w1ngzer0 wrote:yah kind of. But how does leasing work exactly. I would imagine the car has to be under so many miles per year and does the money i put down on the lease go toward my payment?
Almost all leases have a mileage restriction. It is important that you know how many miles per year you drive on the average so you set up the lease to match. Money that is used as cap cost reduction reduces your payment, anywhere from 20-50 dollars per month per $1k you put down.
One advantage to leasing is that you are only paying on the part of the car that you are going to use. This part is called depreciation and the value of the car at the end of the lease is called the residual value. The residual is set at the beginning of the lease and the higher the residual is, the lower your payment will be.
Example: 2006 Nissan 350Z lease, residual at 57%, lease rate at 5.90%, 36 month term with an MSRP and selling price at 30,500 (say, an enthusiast model) will run you $535 per month without any money down. If the residual value were set at 50%, you would be paying $591 per month simply due to a lower residual value. Keep in mind that these are not actual numbers, but an example of how residual affects a lease payment.
For comparison purposes that same car on 36 month finance term at the same 5.90 rate (which would be an excellent rate right now) would run you $987 per month. Taxes are included and figured at the Indiana sales tax rate of 6% in both the lease and finance quotes.
Is it more apparent now why leasing would be advantageous? In addition to that, with a GMAC lease, you have no liability at lease end as long as there is no excessive wear and/or miles on the car when you turn it in. You can simply turn the car in and sign up on a new car without having to deal with negative equity. Again, just be sure to get enough miles allotted so that you don't have a huge overage at the end of the lease.
So now you see that a lease payment is usually lower than a finance payment given the same figures on the same car. With most cars you can negotiate a discount off of MSRP, lump in your negative equity and spread it out over the lease term, take a little higher payment than you would have had if you had no neg equity and still be lower than a finance payment. And at the end of the lease, voila, no more negative equity.
Does any of that help?