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Notes on car buying: cash, credit or lease 

News Slightly skeptical view of modern cars and their engines Recommended Links Forrester SUV 2017 Is Toyota RAV4 Hybrid competitive with Forrester Premium 2017 ? Toyota Rent a Car Toyota lease on a new 2016 RAV4 Hybrid
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Trust but verify. That means bringing laptop of tablet with you to the dealership is a must. At least for the psychological effect.

Modern cars are pretty reliable the first 6 years. Typically problems start after 6 year of ownership. Here different models vary greatly with some annual cost of maintenance can approach the cost of leasing of a new car. And some running 12 years without any major problems. 

Some people commute to work by train and they would  prefer a lease with less then 10K miles per year. But unfortunately such lease is not available from none of major manufactures Finance arms (looks like 10K per year is a minimum for both Subaru and Honda, 12K for Toyota ). 

One way to create artificial short mileage lease that is possible with Subaru and to buy a car and then sell it after three years via Subaru owners program. You might need help in calculating what depreciation Subaru uses for this program and is it mileage dependent or only age of the car dependent.

If you are leasing the car you need to understand the mechanics of the lease  on the level of being able to create Excel spreadsheet to verify the conditions proposed. Never negotiate a car deal based on monthly payment. You need to negotiate the selling price first, then conditions of the financing. Be especially careful when a 0% APR deal is going on. Usually such deals contain hidden fees that compensate for this lost interest on the loan.  they can be called "disposition fee". they can change you higher GAP insurance. Higher bank fee, etc. Try to stay focused on the purchase price and the total cost of the load.

The necessary terms

  1. Base cap cost of lease is price is the vehicle price you and the dealer agree which is usually a discount off the sticker price. It is typically called Base Capitalized Cost in a lease contract
  2. Capitalized Cost Reduction': This is any upfront payment that reduces the cost of financing of the car.  Reduction can be made from cash, the value of a trade-in vehicle or through rebates.
  3. Net capitalized cost  is capitalized cost - capitalized cost reduction, This is the amount of money for which you get the loan from the bank. 
  4. Residual is the cost of the car after the the end of the lease. for the first three years for reliable cars it is around 10% per year.  After five year car loses typically 42-48% percent.
  5. Interest on the loan is what you are paying the bank for the loan. From this value "money factor" is calculated, which is used to calculate the total interest on the loan. Beware zero percent loans. They often are structured to get interest payments from other part of the cost of lease.
  6. Bank fee is upfront fee that you pay the bank for the privilege to obtain the loan. You can view it as the part of interest.
  7. Disposition fee is the fee some vendors and dealership change if you do not buy the car
  8. Gap insurance is the additional insurance dealership or manufacturer financing arm provide you. It is usually highly overpriced (often twice) and you might be better off getting it from you insurance company, if you can. One trick dealerships are playing with those who lease the first time is selling them overprice Gap insurance ( CarsDirect )
    • Online Gap Insurance Providers Offer Low Rates: While new government standards have reduced the number of online gap insurance providers, you still have some good choices for some of the cheapest gap insurance out there. National Gap Insurance offers gap insurance for just $349. This insurance covers vehicles up to eight years old as long as they are financed for a term of less than 72 months. Any interest less than 12.5% APR included in your loan balance will be paid. National Gap Insurance also offers for $399 a policy with the same coverage over an extended, 84 month term. You can also find gap insurance for as low as $299 per month at Just be sure to confirm that the coverage fits your needs and the term of your loan.
    • Avoid Dealership Gap Insurance: Gap insurance is not required for a dealership to sell a car. The finance and insurance manager may illegally inform you that purchasing gap insurance is mandatory to finance your vehicle, especially if you have some blemishes on your credit history. Policies like gap insurance are large profit centers for new and used car dealerships, so never take the dealership's first offer. If, after some negotiating, the dealership offers gap insurance for under $400, consider it. Just remember that the dealer likely purchased the policy from the JM&A Group for between $500 and $1,000.
    • Ask your Insurance Agent: Unknown to many, traditional auto insurance firms offer gap endorsements for current policyholders. In this case, your gap coverage is simply added as a line item on your current policy. Not all insurance companies offer this endorsement, but it is best to check with your State FarmProgressive or GEICO agent to see if they can save you any additional money by adding an endorsement.

