Car Lease - LA / Southern California

Hello all,

Will be living in LA / Southern California starting July 1st. Haven't made a final decision yet, but I think I'd like to lease a car since this isn't a permanent move -- probably a sedan like a Camry, Altima, etc. I'm definitely open to many manufacturers and models. Ultimately I am hoping to get suggestions for leases around $200 per month. The cheaper the better, as long as the car is still good. Some of the lowest prices I've seen so far involve Hyundai and Kia.

This will be my first lease ever, so no previous negotiating experience and I don't know all the things to look out for. A few questions in particular: is it still possible to lease a 2011 model beginning July or August 2012? Will that wind up being cheaper? In the event that it is necessary, could I negotiate a lease that allows more than $12K miles per year? How does that process work?

My specifics: under 25 years old (higher insurance premium...), FICO over 750, can put money down (although I understand that's not a "slick deal").

Please feel free to make any and all suggestions / ask questions regarding this process, even if the lease is over $200. Just no luxury cars or trucks for me. Thanks!

Yes, you can pay up front for more than 12k mi/yr.

Have a good look at the Chevy Malibu - much nicer car than the low end Hyundi & Kia, but leases for a about the same

Quote from Jeffbx : Yes, you can pay up front for more than 12k mi/yr. Have a good look at the Chevy Malibu - much nicer car than the low end Hyundi & Kia, but leases for a about the same

Thanks for the feedback. Do you know how much extra it would be to bump up to 15K miles? Also, do you know if it's possible to reduce from 15K to 12K after the first year if necessary?

When you buy miles up front, it's a use it or lose it situation, so be sure you really need them before committing to anything.

Having said that, the rules differ for every lease company. Some will allow you to buy them up front at a discount, some will charge the same amount on the front OR the back of the lease (meaning there's no reason to pre-pay for them, since you can pay the EXACT amount at the end). There's no way to know for sure what the exact rules are until you talk to them.

I've seen mileage go for anywhere from $0.10/mi for up front pre-pay to $0.50/mi for overages. So best to ask when you talk to the dealer.

FYI - Just be aware that in CA if you lease a car they effectively tax you on the purchase price of the car, not the value of the lease. So if you lease a $20k car and make monthly payments of $250 for 3 years the tax is on $20k, not $9k.

It's something to consider when you are comparing a lease to purchasing the car.

Quote from Jeffbx : When you buy miles up front, it's a use it or lose it situation, so be sure you really need them before committing to anything. Having said that, the rules differ for every lease company. Some will allow you to buy them up front at a discount, some will charge the same amount on the front OR the back of the lease (meaning there's no reason to pre-pay for them, since you can pay the EXACT amount at the end). There's no way to know for sure what the exact rules are until you talk to them. I've seen mileage go for anywhere from $0.10/mi for up front pre-pay to $0.50/mi for overages. So best to ask when you talk to the dealer.

Quote from LivninSC : FYI - Just be aware that in CA if you lease a car they effectively tax you on the purchase price of the car, not the value of the lease. So if you lease a $20k car and make monthly payments of $250 for 3 years the tax is on $20k, not $9k. It's something to consider when you are comparing a lease to purchasing the car.

Thanks both. Repped

Sorry for the double post, but if I have a high credit score should I be looking for a 0 money down lease? Also, I realized I didn't mention that I'll be looking for a 24 month lease

Your credit score doesn't matter on what you put 'down' on a lease - that's a confusing term since in the LOAN realm that's money you use to secure the loan. The more money you have tied up in the loan, the less likely you are to walk away from it.

For a LEASE, that money is a 'cap cost reduction fee' - this applies to what you owe & will reduce your monthly payment. So in the case of a 24 month lease, each extra $24 you pay up front will reduce your monthly payment by (approximately) $1. Car companies always advertise with a high 'down payment' on leases because then they can show a lower monthly payment, but you can get just about ANY lease with $0 down - your monthly payment will just be that much higher.

Quote from LivninSC : FYI - Just be aware that in CA if you lease a car they effectively tax you on the purchase price of the car, not the value of the lease. So if you lease a $20k car and make monthly payments of $250 for 3 years the tax is on $20k, not $9k. It's something to consider when you are comparing a lease to purchasing the car.

This is not correct.

Sales tax is based off of the monthly payment amount. Example. Base lease payment is $200mo. x 7.75%=$15.50 tax. Total lease payment after sales tax is $215.50

You are only charged sales tax on the total price of the vehicle if you chose to purchase the vehicle at the end of the lease term. Your sales tax is then based off of the buy out option (residual) at that time and NOT the capitalized cost (purchase price) when you originally signed up for the lease.

