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I'm now much closer to making the purchase of my Amazon Green Ridgeline RTL w/NAV after deciding to lease rather than purchase. I didn't know anything about leasing but after visiting www.leaseguide.com, I am now well prepared to negotiate a fair lease price. If you are interested in leasing, the site has TONS of information on leasing. I especially found the "How Leasing Works" link to be extremely helpful in understanding the different factors of a lease.

Here's a brief description of lease terms and an example that illustrates how to calculate your own Ridgeline lease:

Capitalized Cost - The agreed upon price of a vehicle. It is also called lease price. It is always best to negotiate the lowest capitalized cost possible. The lower the capitalized cost, the lower your monthly payments will be.

Capitalized Cost Reduction - The capitalized cost of the vehicle less any rebates, factory-to-dealer incentatives, trade-in credit, or down payment equals the capitalized cost reduction.

Net Capitalized Cost - When you subtract the capitalized cost reduction from the capitalized cost, you get the net capitalized cost.

Residual Value - The value of a car at the end of the lease term, after it has depreciated, is called its residual value. The higher the residual value, the more the car is worth at the end of the lease--which means lower lease payments. Fortunately for us, Honda is rated as one of the best automakers to maintain high residual value at the end of a lease.

Money Factor - To calculate the money factor, multiply the money factor by 2400 (this is not related to the length of the loan in months--it is always 2400). For example, a money factor of .00204167 can be converted by multiplying .00204167 by 2400 which equals an APR of 4.9%. You can convert APR to a money factor by dividing the APR by 2400 (4.9/2400 = .00204167). Lease money factors should be similar to or lower than interests rates for purchasing a vehicle.

Lease Term - The lease term is the length of time the car is leased expressed in months. Typical lease periods include 24, 36, and 48 months.


The following is a list of lease fees and taxes:

First Payment - Payable at the inception of the lease and is not considered part of the down payment.

Security Deposit - A fee that is similar in size to your monthly payment. You pay this at the inception of the lease and is refunded at the end of the lease. Depending on the lease company, you may be able to waive the security deposit.

Acquisition Fee - An acquisition fee or "bank fee" is an administration fee charged by the leasing company. If the fee is charged, a typical fee can range between $250 to $900. An acquisition fee is usually part of the capitalized cost.

Disposition Fee - A fee usually between $250 to $450 that is charged by the leasing company to cover the expenses of selling the vehicle once the lease expires.

Tax On Down Payment - Any down payment that is part of the capitalized cost reduction is taxed and due at the inception of the lease.

Registration, License & Title Fees - These are the same types of fees you would pay whether you lease or purchase a vehicle.

Sales Tax - There are numerous ways to calculate sales tax depending on the state. The most common way is to tax the monthly payment at the local sales tax rate.

Lease Inception Fees - When a lease is signed, there are certain fees that are due at the inception of the lease. These include the first month's payment, any down payment, sales tax on the down payment, any security deposit, and license and registration fees.


Example Lease Calculation For My Future Amazon Green Ridgeline RTL w/NAV :D

Capitalized Cost: $31,073 negotiated internet price + $515 destination fee = $31,588. According to the site, you would also add the "Acquisition Fee" to determine the capitalized cost. I don't want to pay this fee so I didn't add it in the example. ;)

Capitalized Cost Reduction: $4,000 down payment

Net Capitalized Cost: $31,588 - $4,000 = $27,588

Residual Value: This is hard to determine as this is the first year for the Ridgeline and no data exists to calculate the residual value. Based on the information on www.leaseguide.com, they estimate a Ridgeline to have a forecasted residual value between $18,705 (12,000 miles/year) to $18,012 (15,000 miles/year) for a 36 month lease.

For my calculation, I will use the $18,705 residual value based on 12,000 miles/year and a 36 momth lease.

Money Factor: 4.9 APR = .00204167.

Lease Terms: 36 months.