Period for  comparison

The comparison period for leasing vs. buying should be 9-10 years. Modern cars usually can lasts at least 10 years, although maintenance cost start rising   after 6 years or 60K miles.  And most buyers keep bought cars for 9-10 years.  That means we need to compare 9 year ownership with with three 36 month leases, and 10 years ownership with two 60 month leases.

Again maintenance costs for most cars kick in after 6 year. If the car has timing belt that entail timing belt replacement which easily run you $1K (with water pump usually replaced too). Add to this new tires, new battery, sparks, brakes, transmission fluid replacement, differential fluid replacement in AWD cars, etc  and we are taking about $2K-2.5K on 7th year of ownership.  And then maintenance costs are gradually rising due to replacement parts costs with most problems caused by failed sensors (typically after 8 years a couple of sensors goes south, something ealier then that)  and exhaust.  Making owning the car less and less attractive each year.  Expect to lose approximately $6K in 10 years if you lease the car three times using 36 months leases instead of buying. But all those years you are driving less then three years old car with perfect brakes and fresh airbags.  

Paying cash gives you the most power in negotiations. For example if MSRP is 29K can usually buy it for around $27,500.  For a lease you power to negotiates is substantially less, as you typically finance car via financial arm of the manufactures which gives you a lease package on take or leave terms. If you use the third party, then you usually pay slightly higher percentage.

You might also be limited in choosing the equipment you want in promotional leases from the manufacturer.

Example: Toyota June 2016 lease on a new 2016 RAV4 Hybrid

Here are conditions of the lease provided by Toyota in June 2016:

Get a 2016 RAV4 Hybrid for $209 for 36 months

Lease a new 2016 RAV4 Hybrid for $209 a month for 36 Months with $3,199 due at signing, which includes $2990 down, $209 first month's payment and $0 security deposit. Example based on model 2016 Models 4444.

Total MSRP including freight is $29888. Monthly payments of $209 x 36 Months equals $7524.

Capitalized cost of $26019 based on down payment and dealer participation which may vary by dealer.

Lease-end purchase option is $19128.

$350 disposition fee due at lease end unless customer purchases vehicle or decides to re-finance through Toyota Financial Services.

Lease does not include taxes, license, title fees, acquisition fee of $650, insurance, regionally required equipment and other dealers’ charges are extra and not included in the amounts shown. Closed-end lease.

Payment may vary depending upon final transaction price. Customer responsible for maintenance, excess wear and tear and $.15 per mile over 12000 miles per year. To qualified Tier 1+ customers through Toyota Financial Services. Must take retail delivery by 07-05-2016. Does not include College Grad or Military Rebate.

*Covers normal factory scheduled service. Plan is 2 years or 25K miles, whichever comes first.

The new Toyota vehicle cannot be part of a rental or commercial fleet, or a livery or taxi vehicle. See plan for complete coverage details. See participating Toyota dealer for details.

Valid only in the continental United States and Alaska.

You can see that actual down payment is $3199+$650 + taxes + dealership doc fees+DMV fees + gap insurance. If we assume 7% tax is 735.98, $300 doc fees, $284 DMV fees  and $720 for gap insurance (this is a double of what you should pay, but dealerships charge that much), this is $5888.97 (so called cash upfront). Also $350 disposition fee need to be calculated in. You probably can buy the same car for 27,500. If you get a  0% loan for 48 month from Toyota then estimated 9 years cost of the car will be $35215 in comparison with 42536 for the consecutive leases. As you can see from the spreadsheet below that lease is less cost effective, even with this supposedly subsidized by Toyota lease  (and calculation assumes that you can get a zero percent loan, which in not given later this year).

