I am a finance manager at a volume import dealer.... AMA

[nycsimone]

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@ldkcivilservant wrote:

So let me get this straight - a 0% rate (if avaliable from the captive lender) could be marked up to 2.5%, and that would be pure profit for the dealer?

No wonder most people dislike car dealers.

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It's funny to watch and see how misinformed people are about the entire process. The 0% promotional interest is generally an incentive from the financial branch of the car manufacturer and you can either select that 0% interest rate OR the rebates.

A majority of people don't keep their vehicle for the entire 60-72 month term. I've never kept a vehicle over 3 years and most people I know keep their vehicles 3-5 years so the 0% interest rate is often less advantagious than taking the full rebate and getting 3% interest financing.

[Anonymous]

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@nycsimone wrote:

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@ldkcivilservant wrote:

So let me get this straight - a 0% rate (if avaliable from the captive lender) could be marked up to 2.5%, and that would be pure profit for the dealer?

No wonder most people dislike car dealers.

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It's funny to watch and see how misinformed people are about the entire process. The 0% promotional interest is generally an incentive from the financial branch of the car manufacturer and you can either select that 0% interest rate OR the rebates.

A majority of people don't keep their vehicle for the entire 60-72 month term. I've never kept a vehicle over 3 years and most people I know keep their vehicles 3-5 years so the 0% interest rate is often less advantagious than taking the full rebate and getting 3% interest financing.

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You are 100 percent correct. The only time it makes sense to take the promotional rate is if there is no additional discounts or rebates available, few exceptions being if the loan to value is exceptionally high So the risk based rate is high or if your credit is marginal and you are able to qualify for a promotional rate due to a lenders special programs.

[lhcole77]

@Anonymous  Curious if you have any experience with this-let's say I want to purchase my vehicle at lease end. Is there any room to negotiate residual value/purchase price? Or is that set in stone.

For example, I added wear and tear insurance. If I purchase, wondering if I can get that amount reduced since I won't be using it.

[Anonymous]

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@lhcole77 wrote:

@Anonymous  Curious if you have any experience with this-let's say I want to purchase my vehicle at lease end. Is there any room to negotiate residual value/purchase price? Or is that set in stone.

For example, I added wear and tear insurance. If I purchase, wondering if I can get that amount reduced since I won't be using it.

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Residuals are preset and not something that is negotiable. In 15 years in the auto biz i have never seen a lease company negotiate the buy out of a lease.... I have seen a lot of customers try though 😊. They have no way to account for the loss if you are buying the car. At the auction the price it brings is what it is.... no murky water. In the past some captive lenders have given there dealers a break buying the cars. Haven't seen that in a while though.

How long have you had the car and when does your lease end?

[lhcole77]

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@Anonymous wrote:

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Residuals are preset and not something that is negotiable. In 15 years in the auto biz i have never seen a lease company negotiate the buy out of a lease.... I have seen a lot of customers try though 😊. They have no way to account for the loss if you are buying the car. At the auction the price it brings is what it is.... no murky water. In the past some captive lenders have given there dealers a break buying the cars. Haven't seen that in a while though.

How long have you had the car and when does your lease end?

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Really appreciate all your feedback.

Got lease October 18 and it is up in October 21. Debating whether I want to buy it at the end or buy a new 2020 or 2021 model. Definitely looking to buy and to keep car for 5-10 years. VW has 3 month lease pull ahead program so may take back July 21 if price is right. Even open to sooner if I can work out a good deal.

[Anonymous]

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@lhcole77 wrote:

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@Anonymous wrote:

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Residuals are preset and not something that is negotiable. In 15 years in the auto biz i have never seen a lease company negotiate the buy out of a lease.... I have seen a lot of customers try though 😊. They have no way to account for the loss if you are buying the car. At the auction the price it brings is what it is.... no murky water. In the past some captive lenders have given there dealers a break buying the cars. Haven't seen that in a while though.

How long have you had the car and when does your lease end?

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Really appreciate all your feedback.

Got lease October 18 and it is up in October 21. Debating whether I want to buy it at the end or buy a new 2020 or 2021 model. Definitely looking to buy and to keep car for 5-10 years. VW has 3 month lease pull ahead program so may take back July 21 if price is right. Even open to sooner if I can work out a good deal.

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Tough to know what the value will be at the end of your lease and if it will be worth it. Over the years i have found with a lot of lease companies it is not worth it to buy the car looking at just dollars as retail transaction prices are many thousands less than the buyout. Keep in mind the buyout is a taxable amount. If you buy directly from the bank they Usually will not tell you that those moneys are your responsibility and you have to take care of this with the DMV. Keep that in mind looking at the out the total cost vs a retail purchase where that is added on. Many of times you guy buy a new car for only a little more. Could be better for you or not. As for the wear and tear you should look at what the manufacturer included- which could be a lot or nothing vs the price you paid for the policy and the wear you put on cars. Some policies can be canceled if you decide that cost out weights the benefits.