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DKgeo34

Leasing a car. Am I better off pre-applying for lease financing before going to the dealership?

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I have FICO scores between 754-802 (depending on the credit bureau). I know I’m getting a Honda (I’ve been very satisfied with my current Honda). I want to lease, but haven’t decided on the dealership or the model.

 

My current lease is from Honda Financial Services. When I went on their website, making sure I had no more lease payments left, I noticed you could apply for lease financing on their website. I don’t think it’s a full-fledged application. It basically pre-approves you.

 

My question: is it in my best interest to apply before going to the dealership(s)?The two dealerships I’m looking at are actual Honda dealerships, so they’d use Honda Financial Services anyway.

 

I don’t know if pre-applying will help or hurt me in terms of my lease rate. I’m not sure if dealers have the ability to negotiate lower rates or have some other power over it. Then again, I would think pre-applying would circumvent the infamous financial manager who always seems to have a reason why they have to increase your deal (down payment/monthly payment).

 

What’s your experience?

 

Thanks!

 

 

 

 

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IMHO applying online is a waste of time since you'll need to apply again at the dealership. also, a bigger down is a good thing for most consumers.

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Do not apply ahead of time as you will be locked into a specific dealership.  Go to the dealer(s) and make your best deal.  Once you have decided what and where you will buy the car, then worry about financing.  From what you post you'll qualify for tier A/1 rates so financing shouldn't be an issue

 

More importantly, you need to familiarize yourself with all the terms related to car leasing such as residual, money factor, etc.  Go to leasehackr or the edmunds leasing forum for the model you are choosing and find out what the residual and base or buy rate money factors are, as well as what most people are paying for that model and any available incentives.  Once you have all this info:

 

 - Negotiate the price (cap cost) of your selected vehicle.  Make sure you know if the price is inclusive of all incentives or not.  See how that compares to what other people are paying.  You don't need to grind every last dollar or try to beat everyone's deal, but don't be the lamb that gets slaughtered either.  Do not negotiate on payment amount.

 - Once you have negotiated your final price, the rest should all be math.  Make sure you are getting the buy rate on the MF, and ask to see it.  Invest in an app like leasematic and calculate the payment yourself to make sure you get the same figures.  DO NOT PUT ANY MONEY DOWN except for first payment/tax/reg.  You should never put money down on a lease because if you total it that money is gone.

- Since it is a lease you won't need anything like extended warranty, etc. so skip all the sales items in the F&I office.  

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29 minutes ago, CTSoxFan said:

Do not apply ahead of time as you will be locked into a specific dealership.  Go to the dealer(s) and make your best deal.  Once you have decided what and where you will buy the car, then worry about financing.  From what you post you'll qualify for tier A/1 rates so financing shouldn't be an issue

 

More importantly, you need to familiarize yourself with all the terms related to car leasing such as residual, money factor, etc.  Go to leasehackr or the edmunds leasing forum for the model you are choosing and find out what the residual and base or buy rate money factors are, as well as what most people are paying for that model and any available incentives.  Once you have all this info:

 

 - Negotiate the price (cap cost) of your selected vehicle.  Make sure you know if the price is inclusive of all incentives or not.  See how that compares to what other people are paying.  You don't need to grind every last dollar or try to beat everyone's deal, but don't be the lamb that gets slaughtered either.  Do not negotiate on payment amount.

 - Once you have negotiated your final price, the rest should all be math.  Make sure you are getting the buy rate on the MF, and ask to see it.  Invest in an app like leasematic and calculate the payment yourself to make sure you get the same figures.  DO NOT PUT ANY MONEY DOWN except for first payment/tax/reg.  You should never put money down on a lease because if you total it that money is gone.

- Since it is a lease you won't need anything like extended warranty, etc. so skip all the sales items in the F&I office.  

Agree 100%.

 

There are about 10 more ways to get screwed on an auto lease compared to a purchase, and a purchase with financing is already fraught with peril for the average consumer.  

 

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11 hours ago, DKgeo34 said:

I don’t know if pre-applying will help or hurt me in terms of my lease rate. I’m not sure if dealers have the ability to negotiate lower rates or have some other power over it. 

Almost every vehicle that qualifies for an American Honda Finance Company lease has a subvented rate.  No markup is allowed on subvention.

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2 hours ago, MarvBear said:

Almost every vehicle that qualifies for an American Honda Finance Company lease has a subvented rate.  No markup is allowed on subvention.

Marv - Are you talking about the residual or the money factor.  Would agree that residuals are set and non-negotiable/changeable.  Does AHFC not allow dealers to mark up the MF for profit?  Would definitely be outside of all my buying experiences across many brands...