The difference is around $58 a month or approximately the cost of gas.  Of cause, if you are leasing the car for 36 month, then from year 4 you are driving newer car, but this is not so important for many people. Also you save a lot of nerve energy of dealing with repairs and regular maintenance (30K maintenance is usually pretty expensive). That also some money saved.

Total MSRP including freight listed in Toyota lease offer (misleading info) 29,888.00
Delivery cost     879.00
Base Capitalized Cost (negotiated price of the car)     29,009.00
Cap cost reduction     2,990.00
Net capitalized cost     26,019.00
Total monthly payments 209 36 7,524.00
Total payment     10,514.00
Tax (7%) 7%   735.98
Acquisition cost (bank fee)     650.00
Dealership doc fees     300.00
Total Interest  paid for the loan 2.43%   633.04
Gap insurance (if bought from Toyota dealership, insurance company is cheaper) 720.00
Roadside assistance from AAA for one year (first two years are free)   75.00
Maintenance costs (third year oil change and tire rotation)     200.00
Disposition fee     350.00
DMV fee     284.00
Cash upfront     5,888.98
Total cost of the lease     13,828.98
Residual     19,128.00
Total cost of the car if you are buying it at the end of the lease 32,606.98
Total cost of three consecutive leases     42,536.94
Realistic price at which you buy the same car for cash (Edmunds)   27,800.00
Tax (7%) 0.07   1,946.00
Dealership doc fees     300.00
Registration and title fees       325.00
DMV fees ($284+ 6*$70)     704.00
Gap insurance      720.00
Total cost of the car      31,795.00
Additional maintenance costs     5,000.00
Cost of roadside assistance after first two years (AAA $60 a year)   420.00
Residual cost of a 9 years old car (Blue Book value)     2,000.00
Total expenses on the car if you are buying for cash     35,215.00
Per year  losses  (cash ownership vs. lease)     813.55

Car reliability

Buying the model after the first year of production probably is a better deal, as many defects are discovered and fixed during the first year of production. Minor upgrades don't count as much. But completely redesigned vehicle is by definition more problematic.

There are traditional "reliable brands" such as Toyota and Honda last at least 10 years with approximately $1K maintenance per year cost for the last 4 years.  But much depends on you (diligence in maintenance) and the car. For such cars lease might be less attractive, despite the fact that it is cheaper. You probably would be better off financing the car and selling it after cetin amount  of years (cars depreciate dramatically the first three year (probably one third) and then depreciation slows down.

The second question is the complexity of the car. The more complex the car, is the less reliable it is. So luxury models paradoxically can have a lot of problems as they are oversaturated with electronics.  That includes Toyota and Honda hybrids.  Also CVT is generally less reliable then traditional gear based automatic transmission, especially for aggressive drivers. So cars with CVT are probably more suitable for lease.

For complex cars packed with electronics a lease might be safer bet. That's why luxury cars are leased at probably trice higher rate then regular cars -- 70%-75% .

Car safety

As GM faulty ignition switch story tell us there is no guarantee. You can get into troubles, even for a model that is produced for many years.  They knew about faulty switch for more then 10 years and more then a dozen peoples died due to this defect. See Slightly skeptical view of modern cars and their engines

Toyota "run away" problem also supposedly resulted by more then a dozen death (I do not understand why people can't just switch the engine off is such cases). Toyota recalls 4 million vehicles amid unintended acceleration problems  

Last month, Toyota issued a massive recall of nearly 4 million Toyota and Lexis vehicles. The recall is intended to fix a very dangerous defect which can lead to Unintended Acceleration of the vehicle. Initially thought to be an issue with floor mats, the real problem involves the cars electronic throttle system. The recall was prompted by a high speed crash in August in California of a Lexus barreling out of control. As the vehicle hit speeds exceeding 120 mph, family members made a frantic 911 call and said the accelerator was stuck and they couldn't stop the vehicle.

For more information regarding Toyota and Sudden Unintended Acceleration visit:


Safety rating is are not all the information you need. You also need to look for greedy executives.

