WTF is Lease to Own?
 

A lot of you may have seen me talking about this, but may not fully understand how it works.

Kare 11 ran a story last fall explaining the numbers break down, and how the market got to this place.
http://www.kare11.com/news/news_arti...storyid=985847

Typical leases work like this:
You pay for X% of the car. The remaining value of the car is called the residual value. We can estimate the value of the vehicle 2-4 years from now because you are restricted to a certain number of miles per year. So based on X miles over Y years, we plan for the vehicle to be worth Z amount. That residual is the price which you can buy the car at the end of the lease.

The traditional model that most car manufactures follow is this:
Over value your residual, so that when the lease it up the customer is in a position where their car isn't worth as much as their residual. This puts them in a position where it's financially unwise to buy it. This then is where they rely on dealers to then sell you a new car.

Mitsubishi's model is this:
Undervalue the residual so that when the lease is due the customer has equity, and may want to use that towards buying a new Mitsubishi. Yes, I said equity in a lease, but I'll get to that in a minute. This also puts customers in a position where they can buy the used car they just took care of, for less than what the car is worth.

Take my Evo for example. The residual for my car is about $16,000. By that time it should be 4 years old and will have about 60,000 miles on it. I just sold a 2008 with 95,000 miles on it for $19,999. So yes, I'm pretty confident my car will be worth more than $16,000.

And yes, I'll be over my miles, and yes I've modded the hell out of the car. But none of that matters because I'm buying it. Those things only matter when you return the car.

Mitsubishi also has what they call a "Pull Ahead" program. It goes out 6-9 months before the end of your lease. It's a letter saying that if you buy a new Mitsubishi, they will let you our of your next 6-9 payments.

*A little known fact about leases*
Never just turn in the keys and leave! Dealers will buy a leased vehicle, even if it's not our brand!. It works just like if you have a loan on a car. We take the value of the vehicle (what we would buy it for) - remaining lease payments + residual. If residual and remaining payments are less than what we would buy your car for, you have equity!

Re: WTF is Lease to Own?
 

Yes.. Mhmm.. Yepp.. I know some of these words :)

Re: WTF is Lease to Own?
 

But what was the initial vehicle cost, your money down, and monthly payments ($ amount and total number of months) to end up at that $16k residual value?

Re: WTF is Lease to Own?
 

Original MSRP was about 35.5, only put $1000 down. It's a 48month/15k a year lease.

My payments, as an example are going to be vastly different from a normal situation because I had to carry about 6k worth of negative equity over on my Ralliart.

Re: WTF is Lease to Own?
 

1250 a month for a lease on an evo. That is total insanity in my opinion.

Re: WTF is Lease to Own?
 

Nevermind, 15k was mileage.

Re: WTF is Lease to Own?
 

From Mitsu's site:

2013 Lancer Evolution GSR

Lease: $259 per month / 24 months / $3,558 due at lease signing.Includes required refundable security deposit. Excludes tax, license, title, registration, documentation fees, insurance and the like.

OR

0.0% APR for 36 months (36 monthly payments of $27.78 per $1,000 financed at 0.0% APR)

This L2O deal keeps looking better and better ;)

Re: WTF is Lease to Own?
 

Hu? Not sure how you come up with that figure? It's 548.62 a months, including my negative equity.

Re: WTF is Lease to Own?
 

You stated 15k a year lease terms, which didnt sound right but leasing has to make money somehow haha.

Re: WTF is Lease to Own?
 

15,000 miles a year, not dollars, lol.

Re: WTF is Lease to Own?
 

Glad I financed mine at 0% for 36 months, I'll own it free and clear after 5 more payments and no silliness to worry about.

Re: WTF is Lease to Own?
 

That was one hell of an offer if you can afford the monthly payments. I know several people who took advantage of that.

Re: WTF is Lease to Own?
 

You also got to remember that this example is an Evo, which has a great resale value. I guarantee you won't have lease equity on any other Mitsu vehicle. It makes sense in certain situations, but I'd rather pay cash for vehicles. :D

Re: WTF is Lease to Own?
 

Most cars, yes, I would agree. But Mitsu intentionally under values there residuals to allow for this to happen.

Re: WTF is Lease to Own?
 

I know leases have been beneficial in the past for cars like Lexus and Acura, brands like Land Rover have taken a beating.