Last post on May 14, 2013 at 11:11 AM
You are in the Mazda CX-5
What is this discussion about?
Mazda CX-5, Car Buying, Car Leasing, SUV
#5 of 97 Re: Cap Cost / Residual / Money Factor ??? [poor_subi]
Mar 29, 2012 (5:34 am)
(imo) Don't lease, EVER!!! All that upfront money you shell out is gone if you ever get in an accident, the insurance only covers what's left on the balance, not what the car is worth.
#6 of 97 Re: Cap Cost / Residual / Money Factor ??? [poor_subi]
Apr 02, 2012 (5:15 pm)
The residual value is so significant in the lease payment that it dwarfs the money factor and sales price + other capitalized costs. So from a market value standpoint, you want to compare it to other vehicles in the same market segment that you may like. You will be astonished when you see how much a small differential in resid affects the monthly bottom line. The CX-5 is the bomb if you are buying but if your are leasing, the 54% resid is bordering on horrible in my opinion. If the CX-5 is your favorite, compare the lease against your 2nd and 3rd choice and make sure you are sitting down. I did this myself and fortunately was sitting at the time!
As for your .0019, multiply it by 2400 to normalize this interest rate to an APR and you will get 4.56%. If the lease is 3 years, you should compare it to equivalent 3 year financing for buyers on new cars. You may then see that leasing from a finance perspective is more costly. If your FICO is worthly of something better than 4.56% which it sounds like is the case, then you decide. My credit union is offering 1.49% right now for new car 3 year loans so 4.56% sounds unfair.
It appears to me as though there is not a wide band between invoice and MSRP on the CX-5, especially with options above the base. Looks like the difference is only $600 - $900 so I would not expect us to be in a strong haggling position on sales price for something so new, hot, and possibly even hard to locate in some areas.
The 39 month residual being better is totally untrue. I think this is more of a ploy to get folks back into the showroom in the summer time of the year that your lease ends as car shopping spring fever is over by then.
Those advertised lease deals like you posted are often on low-end models or models that are not moving as quickly and almost never map to the exact car you want. They do a good job getting you there as they are typically attractively sounding lease payments.
#7 of 97 Mazda FRUSTRATION
Apr 02, 2012 (6:40 pm)
We looked at everything in the small/mid CUV/SUV segment with city MPG rated above 22. My wife likes to sit high but our CX-9 is simply not fuel-efficient enough for the coming threats of $5/gallon. Hence, 2 simple requirements, fuel efficient and high ride. Since I won't buy new, I am considering leasing for the first time since the most fuel-efficient cars are usually the newest. Also, I would like to get out of the viscious maintenance costs cycle. With leasing, one has a tendency to consciously lean toward fully-loaded vehicles, which we did. Narrowed in on the CR-V after 1.5 months of shopping. Then the bomb was unleashed and quickly became my number one choice. Yes, talking about the CX-5.
The most valuable lesson I learned by re-educating myself on leasing and doing lease deal comparions is that leasing actually exposes true variances in market value that are hidden when buying. The 2 lease deals below illustrate my point and show the math behind my pain and frustraton with Mazda, as they are forcing me into my 2nd choice.
The sticker price on these 2 vehicles is separated by less than $200. So for folks like us who have paired their list to Honda and Mazda, but unlike us are buying and probably financing, it is a no-brainer to just go with the one you like better, since the financing will be the same, given the similar sale prices.
The BIG PROBLEM for the CX-5 is exposed in the leasing market due to an 8% differential in residual value as compared to Honda. I looked at lease deals from a couple of Honda and Mazda dealers. The best lease factor I saw from Honda is .0016 (3.84%), while the Mazda was slightly better .00142 (3.41%). The sales prices are different in the real lease offers I show, favoring the Honda. However, you can reduce the Mazda sale price in the calculation and you will still see that the difference in residual is the dominating metric. Notice that the financing cost portion of the lease payment is lower on the Mazda by about $10, even with the higher sale price, due to the lease factor. But the depreciation portion is a whopping $91.30 in the red. This of course results in more sales tax as well. These are Pennsyvania leases which are taxed at 9%.
The CX-5 lease will cost $89.37/month more than the CR-V. If you are fortunate enough to get and equal sale price on the CX-5, the best you be able to do is get within $45.61/month of the CR-V. This was the adjusted calculation that I eluded to.