 "The $10.6 million total budgeted for 2014 (for safety investigation) is less than the $14.4 million total compensation package that G.M.’s chief executive, Ms. Barra, 2014 compensation. It reflects the difficult dance between government and industry.  Too often, regulating agencies see themselves as friends of the industries they regulate. Whether this is due to regulatory capture or a business friendly ideology, it is a disservice to both industry and the people they serve. Regulator Slow to Respond to Deadly Vehicle Defects -

Gene, is a trusted commenter Atlanta, GA link to comment 

The problem here is not just the NHTSA. The manufacturer's and dealers are on the front line. In every case cited, they knew there was a problem. Yet, it took years to fix it. In most cases they could tell there was a problem even before it began by reviewing the designs.

In the case of the GM switches, even the redesign didn't work. All they had to do was put weight on the key to prove it! In the case of the air bags, Takata designed a container with metal that could separate from the canister holding the bag, even if not prematurely. Why use metal? Ever heard of hinges? In the case of the Jeep gas tanks, you only had to look at the back of the Jeep to realize that the exposed gas tank could rupture gas ignite if hit from the rear.

Call it sloppy engineering and testing. After the deaths, the focus is on limiting the liability and expense. Why not just pay attention to the basic design and avoid the massive consequences.

Louis V. Lombardo, Bethesda, MD link to comment

Thank you for this excellent reporting! Based on my work on auto safety at NHTSA 1978 - 2006 (one year 1985 - 1986 at IIHS), I can honestly say this coverage is of life or death importance.

I can also sadly say that NHTSA is now a captive regulatory agency driving under the influence of the auto companies. It is not just NHTSA budget limitations - although the Defects Office has been grossly underfunded since 1980. The NHTSA revolving door has resulted in people going in and out and to and from the auto industry. See

Lease calculation

The main attraction of the lease is complete freedom from all maintenance worries.  Leasing a car is now pretty polished business, that is used by many people on a regular basis.  Bu this is an expensive proposition. You should never expect to have the same total cost of ownership for, say, 9 years leasing a car vs buying. 

The first 6 years of car life are usually trouble free, but after that maintenance cost rise sharply. Most manufactures provide bumper-to-bumper coverage for the first three years. The main drawback is excessive cost in comparison with owning a car. For example if you buy a car for 24K and own it 9 years, spending $5K on maintenance in the last 4 years and $1 before that and repairs your total cost is 30K, of 3K a year. That means approximately  $250 a month. So the difference with lease is approximate $1.2K a year or $100 a month: you probably can get three year lease on such a car for around $250 a month with $3000 "Capitalized Cost Reduction" payment). Additional registration fees and taxed for two leases after the first, etc add around another ($200+$640)*2=$1680.

In other words there is no free lunch in "free market" economy :-)  But please note that at the end of this period you will be driving a car that is much newer and after first three years probably more capable (at lease electronics wise) and slightly more gas efficient that the car you own. At the same time not many people care about modern cars oversaturated with electronics. If you do't this is another important consideration and you can save by buying basic trim. New technology junkies can enjoy upper trims that might cost several thousand more and add features that are marginally useful.  At the same time such things as adaptive cruise control and automatic switching to high beam at night if there are no cars on the opposite side of the road are useful features that increase safety. Heated mirrors are difficult to get on lower trims and they also increase safety. 

Before you agree to the terms dealer proposed please run your figures using Car Lease Calculator. This is the best I have found. You will instantly see what's wrong with the number provided by the dealer :-). Even manufacture sponsored lease can be a rip off charging much higher interest for the loan on your "portion of the car" and you can obtain better terms elsewhere.

