Lease/Finance Price Adjustments

[Eric]

I’ve been going back and fourth with my dealer on my 2021 build for over a month because of changes made on my end.
I’m building one to lease for 3yrs and this dealer is in Ontario, Canada. The same dealer I got my current 2018 XLT from.

My original order was for an XLT Sport with 302A and twin panel moonroof.

Based on some advice and research in regards to the moonroof having a bad history, I told my dealer to take it off my order.

Here’s where things seem a tad peculiar:
I paid $1000 deposit when I made my order and we had an agreement for me to pay around $4k at delivery and a $262/biweekly payment amount.
Removing the moonroof lowered the amount to pay at delivery by around $2k(the cost of the moonroof including tax in Canada) with the biweekly payments staying the same.

Then I switched the order completely to an XL STX for a few reasons (which I’ll explain if anyone asks) and the overall build price went down by about $5800 on the Ford website.

I figured this would eliminate the $2k payment at delivery and the lease payments would be adjusted to cover the remaining $3800 difference.
To make things simple this would mean that I would go from:
$2k at delivery with $262/biweekly(for XLT Sport)
down to
$0 at delivery and $210/biweekly(for XL STX)

After making the changes to my order, here are the new amounts:
$2k at delivery and $232/biweekly.

So the total amount decreased is only $2160 while the total difference in the build price is $5800.
Why would it not go down by the full difference amount with the trim level change when it went down the full amount with the moonroof removal?
The only explanation I got is that numbers work differently because I’m leasing and not financing.
Sorry for the long story but does this sound right??

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[Aaron34]

Might be the residual value of an XL STX is a lot lower than the XLT was? You'd need to get the residuals from both models and compare.

 

[Eric]

Might be the residual value of an XL STX is a lot lower than the XLT was? You'd need to get the residuals from both models and compare.

I’m not really familiar with how residual value works but will definitely use that term when I meet with him again for further clarification. Thanks for the info

 

[Aaron34]

No worries!

With a lease, you're basically paying for the depreciation over the life of the contract. The manufacturer places a value on the vehicle at the end of the lease. Your payments are the difference between that end value (known as the residual value) and your purchase price (which is negotiated). Plus interest, which is called money factor in a lease.

So if the STX depreciates more than the other, your payments will have to make up for that additional loss in value. Sometimes it works out that a more expensive vehicle has a lower lease payment because it'll be worth more in the end - less depreciation.

I hope that makes some sense. Basically, you should ask for the residuals on both, and the money factor they're charging you. And see how the payments work out. When you put money down on a lease, you're paying off some of that depreciation up front in order to decrease your payment.

There's a calculation you can make to convert the money factor into an interest rate. I can't remember what it is, but I'm sure you can Google it and find it.

 

[Eric]

No worries!

With a lease, you're basically paying for the depreciation over the life of the contract. The manufacturer places a value on the vehicle at the end of the lease. Your payments are the difference between that end value (known as the residual value) and your purchase price (which is negotiated). Plus interest, which is called money factor in a lease.

So if the STX depreciates more than the other, your payments will have to make up for that additional loss in value. Sometimes it works out that a more expensive vehicle has a lower lease payment because it'll be worth more in the end - less depreciation.

I hope that makes some sense. Basically, you should ask for the residuals on both, and the money factor they're charging you. And see how the payments work out. When you put money down on a lease, you're paying off some of that depreciation up front in order to decrease your payment.

There's a calculation you can make to convert the money factor into an interest rate. I can't remember what it is, but I'm sure you can Google it and find it.

That was awesome, I really appreciate you doing that for me. It all makes sense now but I’m still gonna get the numbers you listed to see if everything adds up properly.

My dealer is a nice guy but always super busy and won’t be the first time he’s made a mistake.
Thanks again for the detailed reply

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