Why is this truck lease so expensive?

[GravelRider]

I'm just finishing up a 3 year 15k miles/yr lease on a 2018 Ford F150. I am planning to buy (not lease) an F350 for my next truck, but I want to wait until the new generation is out first. So, I decided to look into a 2 year lease on the new generation F150 to see how I like it before buying the 350 in two years. My current lease costs me $420/month, and that was with $0 down. For the 2 year lease on a similarly priced model to the one I currently have, they're charging me $833/month with $1500 down. The only difference is this quote was for 2 years instead of 3, and 18k miles/yr instead of 15k. I expected the monthly cost to go up a little, but not double, and I expected total cost to decrease, since when I return it, the truck will be used only 2 years and have 9k less miles.

So, to recap

For 3 years and 45k miles, total cost is $15k.
For 2 years and 36k miles, total cost is $20k

What gives? I asked the sales guy, and he said they're squeezing the payments into a shorter time span, so it's more per month. That makes sense in a loan, but not in a lease. What am I missing?

[upflying]

One reason for the increase could be F150's are now $50,000..pickups have become very expensive in the last 3 yrs.

[D W]

A leased vehicle is nothing but a rental vehicle. Forget about the "price". That is a fictitious number with a leased vehicle. They have it figured out so you eat every bit of depreciation on the vehicle and then the dealer who executes the lease gets an amortization kickback to cover their costs. They have got you seven ways from Sunday to cover all their costs, and they get keep the vehicle when you turn it in.

[lbrjet]

See what the current cost of the 15K 3 year is to compare apples to apples.

[Cabinfever97]

Originally Posted by D W

A leased vehicle is nothing but a rental vehicle. Forget about the "price". That is a fictitious number with a leased vehicle. They have it figured out so you eat every bit of depreciation on the vehicle and then the dealer who executes the lease gets an amortization kickback to cover their costs. They have got you seven ways from Sunday to cover all their costs, and they get keep the vehicle when you turn it in.

Not really accurate. When you lease a vehicle you need to negotiate the sale price as low as possible. That affects the monthly lease cost since the lease is based on the selling price. Also a closed end lease is better. That way if you decide to buy at the end of the lease the price is set. I once leased a car in 2000, then bought it at the end of the lease. Between the lease and interest paid on the loan to buy I actually saved a few hundred dollars than had I bought new. BTW, that was the last new vehicle I ever bought, likely the last. So many great used vehicles with low mileage that save the hit of the window sticker. Example, the F250 we bought last year. 2015 XLT 4X4 with 44,000 miles, $30,000. In 2014 we bought a Ford Fusion SE. Had 11,000 miles, $16,000. I do have great respect for those who buy new and trade in with low miles.

[simiHal]

Originally Posted by Cabinfever97

Not really accurate. When you lease a vehicle you need to negotiate the sale price as low as possible. That affects the monthly lease cost since the lease is based on the selling price. Also a closed end lease is better. That way if you decide to buy at the end of the lease the price is set. I once leased a car in 2000, then bought it at the end of the lease. Between the lease and interest paid on the loan to buy I actually saved a few hundred dollars than had I bought new. BTW, that was the last new vehicle I ever bought, likely the last. So many great used vehicles with low mileage that save the hit of the window sticker. Example, the F250 we bought last year. 2015 XLT 4X4 with 44,000 miles, $30,000. In 2014 we bought a Ford Fusion SE. Had 11,000 miles, $16,000. I do have great respect for those who buy new and trade in with low miles.

Maybe you can get a good deal if you buy your leased vehicle when the term is up but the bottom line is that at the end of a lease you have no equity in the vehicle. So, yes, you are just renting it long term.

[FredCoMTB]

Originally Posted by GravelRider

I'm just finishing up a 3 year 15k miles/yr lease on a 2018 Ford F150. I am planning to buy (not lease) an F350 for my next truck, but I want to wait until the new generation is out first. So, I decided to look into a 2 year lease on the new generation F150 to see how I like it before buying the 350 in two years. My current lease costs me $420/month, and that was with $0 down. For the 2 year lease on a similarly priced model to the one I currently have, they're charging me $833/month with $1500 down. The only difference is this quote was for 2 years instead of 3, and 18k miles/yr instead of 15k. I expected the monthly cost to go up a little, but not double, and I expected total cost to decrease, since when I return it, the truck will be used only 2 years and have 9k less miles.



So, to recap



For 3 years and 45k miles, total cost is $15k.

For 2 years and 36k miles, total cost is $20k



What gives? I asked the sales guy, and he said they're squeezing the payments into a shorter time span, so it's more per month. That makes sense in a loan, but not in a lease. What am I missing?

The money factor, residual, and purchase price are probably all different. Unquestionably, we're in a seller's market. Do you know the money factor, residual, msrp, sales tax laws, and sales price? All of those and you can calculate out what's different.

One big thing might be sales tax... in certain states you must pay title/excise tax for the whole vehicle over the term of the lease. If that's $2500 over two years instead of three... you get the idea. Some states allow for a trade in offset, others don't. Some just tax the monthly payment.

If you already can calculate a lease ignore it, but it's math when it comes down to it and you can call out a finance manager on nonsense sometimes.

I'll also note that shopping a lease around seemed to be more effective than shopping a purchase... there's more room for obfuscation in a lease.

[FredCoMTB]

Originally Posted by FredCoMTB

The money factor, residual, and purchase price are probably all different. Unquestionably, we're in a seller's market. Do you know the money factor, residual, msrp, sales tax laws, and sales price? All of those and you can calculate out what's different.