There are actually multiple car lease payment calculators available of Web and nothing prevents you from trying several of them in order to better understand the ropes.  See Recommended car lease calculators

However, evaluating a lease is  difficult because payments are based on a combination of factors, of which price is only one. There's alsothree other important factors

Some people lease with the intention of buying their vehicle at the end of the lease, or before the end of the lease. that's almost always a bad idea, unless the car is new and you are unsure about its quality. In the latter case the first three years is like an extended test drive. It also allows them to start out with lower payments by leasing and then buy the car at lease-end with a used-car loan, but at the end you always pay more. Most often considerably more (at the tune of $3K for three years lease).  This technique is nearly always more expensive in the long run than simply buying outright.   In most cases it is better to get loan and buy the whole car from the very beginning.

Most car leases have automatic built-in GAP coverage, while car purchase loans do not. GAP coverage, or GAP insurance, pays the difference between what you owe on your loan or lease, and what your vehicle is actually worth if your vehicle is stolen or destroyed in an accident. Dealships view this as aprofit center and usually you overpay for them $300 or even more. It is better to get gap coverage via your insurance company if you can.

As with any question of this type, there can be more than one answer, depending on particulars.

A slightly better way to drive a late model car at the lowest possible cost is to take over someone's existing car lease. It's less expensive than taking out a new lease. You avoid all the up-front hassles, negotiations, and fees. Many people who took  great lease deals now need to get out after losing a job or suffering other financial distress. Most lease companies allow those leases to be transferred to someone else by simply paying a small transfer fee.  If you are driving   low number of miles per year that can save you some money.  Online companies such as  act as match-makers. You can look over their vehicle listings and if you find a car you like, they help arrange the lease transfer. The "seller" pays most of the cost. It's easy and fast.

Car leasing is always more expensive in a long run, if the car is reliable.  in ten years you overpay for the privilege to drive the latest model to the tune $500-$1K a year. But you never have a trouble of repairing your car and saved time and nerve energy also have a cost. Time is money.  The ability to avoid all the stress connected with repairs is probably the most significant plus (for 9 year ownership maintenance costs are around 5-7K. But 12 years typical maintenance cost are around 6-8K  and might be closer to $10K)

If you can take over someone's existing car lease, you save on down payment and the cost comes close to the cost of ownership. It's  less expensive than taking out a new lease. You avoid all the up-front hassles, negotiations, and fees.

Let's simplify the answers and summarize them here:

1. You can consider four three year leases of the car equivalent to buying. The SHORT-TERM monthly cost of leasing is ALWAYS SIGNIFICANTLY LESS than the cost of buying. But total costs of leasing are dramatically higher.

With zero down payment for the same car, same price, same term, and same down payment, monthly lease payments will always be 60% or more lower than cash or loan payments. The total price you pay for 12 years will be approximately twice the cost of the car.  This is still true even when if we assume zero interest in both cases.

2. The life of the car (9-12 year) cost of leasing is approximately 50% higher then the cost of buying (assuming 3 year leases)

However, if you allocate lump sum at the beginning and invest it at 4% the total cost will be identical between leasing and buying. 


Buying vs leasing

When you lease you buy only "trouble-free" years of the car and do not pay  maintenance charges.  Generally for 12 year car lifespan you can expect to save around 50% by owning a car vs. leasing it  four times for three years.   Of course you will be driving an older vehicle after first six years and can suffer from rip-offs during repairs (dealers main source of income is not new car sales anymore -- it is repairs),  but still 50% is a reasonable estimate.

Most repair costs start after 6th year and can run as high as $1K a year on average for the next 6 years (some years are better then others). For example if you bought a car for $22 cash and spend in 12 years $6 on maintenance your total cost is $28K. If you lease this case for $250 with $3000 down payment, you pay $12K each three years or $48K for for 12 years.  That's 58% overpayment.

As an example, if you LEASE a $25,000 car that will have, say, an estimated resale value of $13,000 after 24 months, you only pay for the $12000 difference (the depreciation), plus finance charges (which BTW can be substantial). You return the car at lease-end and need to pay again registration feed, tax, etc. You insurance cost might be slightly higher as you do not own the car.

