New Vehicles
New vehicle leasing was our initial business back in 2002, and today new vehicles still account for roughly half of our business. We offer flat fees, transparent costs, and turnkey transactions. We work with a number of banks and provide flexible funding options.
If you have a trade-in, we work its value just like we do on the new vehicle. Rather than simply put a bid on it, we additionally have the dealer and a wholesaler put a number on it. This ensures you're getting top dollar for your old car. And we don't play games with the numbers, over-allowing or making extra profit from your trade.
Most importantly, we value your time. Instead of spending hours at a traditional dealership, almost all of the transaction is handled by email. When you come in, the docs are ready to go. No surprises; no extra stuff to sell you. So expect to have the documents done within 10 minutes of your arrival. After that, we'll take as long as needed to show you all the bells and whistles of your new ride.
As a general rule, there are two primary reasons to do a traditional lease. The first reason is if you like to trade vehicles regularly (2-3 years). A traditional lease provides a set, future floor value for the vehicle and the option to keep any equity above that residual value. This protection is most valuable in the early years of a vehicle’s life when the depreciation varies most. If you’ve been upset with the trade value of a vehicle you own, a traditional lease can cure this issue. The second reason to do a traditional lease is if you have the ability to write off your vehicle for tax purposes. Leasing provides far greater tax advantages for moderate to expensive sedans and other vehicles under 6k pounds GVWR (vehicles over 6k GVWR are probably better served with a purchase or Capital lease). Another minor reason to lease is to lock in future values on hot new model introductions. Leasing also has several “soft” advantages including lower maintenance and repair expenses and headaches (including reducing the likelihood of being stranded) and continually driving a later model vehicle. Some leasing companies promote leasing as a way to buy more car for the same payment. While this is true, it’s not an economical argument for leasing (if so, you could say the same for a seven year loan). Buying (or leasing with a nominal residual) is the most economical means to pay for a vehicle IF you will drive that car long term (4+ years, the longer the better). Buying is also more flexible than a lease should you want to get out of the vehicle sooner than expected. Early termination of a Traditional lease generally results in more negative equity (lower payments mean a higher payoff) and there is usually a penalty of ½ – 2 payments. Many people want to purchase so they can have or build equity. This is not necessarily a valid argument; vehicles are an expense, not an investment. The goal is to minimize the expense and having equity in a deteriorating asset does not make it a better asset. Paying cash for a vehicle reduces the negative impact of the deterioration of value by reducing interest expense, but it does not change the direction of asset value from negative to positive. Having equity after, for example, four years when a car loan is involved is less valid, since this equity is primarily a function of the higher payments you’ve made (you’re investing the extra payment into equity). If you trade out in three years (under a five year loan), you probably don’t have any equity anyway. My recommendation is to focus on the total expense. Ignoring potential tax benefits, there’s no doubt a purchase (or 1-Pay or Amortized lease) will be less expensive than a Traditional lease if you’ll drive the vehicle long term. If you’d like to get a new vehicle on a shorter cycle, consider the Traditional lease. Be realistic with yourself though – many people think they’ll keep a vehicle long term, then trade out frequently, giving up the benefits of both the lease and ownership.
We have a flat fee of $1000 on new vehicles.
Whether a lease is considered an Operating or a Capital lease depends on who has the risks and benefits of ownership. If the lessor has the risks/benefits of ownership, it’s considered an Operating lease. If the lessee have the risk/benefit, it’s a Capital lease. The primary determinant between the two is the residual. A residual of over 10% is typically classified as an Operating lease, as the lessor has the risk of value at end of term. If the residual is under 10% (which is usually $1 on these types of leases), the risk/reward of ownership are with the lessee so it’s considered a Capital lease. From a tax and accounting standpoint, Operating leases are expensed as the payments are made (to the degree the vehicle is used for business purposes). The vehicle is not listed as an asset or liability on your balance sheet (if in your company name). A capital lease is treated just like a purchase from a tax/accounting standpoint. If the vehicle you’re considering is under 6k pounds GVWR (cars, small or medium SUV), an Operating lease is the best alternative. If the vehicle is over 6k pounds, the Capital lease is probably preferred due to the large first year depreciation available for assets purchased (the exception being if you’ll exceed $250k in Section 179 depreciation).
The payment has two components – depreciation and interest. Depreciation is the difference between the capitalized cost (ie loan amount) and the residual value. Divide the total depreciation by the number of payments to get the depreciation component. Interest on a lease is termed a money factor. Add the cap cost and the residual and then multiply by the money factor to get the interest component. To find the effective interest rate, multiply the money factor by 2,400.
A Traditional lease generally has a bank acquisition fee ranging from $700-1,000. This fee covers residual and usually GAP Insurance. Also there is usually a termination fee of $350-500 at end of term depending on whether you purchase the vehicle off lease or turn it back in. Of course if you exceed the mileage allowance, or the vehicle has excessive wear and tear, these charges will also apply (some lessors offer insurance on excessive wear and tear). Note: One-Pay leases do not have a bank acquisition fee or termination fee.
We can actually structure retail leases up to 20k miles per year (no limits on commercial leases). While leasing is often marketed primarily to low mileage drivers, I like high mileage leases. The banks charge the same per mile, whether you drive 10k miles per year or 25k. In reality, high mileage depreciates a vehicle far more than low mileage, so you’re getting a bit of a bargain on the mileage.
Texas law prohibits us from charging a fee for helping you purchase a new vehicle. To be honest, most of our clients would probably prefer to purchase, but utilize our leases because they appreciate our straightforward dealings and high level of services. The 1-Pay and Amortization leases were designed specifically for these clients.
We’ll ask you to swing by our office so we can get a detailed description of your trade-in as well as some pictures. We’ll take that information and shoot it around to various wholesalers. We collect bids and the high bidder wins.
Once you decide what vehicle you want (model, options, color), we’ll send you manufacturers invoices showing you all the pertinent information and our price. If you have a trade-in, we’ll also collect bids from multiple sources based on your detailed description. You decide which lease structure to utilize (we’re happy to discuss the alternatives based on your needs). You will know all of the numbers up front. Once you agree, we tell the dealer to send the new vehicle to us and schedule a closing appointment at our office with you (you don’t have to set foot on a dealership lot). You drive in with the trade and drive out with the new vehicle. We also walk you through the vehicle and show you how to operate all the bells and whistles. The paperwork will reflect the numbers you’ve already agreed upon. We don’t try to up-sell you with additional products at closing.
Bring a check, your TDL, your current insurance (on any vehicle), trade title and all sets of trade-in keys (if applicable). The paperwork takes 5-10 minutes, but the guided tour of the vehicle can last from 30 minutes to an hour. The more technology on the vehicle (i.e. Navigation, Bluetooth), the longer the tour will take. Bring your Bluetooth phone as well and we’ll link it to the vehicle (if so equipped).