Oldsnwbrdr

I work in the financial field so you'd think I'd know better.

In 2000, I leased an Acura TL that would have expired this August.

I'd been fascinated by the RX-8 and decided that I wanted to drive one. Last November, I did exactly that. And just in case, I ran off my lease payoff information and took it with me to the dealer.

Obviously, I enjoyed my test drive. Naturally, the salesman tried to close the deal and I told him about my current lease situation. I was handed off to the finance manager. He asked me what sort of monthly payment I wanted.

Unfortunately, I played that game. I now have a lease payment that is only slightly higher than my Acura, but they rolled that negative equity into the payoff of my Mazda, and also sold me some stupid warranty that I didn't need or want, but he claimed was necessary in order to get to that payment.

The short version is... if I had to sell my car now (6-speed with GT package, about $32K), I'm guess I could get around $27-29K for it, and my lease payoff is about $37K.

Sure, the dealer was a little slimy putting this together but I have no one to blame but myself. I had to put an additional $1,500 in to it for snow wheels/tires.

So if something was to happen to my car (totalled, stolen, God forbid), I'd have a lot of negative equity I'd have to settle up with the bank.

Still, I do love the car, especially in this warmer weather. I still walk up to the car and think to myself "that is one hot automobile." And I still can't believe all of the stares it gets.

Dumb dumb dumb. Next time, I'm BUYING a certified used car.

bureau13

Didn't they also sell you gap insurance, or whatever it is that is supposed to cover the difference in insurance payout and loan balance if something happens to the car? I thought in those situations they wouldn't finance without it.

jds

kidcas

that sucks.... i've been in sales and played the game..... chalk it up to a learning experience and don't let it happen again...

it's kinda like renting a porno and having some hot chick as the cashier..... you kinda feel shitty about it, but then you leave, go home, watch your porno and feel better....

Velocity-8

Yes, I would agree that you should've known better. First off, buying the warranty was a waste and they suckered you. The factory warranty will cover the lease term so unless you buy it out you only gave money to the dealer.

Adding a wheel and tire package also ups your payment.

All leases have Gap Insurance so it's covered in the event of a total loss and you will not have to pay any negative equity.


What do you do in the "financial field"...janitor? :D Seriously, for someone in the financial field there's a lot you missed on this deal.

sorry to be harsh but that's how I see it. :D

Peace.

Elara

At least you love the car. There are a lot of other, more expensive mistakes you could have made. Just take it as a learning experience.

8pex

Yes! get gap insurance. My friend totaled his M3 and didn't have it and got burned bad.

Velocity-8

GAP is included in EVERY lease. But you all knew that because you all read the entire agreeement. :D

WHealy

Velocity-8,

I certianly don't know the ins and outs of leasing in NJ or OH for Oldsnwbrdr, but here in Indiana, GAP insurance is an OPTION on leases. I would agree that it's the norm as opposed to exception today. It's been a long time since I've heard of a direct Auto Maker (Ford) lease not having GAP. But if you get it from a bank, they can choose not to include it. Especially if they are trying to fix payments. It usually adds a wopping $10-15 to the final payment. Just trying to claify.

Velocity-8

Good point. Sorry if I was harsh.

mysql101

What I don't understand is how you were able to sign the paperwork without knowing that your LEASE would cost you 7k more than if you had bought the car.

mysql101

PS: My last post wasn't meant to flame or insult. I honestly don't know how you could have done that. Did the car impress you so much that you just signed everything they put in front of your nose in order to get it?

WHealy

Jason,

Lease payoff are a very confusing issue. They are worded so confusingly, it's difficult for anyone to understand. Sometimes there are early payoff penalties. Sometimes, the payoff is the remainder of the lease payments. Which makes no sense as a lease is just a balloon with a guarenteed colateral swap for the balloon. Financial institutions have gotten away with way to much on payoff techniques. Why someone hasn't come in and regulated this as of yet is beyond me.

mysql101

WHealy, I guess it shows that I've never leased before. I usually buy in cash or get a loan.

So a better idea on how good (or bad) a deal he has is the total cost if he kept paying the lease as he agreed to, rather than the payoff figure.

If he so desperately wanted into an RX-8, why are we talking about payoffs?

WHealy

Jason,

Good point. The severity of the upside-down part is only an issue if he chooses to exit the lease early. Although without GAP insurance, he may be concernd what happens if someone else were to hit him and total his car from a financial perspective. If that was the case, even though the accident was not his fault, he would have to pay the figure we are talking about here. This also applies to conventional loans. But typically, conventional loans don't have inflated payoffs and due to no end balloon payment, you are upside down longer. So the payment in this case is usually smaller. But you can get GAP insurance on conventional financing as well. Hence the if you're going to lease, be sure and get GAP insurance statement.

Oldsnwbrdr

I'll check as to whether or not my lease has the gap coverage piece. It was offered at the dealership but I didn't take it because I thought I could get it cheaper through my own insurer. Will have to look into it.

WHealy is correct that the impact will be felt if I want to exit the lease early. The residual value on the car at the end of 4.5 years is in the $13K range which seems very reasonable.

PaulieWalnuts

Sorry to hear of your situation. I've learned the hard way more than a few times myself. Maybe a more accurate thread title would have been "Getting a lease a dumb move for me".

rx8miami

how many payments on the lease?

beachdog

GAP insurance does not cover any down payment or capital cost reduction as the leases call it. If you have a bad accident or want to walk away, your down payment is gone whether you had GAP or not. One of the big reasons to never put anything down on a lease.

WHealy

Huh? A down payment is lost no matter what form of financing you use (lease or loan). Unless the down payment exceeds the depreciation incurred on the vehicle when it was totaled. Then you would get back what was not in the depreciation again either with a loan or a lease. For that matter, all the payments you make work that way. In a lease, you are upside down longer than in conventional financing given the same down payment. That's why GAP originated with leases but is now availble with conventional financing.

Back on topic - I keep re-reading this thread to hopefully make sense of the original post someday ...

beachdog

If you buy the car cash or take a regular loan and total the car, the insurance pays you based on their calculated current value. If you lease and then total the car, the insurance company is going to pay the lessor their calculated current value.

Cash purchase or bank loan, you are going to be out the difference between the purchase price and the insurance payout.

On a lease, you will be out your down payment/capital cost reduction. Capital cost reduction always works against the lessee.

Truss

:D That's the funniest thing I've read all day. Thanks.

T.

Logan072

I got my gap insurance and extended warranty for only 5 more dollars per month.
I work for a financial institute as well, and am not a janitor.