When you buy a car (cash or loan), you pay the entire cost of the car ($25,000), plus the interest on your loan plus other charges (registration cost is equal to what is charged for registration on a three year lease). You own the car at the end of your loan or immediately if you paid cash.  After you paid your loan, you have the option to sell or trade the vehicle, or continue to drive without monthly payments for the total useful life of the car (let's assume 10-12 years or 150K miles for modern cars)

All cars suffer the same depreciation regardless of whether they are purchased or leased.  

Because leasing is made somewhat more complicated with residuals, term, money factors, acquisition fees, etc.; it shouldn't be undertaken quite as casually as you might with a car loan. There are more opportunities to misunderstand and make mistakes. Therefore, leasing requires that you be more careful and more informed. 

Leasing may also require a higher credit score than a car loan. Personal credit scores are available for free online with a simple enrollment at web sites such as Your score might mean the difference between leasing and buying, or not getting approved for either.

Determining a fair price for a new car

It's easy enough to find fair price a new car. that does not mean that you have to save that last $10 on price but it prevent gross rip off by the dealers, who sometimes pray on uninformed customers. The simplest way to obtain a fair price for your model and trim level is to use a free service such as TrueCar to compare the price you are being offered to what other people are paying for the same car. also can serve you as a guide for the price you need to pay.

Most dealership now have an internet person who can provide you a quote by email.

Please note that if you have a dealership near you that offers such perks as free oil change and free loaner car this should also need to be included into the price. For example oil you can assume that you are saving $100 for each 10K miles you drive on oil change, and $50 per year on free loaner car. For ten years and 100K miles this is equal to $1500.

If you count saved nerves and possibility of traffic accident travelling to a remote dealership it is also money saved. That means that other things equal you should better have a dealership close to you. 

Also it's nice to support local dealership in any case.

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Old News ;-)

[Jun 12, 2016] Calculate Your Own Car Lease Payment

Most car shoppers have no idea what a good lease payment is for a car they're considering. They need a benchmark to guide them through the shopping process: something to shoot for as they get lease quotes from different dealerships. You can calculate such a lease payment with the formula described later in this article. However, there are easier ways to estimate what your lease payment could be.

Your first stop should be to check our Incentives & Rebates page. Here, manufacturers sometimes offer "lease specials" with very attractive monthly payments.

Another valuable resource is the Lease Calculator. You will need to have some information handy to get an accurate quote, but the calculator will do the math for you. It also pulls in current purchase price information about current models and local tax rates.

Finally, you can use the Internet to simultaneously get multiple real-world lease quotes. With three to five quotes in hand, you can quickly test the market. Later, you can finalize the rest of the deal with a phone call or e-mail.

If, after you exhaust these resources, you are still determined to calculate your own car lease payment, read on.

Lease Payment Estimating
Calculating a lease payment to the penny is unrealistic: Local taxes vary widely and the dealer may charge additional fees. But you can arrive at a ballpark figure by using the following formula. As an example we will use a $23,000 car and a three-year lease. That's a term highly recommends because, for one thing, you will always be under the manufacturer's bumper-to-bumper warranty.

You can calculate a "bottom-line lease" that represents the very best deal you can expect to get. Such a lease is based on the car's invoice price. When you shop and get quotes from dealers, if you get payments close to this (in a 36-month lease), you will have done well. As you're working on estimating your payment, please reach out to the Live Help team for free assistance any time you need it. They'll be happy to help.

To calculate a bottom-line lease payment, you will need to gather several figures:

1. MSRP of the vehicle. Also called the sticker price. You can find the MSRP price for each car shown on

2. The money factor. This is the interest rate on which the lease is based. It's sometimes called a lease factor or even a lease fee. To get the money factor, call the dealer or get the information from your credit union. A common interest rate is 3 percent and as a money factor, this would be 0.00125. (Here's a handy tip: To convert interest rates to money factors, divide the interest rate by 2,400. To convert money factors to interest rates, multiply by 2,400.)

3. Lease term. We recommend leasing for 36 months or less.

4. Residual value of the car. Look up your car's residual value. Or call the bank or dealer and ask for the vehicle's residual value. As a rough guide, most cars have a residual value of between 45 and 60 percent for a 36-month lease.