Lease Payment = Depreciation Fee + Finance Fee + Sales Tax


Depreciaition Fee = (net capitalized cost - residual) / term

$27,588 - $18,705 = $8,883 / 36 = $246.75


Finance Fee = (net capitalized cost + residual) x money factor

$27,588 + $18,705 = $46,293 x .00204167 = $94.52


Sales Tax = (depreciation fee + finance fee) x local sales tax
$246.75 + $94.52 = $341.27 x 1.0775 (7.75%) = $367.72

Lease Payment = $367.72


Lease Inception Fees:
(Money due at inception of lease)

Capitalized Cost Reduction $4,000 (down payment)
First Payment $367.72
Security Deposit $400 estimate
Tax On Down Payment $310
Registration, License, and Title Fees $500 estimate?? Not sure what is appropriate for this category.

Total Lease Inception Fees: $5,577.72

After looking at this lease calculation, I feel my lease inception fees and lease payment are both a bit high. Areas I could focus on to reduce the price include the money factor and security deposit. Please note this is just an example but hopefully it illustrates the different components of a lease and how to effectively develop a lease plan that will work with your budget.

If anyone has any experience with leasing and/or has additional information to offer, please post your thoughts.
 

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I guess you can lease if you want, maybe you can do it through a business or something like that to write off the cost. I personally would have a hard time paying out appr. $20,000 over a 3 year period and owning nothing at the end.
 

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It's the only way to get into a $31.5K vehicle with $5K down for $367/mo. The leasing company is betting on the vehicle's high resale value.
 

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shovelhd said:
It's the only way to get into a $31.5K vehicle with $5K down for $367/mo. The leasing company is betting on the vehicle's high resale value.
The problem is you are thinking in terms of $367/mo. The actual monthly payment is higher than $505 when you spread that 5K downpayment out over 36 months.

BTW, that $5000 is gone forever as soon as you drive out of that dealership. If you get totalled after one day even if you have gap insurance, the lease is paid off but you're out $5000.

IMO lease crap, finance Hondas...
 

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Discussion Starter #5
Thanks for the post Crispy. I am looking for all points of view on the lease vs. purchase issue.

If I understand your logic, and my monthly payment is $505 when you spread the down payment over 36 months, then you would have to spread the down payment of a purchase over 60 months to compare apples to apples. In that case, I'm still paying less than you in the short term. Instead of financing the entire purchase price of the vehicle over 5 years, I'm financing the depreciation of the car for the first 3 years; I'm paying for what I use. Although, I admit that I should be able to negotiate a better deal that my example above. Also, the down payment is $4,000, not $5,577.72. The additional $1,577.72 is part of the drive-off fees (lease inception fees) and is similar to fees you pay when you purchase.

Please keep in mind that there are additional reasons why people choose to lease instead of purchase.

1. Lower monthly payment, lower down payment.
2. Vehicle is under warranty for lease period. I feel strongly about this as the Ridgeline is in its first year.
3. I'm starting a family soon and after 3 years we can re-evaluate and see if the Ridgeline still suits our needs. Maybe we can get the 2009 Ridgeline?? :D

If anyone else has a view on lease vs. purchase, please post. I am insterested in learning more about these two options before I make my final decision.
 

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Just remember, Dealers are PUSHING leasing for a reason. Because it is better for THEM.

First time leasors are easy to get. People are used to a "downpayment". So if they are trading something in, they don't mind seeing that equity go into the new vehicle. It's what they are "used to".

Problem is, 36 months down the road, the lease is up. You've got no equity. You've got to get something else. Buying the leased vehicle will not be an option. And this time you don't have that $4000 to put down.

I'm financing $24,000 with $1000 down and paying under $400. But I'm buying an RT since we already have the nicely equiped Ody.

Again, all of this is just my humble opinion. ;) And yes, I've leased a vehicle in the past and so did the woman I married. I'm so anti-leasing now it isn't funny.
 

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Discussion Starter #7
I understand what you are saying. I think it comes down to personal finances. I can afford to purchase the vehicle with a large down payment to make the payments work but... the lease is so attractive because I have a low drive off amount and low payments.

I looked in the paper today (Southern California) and saw an ad for Ridgeline w/NAV for $349+tax, 36 month lease, $2999 drive off, no security deposit, with 12,000 miles/year. Not sure what the cap cost of the vehicle is but that seems like a good deal compared to my example above.
 