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Marv - Are you talking about the residual or the money factor.  Would agree that residuals are set and non-negotiable/changeable.  Does AHFC not allow dealers to mark up the MF for profit?  Would definitely be outside of all my buying experiences across many brands...
Not if it is a subvented rate .

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And I was just referencing the money factor. You can only mark up if you use standard money factors.

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Run the numbers to determine the lease cost.  

 

This can be somewhat challenging as computing the cost of a lease is more difficult than the cost of a loan. 

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4 hours ago, purplegurl1920 said:

Bump


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why?

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On 6/5/2019 at 6:09 AM, CTSoxFan said:

Do not apply ahead of time as you will be locked into a specific dealership.  Go to the dealer(s) and make your best deal.  Once you have decided what and where you will buy the car, then worry about financing.  From what you post you'll qualify for tier A/1 rates so financing shouldn't be an issue

 

More importantly, you need to familiarize yourself with all the terms related to car leasing such as residual, money factor, etc.  Go to leasehackr or the edmunds leasing forum for the model you are choosing and find out what the residual and base or buy rate money factors are, as well as what most people are paying for that model and any available incentives.  Once you have all this info:

 

 - Negotiate the price (cap cost) of your selected vehicle.  Make sure you know if the price is inclusive of all incentives or not.  See how that compares to what other people are paying.  You don't need to grind every last dollar or try to beat everyone's deal, but don't be the lamb that gets slaughtered either.  Do not negotiate on payment amount.

 - Once you have negotiated your final price, the rest should all be math.  Make sure you are getting the buy rate on the MF, and ask to see it.  Invest in an app like leasematic and calculate the payment yourself to make sure you get the same figures.  DO NOT PUT ANY MONEY DOWN except for first payment/tax/reg.  You should never put money down on a lease because if you total it that money is gone.

- Since it is a lease you won't need anything like extended warranty, etc. so skip all the sales items in the F&I office.  

How is it that putting more money down on the lease equal that money is gone? If you put $3,600 more down to decrease your payments by $100 per month on a three-year lease, the money isn't gone. If you decide you want to buy the car before  the end of the lease, the pay-off amount is decreased by whatever down payment hasn't been applied to future payments. Provide an example of what you're referring to.

Edited by Burgerwars

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On 7/14/2019 at 10:48 AM, Burgerwars said:

How is it that putting more money down on the lease equal that money is gone? If you put $3,600 more down to decrease your payments by $100 per month on a three-year lease, the money isn't gone. If you decide you want to buy the car before  the end of the lease, the pay-off amount is decreased by whatever down payment hasn't been applied to future payments. Provide an example of what you're referring to.

You missed the key words there..."if you total it".  Below is an example, I am keeping it detailed with simple math for those that don't understand leasing.

 

 

Almost every car lease has GAP insurance standard as a part of it.  GAP insurance covers you in case of an accident where the payoff is greater than the value of the car (for those reading who don't know).  For simplicity lets say the car is $50K all in and it is a 36 month lease with a residual value of 64%, and a 0.0001 MF (essentially nothing) and no taxes...again trying to keep the math simple.  You're payment each month would be $500/month ($50K cap cost less $32K residual = $18K/36 = $500/month with nothing down).

 

Now same example you put down $5,000.  You payment would drop to $361/month ($18k depreciation-$5k down = $13k/36).

 

So lets say you have an accident 3 months into the lease and you total the car.  As soon as you drive the car off the lot (and the car becomes used) the initial depreciation hit is ~10% (obviously this is model dependent).  So your car is now worth $45k.  You've made 3 payments in our hypothetical of $500 each, so you owe $48.5K (since there is no MF/interest in this example the calc is straight forward).  That $3500 negative equity is covered by the gap insurance and you walk away even.

 

Now lets take the same example with putting the $5k down.  The car is still worth $45K.  You owe $43.9K (the $50k initial less the $5k down less 3 payments of $361).  The insurance pays off the loan and you get $1.1K back.  BUT, you have now lost the $5k you put down on the car.  So net net, you are out $3.9K.

 

TL/DR - If you put money down on a lease and total it, instead of the GAP insurance covering the negative equity (which will likely be the case for most of the duration of the lease) you are covering that out of your pocket.

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Point taken. Whether you lease, buy, finance, steal, etc., a car, it's almost universally a money loser. I've leased and bought, and lost money, but that's the cost of having a set of wheels. The last car I bought new for close to $30,000 I eventually sold for $5,000, although I sold it for a bit less than it was worth because I sold to a relative who needed a car.

I wish cars were free. That would solve lots of issues. 😕

Edited by Burgerwars

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