Hope this clears up any misunderstandings.

Quote from keledog : This is not correct. Sales tax is based off of the monthly payment amount. Example. Base lease payment is $200mo. x 7.75%=$15.50 tax. Total lease payment after sales tax is $215.50 You are only charged sales tax on the total price of the vehicle if you chose to purchase the vehicle at the end of the lease term. Your sales tax is then based off of the buy out option (residual) at that time and NOT the capitalized cost (purchase price) when you originally signed up for the lease. Hope this clears up any misunderstandings.

Thanks for the clarification. I found this article and coincidentally the example given matches what you stated: http://www.edmunds.com/car-leasin...yment.html

I have an additional question after reading the Edmunds article. When an advertisement shows a lease offering for $179/month (example), I know it excludes taxes. But does it also exclude the money factor portion as described in the article? Below is the sample table from the article. Basically I want to know if the amount shown in an advertisement is only line 8 or lines 8 and 15 combined.

1. Sticker Price of the car + options	$23,000
2. Times the residual value percentage	X .57%
3. Equals the residual value	= $13,110
4. Invoice price of car minus incentives (net capitalized cost)	$20,000
5. Minus the residual (From line 3)	- $13,110
6. Equals the depreciation over 36 months	= $ 6,890
7. Depreciation (Line 6) divided by term in months	÷ 36
8. Equals the monthly depreciation payment	= $ 191.39
9. Net capitalized cost (From line 4)	$20,000
10. Plus the residual (From line 3)	+ $13,110
11. Equals	= $33,110
12. Times the money factor	X .0037
13. Equals money factor payment portion	= $ 122.50
14. Monthly depreciation payment (from line 8)	$ 191.39
15. Plus money factor payment portion (from line 12)	+ $ 122.50
16. Equals bottom-line monthly lease payment	= $ 313.89

Ads generally DO include the money factor - this would be analogous to the APR of a loan. If you offer to pay the entire lease amount up front, then the money factor becomes zero & that removes line 12 from the equation altogether.

So the 2 big numbers to find out are line 12 (which is generally fixed by the bank/lease company & will be the same for every car at that dealership) and line #2 - THIS one is the magic number. If you know someone that works at a dealer or if you're very convincing, you might get the salesperson to show you the residual values for all of the models they carry - they DO have this information, so if they say they don't, they just don't want you to see it.

The reason that this is a magic number is that there is a HUGE difference in residual values of the different models at a dealer - you may find that a car you thought was out of your price range really is not because of the high residual value. You may also find that the car you were interested in seems to lease for a lot more than you thought becase of the LOW residual value.

In general - new cars that are just released will start with a very low residual value because they base these values off of prior year sales, and if there ARE no prior year sales, they have to guess, and they always guess low. So don't lease the first model year of a new car.

Also, unlike purchasing you do NOT want to wait for 'end of the model year discounts' like if you were buying a car - the longer a car has been on the market, the lower the residual value.

So best case for a lease is a popular car, new model year but not a FIRST model year.

Quote from Jeffbx : Ads generally DO include the money factor - this would be analogous to the APR of a loan. If you offer to pay the entire lease amount up front, then the money factor becomes zero & that removes line 12 from the equation altogether. So the 2 big numbers to find out are line 12 (which is generally fixed by the bank/lease company & will be the same for every car at that dealership) and line #2 - THIS one is the magic number. If you know someone that works at a dealer or if you're very convincing, you might get the salesperson to show you the residual values for all of the models they carry - they DO have this information, so if they say they don't, they just don't want you to see it. The reason that this is a magic number is that there is a HUGE difference in residual values of the different models at a dealer - you may find that a car you thought was out of your price range really is not because of the high residual value. You may also find that the car you were interested in seems to lease for a lot more than you thought becase of the LOW residual value. In general - new cars that are just released will start with a very low residual value because they base these values off of prior year sales, and if there ARE no prior year sales, they have to guess, and they always guess low. So don't lease the first model year of a new car. Also, unlike purchasing you do NOT want to wait for 'end of the model year discounts' like if you were buying a car - the longer a car has been on the market, the lower the residual value. So best case for a lease is a popular car, new model year but not a FIRST model year.

Great info, thanks!

I am leasing a 2011 Malibu for $230/month. I found a local dealer with a demo model, which means it was driven by a dealer employee and had 6,000 miles on it. I get 15,000 miles per year and it's for 39 months. I like the car a lot.

We just priced another new Malibu lease and were quoted $189/month for 24 months and 10,000 miles/year. That may give you a better estimate.

Oh, and the models mentioned were LT trims, which is above the base LS models.