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I am on my third lease and have had good experience with the process. For me its no down payment(its best not to put down anything) and lower monthly payments vs buying that make it attractive. After 3 years I can buy the car or go lease another. I have only paid for half of the vehicle at this point and have no expense beyond regular maintanence. Some people love leasing others hate it, paying cash is obviously the best. It all depends on what your finances are. :)
 

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Just letting you know, I'm a salesman for Honda and the residual has dropped since I leased my navi the first week of April and for 36 months, the residual is 59 or 60%, cant remember right now. But your getting a great price on your navi, and BTW, gap insur. is included in a lease.
 

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Rocker is right .

Leasing is not a good deal if you have to make a large dwn payment.

It works if you put nothing down and you trade off at least every 36 months anyway and you are a low mileage driver. Otherwise you are always in a negative equity position with no collateral for a trade in. Look at driving the vehicle for 48 months and having a 15K down payment on your next ridge instead of nothing in equity.
You also need to look into the warranty Honda sells for cheap. 100K miles of Honda care is about $1200 bucks on the net. My adivce is to go for a less expensive MSRP if you concered about the payment drive the thing for 4 or so years and get the long term warranty . Then when you have some equity you can afford to buy the more expensive truck and still have the low payment.
If the payment is to high your trying to buy more truck than you can afford and leasing is not going to get you into the position to afford it later unless your expecting on winning the lotto.
Its the same with intrest only home loans that people are sold a home they really cannot afford and are putting off the loss by looking at the purchase in the short term.
Yes leasing sells on the idea you are only paying for the part of the vehicle you are using what the dont tell you is that you are giving away the part that should be your equity on your next purchase.

Also I have two kids age 4 and half and 13 months, the wife drives an 04 fully loaded tahoe but any time we leave the house everyone wants to pile into the Ridge. I was also in the car biz for way to many years.
 

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You also have to remember that what you are really doing is paying the dealer for the most costly years of the vehicle in terms of depreciation. Yes you are getting what most people consider to be the best years of the vehicle, but at the end you will have nothing and you will have returned a very appealing used vehicle to them to resell at a much better price. With vehicle prices where they are and residual value over 3 years, if you purchase a vehicle with a 60 month load and trade it after 3 years, you will actually have equity in the vehicle. I traded my 4 year old Forester and had almost $8k in equity, I only put $5k and took a 60 month loan out on it. I was paying only $20 per month more than you listed and it was a $27k+ purchase. A year earlier I had it assessed at $3,500 more than I traded it for on this vehicle, so my equity in the vehicle only increased approximately $1200 over that year.

But this shouldn't stop anyone who believes in leasing from doing so. It is just something to consider when you are thinking about leasing over buying. Especially if you are an extremely low mileage person like me (under 8k miles a year in general, traded the forester with 26k miles and it was 4 years and 1 month old).
 

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So much constructive information on this subject, I guess so much depends on ones personal financial situation. I have never really thought AUTOMOBILE and INVESTMENT should go in the same sentance. If I viewed this from an investment standpoint, I should have kept my old GMC and bought land with the difference, its the only thing I have ever made money on :) The ridge is my first lease, part due to finances and part due to the first year vehicle thing. I know that in 36 months I will have a definate opinion, If It does not work out It would not be the first time I have learned by experience. P.S. I LOVE THIS TRUCK! :D
 

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Don't let the ROC get you down, lease fans. It's a religious argument. Gather the data, and do what's right for you.
 

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oridgenL said:
So much constructive information on this subject, I guess so much depends on ones personal financial situation. I have never really thought AUTOMOBILE and INVESTMENT should go in the same sentance. If I viewed this from an investment standpoint, I should have kept my old GMC and bought land with the difference, its the only thing I have ever made money on :) The ridge is my first lease, part due to finances and part due to the first year vehicle thing. I know that in 36 months I will have a definate opinion, If It does not work out It would not be the first time I have learned by experience. P.S. I LOVE THIS TRUCK! :D
Oh if you read my statement as buying a car is an investment you totally misunderstood me. A car is a tool not an investment. Investments appreciate not depreciate in general (yes we all know how good our stocks have been). That isn't to say that you shouldn't consider how your money depreciates over the period of time you hold the truck. A lease is a 100% depreciation program, every penny you put into the truck is lost the moment you spend it. On a loan/purchase, the money you put in depreciates over the life of the vehicle not the life of the loan.