Keep in mind that it is Mazda who is saying the resale value of the CX-5 after 3 years/36k miles is 56% as you generally won't find a bank or leasing company who would invest in a more optimal residual than the manufacturer. You can argue that 56% may be a realistic number and that perhaps the Honda resid of 64% is artifically inflated. Though it doesn't matter if your plan is to turn the car over for another at the end of the lease. This low residual hurts you every month along the way. For buyers, it may not be obvious that the resale values between the 2 vehicles is so different. Even so, if Honda can inflate resids to lease more cars, why can't Mazda do the same in order to compete?
So my question to Mazda is: How can you build such an awesome car that will compete feverishly head to head against the likes of the Honda CR-V in the buyer market, yet allow the same car to be torched by Honda in the leasing market? Why not raise your resids to at least 58% to allow leasees to drive a CX-5 too? Aren't you short-changing this highly regarded newcomer? As a current Mazda owner I am shocked by these numbers and I am very frustrated that I cannot lease a CX-5 with sound mind. The better MPG and the customer loyalty free maintenance I will recieve for the lease term do not offset the $90/month difference in payment. This totally sucks.
Mazda CX-5 AWD GT w/TECH
Sale Price $29,875.00
Residual % of MSRP for 36/12k 56.00%
Residual Value $ $17,063.20
Total Capitalized Fees $0.00
Gross Capitalized Cost $29,875.00
Cap Reduction $0.00
Net Cap Cost $29,875.00
Money Factor 0.00142
MF as APR % 3.41%
Monthly Dep $355.88
Monthly Fin $66.65
Monthly Pre-Tax $422.54
Monthly Sales Tax 9% $38.03
Montly Payment $460.56
Honda CR-V AWD EXL w/Nav
Sale Price $28,500.00
Residual % of MSRP for 36/12k 62.00%
Residual Value $ $18,975.10
Total Capitalized Fees $0.00
Gross Capitalized Cost $28,500.00
Cap Reduction $0.00
Net Cap Cost $28,500.00
Money Factor 0.0016
MF as APR % 3.84%
Monthly Dep $264.58
Monthly Fin $75.96
Monthly Pre-Tax $340.54
Monthly Sales Tax 9% $30.65
Montly Payment $371.19
#8 of 97 Re: Cap Cost / Residual / Money Factor ??? [tinycadon]
Apr 06, 2012 (12:00 pm)
Actually, all good leases come with gap insurance built-in so this is not a reason one should not lease.
#9 of 97 Re: Mazda FRUSTRATION [captainrod]
Apr 06, 2012 (12:06 pm)
Oops, typo. The resid on GT AWD w/TECH is 56% not 54% but the good news is that the calculations did not have the same error
#10 of 97 Re: Cap Cost / Residual / Money Factor ??? [captainrod]
Apr 06, 2012 (12:27 pm)
Cap Insurance only protects the bank captainrod, if you put down $5k you lose $5k, if you put down $2k you lose $2k, so no matter what you will never recoup any part of the $$$ you put down when you drive off the lot even if your car is totaled 1 minute after you drive away.
#11 of 97 Re: Cap Cost / Residual / Money Factor ??? [tinycadon]
Apr 06, 2012 (1:34 pm)
Never say never. Leasing is the perfect situation for my business, and the last lease I acquired was $0 down, $0 for all maintenance, and actually rebates me for the miles I don't use. Lots of those deals out there - maybe not on the CX-5, but they are around, if you have good credit, are not a high-mileage driver, and want to get into a new car with very little out of pocket.
#12 of 97 Re: Cap Cost / Residual / Money Factor ??? [gearjammer62]
Apr 07, 2012 (9:47 am)
I would agree. For the self employed-Leasing with 0 down does make the most sense if you don't put on too many miles in 3 years. Having a vehicle always under warranty- driving the latest and greatest every 3 years- outweighs the purchase option considering most all vehicles lose in the neighborhood of 50% off MSRP in the same 3 years.
The only way to come out on buying new is to buy and "hold" w/ no major repairs needed (for a long time.) I bought a 1998 Camry and still driving today w/ 145,000 miles. It is ageing but running well. Nevertheless, there are always payments of some kind on an automobile. Either lease / purchase/maintenance / repair expenses to come up with on a virtual monthly basis.
