My friend leases a $22,000 car for $318 per month on a 24 month lease. How ?

Question

How can they make out on a deal like that? They won't consider extending the lease for a littler lower amount to reflect that it is now a 2 year old car. They just want their car back. It only has 11K on the odo. This is in Michigan.

Answer 1

1st off, the leasing company or auto finance company didn't pay 22k for the car. They got a discount when your friend wasn't looking.

suppose they actually paid 19k

then, 10% interest on 19k is 1900 a year or 159 a month and the rest of his 318 payment has been paying down the principal amount [and taxes, if any].

with only 11k miles on the car, it will sell for more than the amount they estimated when they made the lease deal and thus they want to reap the benefit of wisely choosing a buyer now. Thus, they're refusing to re-lease.

This is the hazard of leasing. If you run short on the miles allowed, the leasing company does well. If you run over on the miles, they sock you for the extra miles at a ruinous price (about double the actual overmileage value).


Moral: don't lease