In the end, the vehicle has a $0 value to both of us, just a matter how long it takes to get there. Again there are several factors that go into this. Like how long are you going to keep the car, how many miles will you put on it, what would be the approximate residual value at that time and how much would you still have left on the loan if anything if purchased. Compare this to the lease. If you trade every 3 years and to get to a similar payment you have to go to a 6 or 7 year loan you may well find that a lease is more economical because you may end up upside down in a loan but with a lease you won't owe anything at the end.

What I have found for a lot of people who lease is that they consider today only and not the result at the end of their 3 years. So they think of how much it costs to make payments and not what they will need to do at the end of the lease. Again for some people a lease is good because it fits their lifestyle and it protects them from the common problem of being upside down in a loan when they are ready for their next vehicle.
 

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Thank you captmiddy, I appreciate what you are saying :) I definitely did not have any counsel on leasing before I took the plunge. I was awake enough to change dealerships after 20 years after my dealer FRIEND tried to take advantage of me on this truck. I for sure had that deer in the headlight look over this vehicle :eek: This has never happened to me before over any automobile. One question I had, my current dealer made kind of a big deal out of telling me that another option I had at the end of my lease was to sell the truck outright and " put some money in my pocket" could you shed some light on this :confused: Thank You!
 

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oridgenL said:
Thank you captmiddy, I appreciate what you are saying :) I definitely did not have any counsel on leasing before I took the plunge. I was awake enough to change dealerships after 20 years after my dealer FRIEND tried to take advantage of me on this truck. I for sure had that deer in the headlight look over this vehicle :eek: This has never happened to me before over any automobile. One question I had, my current dealer made kind of a big deal out of telling me that another option I had at the end of my lease was to sell the truck outright and " put some money in my pocket" could you shed some light on this :confused: Thank You!
Your welcome and as was already pointed out if you can sell over the agreed residual value, you can pocket the difference. This isn't an easy thing to do since you never are the title holder on a leased vehicle, which means a lot of title work and such to get the vehicle's ownership transferred. At the end of the lease you are responsible for returning the truck in agreed upon condition or paying the agreed residual value. So what this means is you have to get a buyer who will agree to buy it after you complete your lease so that you can go in, pay for the car and then turn around and sell it at the agreed higher price and pocket the rest.

They always make it sound so easy, but it isn't. In some states titles can take several weeks to transfer from the dealer to you officially, and you can't really sell the car till you hold the title because it is likely the person you are selling it too wants a loan and they can't get the loan without the title to secure it with. Before you consider this as a good approach, you should consider what it will take and how much money you will need to sink into it to make this a viable option. It may be cheaper just to return the thing to the dealer.
 

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Well in 32 months I should be alot more clear on what to do... I hope.....usually along with that comes what not to do again. One thing I will know for sure is if this dealer was any different than my last one. Thanks again
 

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All I know is the buyout at the end of a 60 month lease on my wife's Durango was $16,000. For a <$9000 SUV. Even Honda couldn't make up for that kind of difference.

Plus there was the lovely $300 "turn-in" fee. Pay them to take the truck back. Nice. Not to mention the over-mileage and damage assessment WHICH YOU HAVE NO CONTROL OVER! Other than to spend thousands getting every little ding and dent out.

Leasing = Delayed aggravation.
 

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I just came across this thread and can't help but reply... :)

For those opposed to leasing - remember, irregardless if you lease or buy, you are ALWAYS paying the depreciation gods. In other words, buy or lease, you are losing money. After buying and leasing many vehicles over the years, I can tell you that depreciation hurts either way. Leasing just allows you to pay off the depreciation each month, rather than taking the hit at the time you sell the vehicle...

I can also tell you that the residual values for Hondas are VERY accurate. The value of the vehicle after 3 years is usually very close to the original residual...

Also, remember, with a lease you don't have to pay state sales tax on the new vehicle at time of purchase (only tax on the payment). This is a large some of money that you can invest in your favorite mutual fund... :)

Essentially, if you want a new car every 3 years, drive a predictable amount of miles, take care of the car, and invest the difference, you should lease...

My three cents....
 
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