#13 of 97 Re: Cap Cost / Residual / Money Factor ??? [tinycadon]
Apr 07, 2012 (8:33 pm)
Obviously the bank needs to be protected since they own the vehicle. You have 0 equity and will always have 0 equity as they purchased the car. So you have no asset to protect but the gap insurance does protect you, the lessee, in this situation from an insurance standpoint, as it fills the exact gap that you are referring to. When you do conventional financing you also lose some of all of your down payment in the event the car is totaled. This is why I say this is not a reason to conclude one should never lease. Also the insurance company certainly won't refund the sales tax that you paid so when you go to buy a replacement vehicle you will pay the sales tax again. In my state sales tax is paid on lease payments so it is never on the entire car value but it is taxed at a premium of 50% additional sales tax. On a loan, most of your payment early on is interest so your equity builds slowly. Depending on how much you put down, you could get upside/down relatively quickly. You can never get upside down in a lease since you never have any ownership in this negative equity investment. Most lease deals don't risk much up front to lose in the first place. Often times the junk fees are capitalized and the the car is driven away with nothing down except the first month's payment. Folks that lease tend not to use large capital cost reductions as a prepaid lease is somewhat self-defeating.
#14 of 97 Re: Cap Cost / Residual / Money Factor ??? [captainrod]
Apr 28, 2012 (6:26 am)
I see a lot of misinformation here regarding leases, insurance, equity etc. so I thought I might try to clean it up for you. I'm an outside property damage appraiser for a major insurance company and typically settle 3+ total losses per week and also lease all of my family vehicles. Your insurance policy is a contract between you and your insurance company, whether you own, finance or lease it makes no difference in the policy language. 99% of personal auto policies are "ACV" or actual cash value policies. What this means is that in the event of a total loss we will pay the ACV of the vehicle. How the ACV is determined varies based on state regulations however in most states its either book value or from a local market survey. Whether you lease, finance or own the car outright it has no impact on what the car will be valued at or how much we will pay to settle the claim. The earlier post that said "the insurance only covers what's left on the balance, not what the car is worth" is entirely incorrect. An ACV policy will pay only ACV regardless of what is owed on the car. This is a conversation I have with customers all the time. I'm sorry but just because you paid $10,000 last week for your sweet '02 Malibu doesn't mean that's what it's worth, the settlement will be ACV regardless of wether you owe $10K or $500. Whether you paid too little or too much has no bearing on it's value or settlement amount. Now regarding leases that is also a contract between you and the leasing company. You agree to make a certain amount of payments with an option to buy for a fixed amount at the end of the lease term. Everything should clearly be spelled out in your lease contract. Also in error in previous posts is that you never have equity in a lease, that's just plain incorrect. The leasing company want's to cover themselves when the lease is over and they send the car to auction so they always set the residual low. Establishing the residual value at lease end requires some speculation so they aren't always right but they will do their best to keep it high enough to make the lease attractive while keeping it low enough that they won't loose on the back end. I've leased over 10 cars over the last 15 years and on every car I've been able to sell it at lease end for significantly more than my buyout. I actually have two leases ending soon, one next month and the other in July. The difference between my buyout option and NADA on them both is nearly $8,000. Even pricing them $3k under NADA would net me $5k each. I'd be foolish to turn them in at lease end a walk away leaving that much equity on the table. You can guarantee the dealer that I turn them in at would buy them and have them on the lot within a week. So in the event either one were to total my insurance would determine the ACV, call my leasing company to find out my payoff which is my lease end value, plus any remaining payments, plus any fee's stipulated in the contract and pay them off (assuming it's less than the ACV) any balance would be paid to me. This is handled the same regardless of a lease or loan. Payoff the bank and any balance is paid to the customer. In the beginning of the lease when you are most likely to be upside down is when the gap insurance would step in to take over any gap between what I pay for ACV and what is owed on the car. This protects you from owing it out of pocket and protects the bank from having to try and collect it from you. And lastly you may even be reimbursed for your taxes paid depending on the laws of your state. Overall leasing is great for many reasons, yes you are loosing money every month but hey, that's the cost of driving a new car all the time. The benefits are many, the most significant being that all of the risk is being assumed by the bank in determining the residual value. At your lease end if you have equity in the car you have the option of buying/selling it and recovering your equity, if something changes in the market and your residual value now exceeds the ACV you can turn in your keys at lease end and walk away. This happened a few years ago with trucks. In 2005 trucks were king and residuals on many models exceeded 55%. Then came the crash along with high gas prices and you couldn't give trucks away. New truck pricing dropped significantly with rebates as high as $8,000 on new models. That made the acv of those at lease end much lower than the 55% they had been set at. Perfect scenario to walk away where those who purchased those same vehicles now found themselves owing more on the truck they bought two years ago than they could buy a new one for now. Obviously buying used and keeping a car is the most cost effective however if you are getting a new car leasing often makes the most sense. Lease finance rates are so agressive it hard to ignore. I'm looking at an XC60 now that's lease rare is .6% The residual on only 44% which sucks but If I wanted to buy this car, cash or finance why would I when I can lease it for .6%? Invest my money elsewhere. Then at the end of the lease I will have decent equity due to the low residual.