BMW residual has come down in past few years. Perhaps 62 to 63%, maybe lower.

c5 rv
09-08-07, 11:16 PM
thank you now i understand. so basically a dealer would rather sell a car then lease a car anyday of the week.


Every luxury dealer I've ever met loves leasing cars. A lot of professionals lease for tax reasons, and that's a big percentage of the market for luxury cars. Leasing also puts the customer on the clock for when they will need a new car - and the leasing dealer knows when the alarm will ring. A good dealer will build a relationship with the customer through service visits, mailings, and calls so that in 24, 36, or 39 months, the customer will be leasing another car from them. This is what dealers love - customers with money that gets a new car from them on a set timeframe. With the best dealers, the customer doesn't even need to come into the dealership to get a new car. A couple phone calls from the dealer, discussion of what car, agreement on the lease price, and a new car with paperwork shows up at the customer's home or office. The person that buys a car for a deep discount at a special tent sale probably won't be back to buy again. Those one-time sales are expensive.

jgrade
09-11-07, 11:07 AM
Exactly like c5 rv said. To add to that, in the luxury market, leases help move more inventory. Many people lease a luxury vehicle because they can't afford to purchase it even with 0%. I currently pay about 460/mo on a 48mo lease. If i were to purchase the car a 0% for the same term I would need to pay about 1000/mo or buy down the cost. Now somewhere around month 40 I will get a letter from the dealer or GMAC and offer to release me early from the lease if I buy lease another car (from any GM dealer). Great way to keep a customer and project future sales.

So I get to use a car I could not otherwise afford, and the dealer probably gets a repeat customer. Either way, they still make money. How much they make is up to the deal that is signed. All the bank cares about is that they got their slice (either interest or the cost of money for a lease)