Calculating a Sample Car Lease Payment
In the following example, let's assume you negotiated the car's sticker price of $23,000 down to $20,000. We'll also assume that the interest rate is 3 percent and the residual value is 57 percent. So what would the monthly payments be on a three-year lease?The first step is to find out what the car will be worth three years from now. In other words, how much of the car's value are you going to use during the lease term? In this example, multiply the sticker price of $23,000 by the residual value of 57 percent.

$23,000 X 0.57 = $13,110

The car will be worth $13,110 at the end of the 36-month lease. Since the car was worth $20,000 (after you negotiated it down from a sticker price of $23,000) and it will be worth $13,110, you will be using $6,890 of the car's value.

$20,000-$13,110 = $6,890

Then, divide $6,890 by 36 (the number of months in the lease). That yields a base monthly payment of $191.39. But, before you get excited about how low this payment is, remember that this figure doesn't include interest or tax. Finding how much interest you'll be charged is the second half of the calculation.

Add the negotiated price of the car to the residual value and multiply this by the money factor.

($20,000 + $13,110) X 0.00125 = $41.38

Finally, these two figures are added together to give you the approximate bottom-line monthly lease payment.

$191.39 + $41.38 = $232.77

Remember, this figure still does not include taxes or fees. It also doesn't take into consideration any down payment, trade-in credit or upfront money such as rebates or incentives. The entire formula looks like this:

1. Sticker Price of the car + options $23,000
2. Times the residual value percentage X 0.57%
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
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 0.00125 (3 percent)
13. Equals money factor (interest) payment portion = $41
14. Monthly depreciation payment (from line 8) $191
15. Plus money factor payment portion (from line 12) + $41
16. Equals bottom-line monthly lease payment = $232

Don't forget that you haven't paid sales tax yet. To account for tax, multiply the monthly lease payment by the state sales tax. For this example, in California the sales tax is approximately 9.25 percent. (For a more precise preview of your payments, you can also factor in any local sales taxes at this stage.)

$232.78 X 0.0925 = $20.95. This increases your monthly payment to $253.73

In the above example, you could reduce your monthly payment with a bigger down payment or by trading in your old car. Most advertised lease payments assume at least $1,000 in "drive-off fees." However, you decide on the amount you want to pay for drive-off fees yourself. The more money you put into drive-off fees, the lower the monthly payment. Subtract any money you put down from line 4, which is the invoice price of the car.

While this calculation looks a bit complicated, it is easy to set up a spreadsheet to do the calculation for you. Then, all you need to do is plug in the new figures for each car you are considering and your spreadsheet will generate an estimated lease payment. It's time well spent, since this will guide you through the process and help you get a good deal on a leased car.

[Oct 03, 2015] How to buy a used car - step by step guide part 2 - how much you can afford, insurance, what mileage is OK

Buying 1-2 year old used cars

Sometimes you may come across a one- or two-year-old used car. On one hand, it might be a good deal, since a new car depreciates the most in the first year and there is still some warranty coverage left. On the other hand, the main question is how this car ended up on a dealer's lot, because usually people tend to keep their cars for at least three-four years.

Most of lease or finance contracts are also have three to five years terms. One common source for one-two year old cars is the car rental companies, as they typically lease their cars for one or two years, after which the ex-rental cars find their way to the dealer lots. Another possibility is that the car was either bought back or traded in because there was some problem with it that the previous owner couldn't live with.

It also could be an insurance write-off after an accident. Either way, if you want to buy a one or two year old car, try to find out where it came from and have it thoroughly inspected. Running the car history report can help. By the way, if you are looking for a one-year old car, you might be able to buy directly from a car rental company; read below.

[Sep 27, 2015] The moral universe of the corporate killers

Sep 27, 2015 |

Mark--The passage "As Paul Krugman points out" links not to PK, but to a Brad Plummer Vox article. I assume that you wanted to link to PK's column in this AM's NYT.

BTW, you may want to point to this Jeb! Tweet: I think that he may have set a record for the total number of horribly bad policy positions that one can advocate in 140 characters or less.


Couple of side bar comments:

...and apparently the buzz in the automotive world is that "everyone" was doing it...

Anybody who thinks Mr. Cook and Apple can't disrupt the automobile industry clearly isn't paying attention to the automobile industry. It seems designed more by cads than CAD. Smart elegant design? The auto industry is retrogressive: low hanging fruit. The whole damn kit: from CEOs to Dealers to Mechanics you can't trust. It's a moral atrocity.

Apple can and will seize the wheel and make a ton of money doing so...

As Paul Krugman points out, the scandal makes a nice counterpoint with Jeb Bush's latest "anti-regulation" rant.

Another nice counterpoint:

Of course there are many others. And of course there are also many cases of over-regulation. But you don't win an argument for smart regulation unless you have plenty of examples to draw from. I suspect Mrs. Clinton will be well-armed that way come the big time debates with Jeb!


Fisher's reaction is so typical for many economic libertarians that I've met. They can't really dismiss environmental problems altogether, so instead they diminish and minimize - "Oh, it's just some marginal emissions/a small amount of forest land/a little pollution into the river! What's the harm? And do you really want to hurt an important company that employs thousands over it over a little bit of dirty air?"


Mark is too easy on both VW and GM in this paragraph:

"That's not as bad as an ordinary murder, where the killer picks out a specific victim, because being personally singled out to be killed is somehow worse than being a random victim. But in both the GM case and the VW case, people wound up dead (or injured, or sick) through the choice of someone else. In the GM case, the company's culpability was mostly passive: it made a design or manufacturing mistake and then didn't disclose it or act promptly or adequately to fix it. What VW did was much worse: the 'defeat software' wasn't a defect, but a deliberate decision to break the law with the predictable consequence of killing hundreds of people, at least twice as many as died of GM's malfeasance. I don't think you need to live in Marin County to find that objectionable."

The pertinent question is whether VW or GM knew that people would die as a result of their actions. If they did, then they are as culpable as an ordinary murderer, despite not having picked out a specific victim or having acted "passively" in deciding not to disclose their mistake. They are comparable to a person who randomly fires a machine gun in a crowd.

David T

One of the ICCT engineers who uncovered this seems to be telling every news shop that will listen that people should be checking other automakers for the same problem. VW's behavior is so appalling and frankly stupid (destroy a company to sell a few diesels? It's not even their biggest product line) that it's hard to understand what they could have possibly been thinking. The general amorality of corporate culture may be part of it. But I wonder if there was a bit of "everybody else is doing it" going on here too. (BMW must be pretty happy that their car passed.)


Perfect movie reference(The Third Man, 1949). The sociopathic black marketeer Harry Lime is played by Orson Welles and his moral American friend Holly Martins by Joseph Cotten. As they ride in a Ferris wheel far above the people of Vienna, this exchange occurs:

Martins: Have you ever seen any of your victims?

Harry: You know, I never feel comfortable on these sort of things. Victims? Don't be melodramatic. [gestures to people far below] Tell me. Would you really feel any pity if one of those dots stopped moving forever? If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare? Free of income tax, old man. Free of income tax - the only way you can save money nowadays.



Ok. This may be an extremely stupid question, but how do we know that this was illegal? Many regulations of this type in the electronics/telecommunications field are overspecified and everybody knows the tests (and they cheat in similar fashions if not so explicitly and in such wholesale fashion). If the regulation was written to state that an engine will pass the following test then that's what would be built. Unless there was an explicit prohibition in switching modes or a requirement that the test mode be comparable to driving mode then the engineers may have just seen it as a game. So I'm not defending the amorality of this, but the question of conspiracy is harder to prove if it may not be illegal except under the EPA's theory. And if it wasn't obviously illegal, then what is the moral obligation of the worker to trade-off their livelihood for exposing the fraud.

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