One big thing might be sales tax... in certain states you must pay title/excise tax for the whole vehicle over the term of the lease. If that's $2500 over two years instead of three... you get the idea. Some states allow for a trade in offset, others don't. Some just tax the monthly payment.

If you already can calculate a lease ignore it, but it's math when it comes down to it and you can call out a finance manager on nonsense sometimes.

I'll also note that shopping a lease around seemed to be more effective than shopping a purchase... there's more room for obfuscation in a lease.

Also, your lease likely has a residual you can buy the truck for that's possibly even lower than a trade in now (meaning a nice deal for you if the alternative is purchasing or leasing new). Might be worth purchasing that truck with a couple year warranty then just trading it. This assumes the truck works for you.

We have a lease on a 2019 that's up later this year. Could do a new one but not worth it to us at today's prices. We also genuinely enjoy the truck and it does what we need... if it didn't, different answer.

If you're in a state where you have to pay title tax over the term, there's a chance it'll apply to a lease-end purchase.

[bob213]

A $50,000 loan at 1.9% (my CU rate) for 5 years would cost about 850. per month. In 2 years you would have it paid down to $30,000.
Do you think you could sell that truck for $30K or more in 2 years? I don't know, but if you could I think I would just buy it.

[TitanMike]

To me leases are for people that feel they have to drive a new vehicle every 2-3 years and don't mind having a monthly payment forever.

I haven't had a truck payment for over 11 years and the truck still tows my trailer very well.

If it ever quits I've saved enough $$ to just buy one for cash.

It's all about choices.

[GravelRider]

Thanks for the input everyone. I'm still not sure what I'm going to be doing in terms of the truck. I really do want to wait to buy the F350 until the new generation comes out, as I plan to keep the next truck I buy for 10+ years.

I'm actually not a fan of leases, as it does create a payment forever, and I don't need a new truck every few years. In fact, I hate vehicle shopping and getting new vehicles. My current lease is the first I've ever done, and vowed never to do it again... But now here I am considering it. Lol.

[D W]

Originally Posted by TitanMike

To me leases are for people that feel they have to drive a new vehicle every 2-3 years and don't mind having a monthly payment forever.

I haven't had a truck payment for over 11 years and the truck still tows my trailer very well.

If it ever quits I've saved enough $$ to just buy one for cash.

It's all about choices.

Yup, and forever is a long time!

[REL]

Basically:
Capitalized Cost (price sold to the Leasing Company )
minus Residual Value x Finance Fee % ÷ Term. Reduce 1&3 or increase 2&4 reduces monthly payment. The only time I ever "sold" a car for more than MSRP was through a lease.

[kayo]

Another thought is to look for trucks in September. I saved a boatload on a new 2013 Chwv, 350 diesel dually loaded with all the bells and whistles, carryover in Sept. of 2013

[latner]

Originally Posted by TitanMike

To me leases are for people that feel they have to drive a new vehicle every 2-3 years and don't mind having a monthly payment forever.

I haven't had a truck payment for over 11 years and the truck still tows my trailer very well.

If it ever quits I've saved enough $$ to just buy one for cash.

It's all about choices.

X2 Plus being able to drive something you probably couldn't afford if a lease wasn't an option

[Ready2camp]

Leasing a vehicle is the same as renting one. If you're a person who has money to burn and likes to have a new car every two years then go for it. Think of how much money you spend on a lease and you don't own it. Yet you have to maintain/repairs on it. Then to think of purchasing it after the lease is up. OMG, how much money did you actually pay for this vehicle, it's like buying the vehicle twice! Never purchase your leased vehicle! If you want to know about a vehicle before buying one then rent one for a month. People also lease because they can't afford the car if they were to actually buy it. People don't live within their budget. On a side note since I'm on a small rant. People who buy RV's and finance them for 15-20 years. If you can't finance it for 5 or less years then you can't afford it.

BTW, I'm a retired financial advisor and retired at age 50, own 3 homes in southern CA with no debt except for a car payment that is financed for 3 years

[Capt. Mike]

Originally Posted by kayo

Another thought is to look for trucks in September. I saved a boatload on a new 2013 Chwv, 350 diesel dually loaded with all the bells and whistles, carryover in Sept. of 2013

That is a good strategy, and one that I have used in the past - buy a current year model just as the new models are hitting the dealers' lots. Unfortunately, with the shortage of new trucks right now (between factory shut-downs for Covid and lack of computer chips) I'm not sure that is even going to be possible this year. The pent-up demand for new HD trucks will likely keep prices high even at model switch-over time for a couple of years.

[PenJoe]

New and used trucks are at a premium since Covid-19. Our 2013 Silverado was in mint condition with low miles. We planned to keep it. A woman with dementia changed that when she broadsided us. We were forced into shopping for another truck. To sweeten the pie, our son was looking to buy a new truck. Any dealer would jump hoops to sell two new trucks-NOT.

Virtually every dealer we tried to negotiate with would not budge a nickle. That was shopping Wisconsin, Minnesota, Michigan, Iowa and Illinois. Most of the factories had shut down because of Covid. Used trucks were sky high. You need one, you pay the piper.

Now that the factories have reopened, electronic chips are in short supply. Some assembly lines are shutting down. Others are building, only to store partially complete vehicles until chip supplies improve and they can finish the build.

By chance, I came located a dealer in Peoria, IL that had gotten some 2019 Silverados with GM offering a very healthy discount ($10.5K). It is the 2018 body style built in 2019. Virtually every option we wanted including integrated brake controller and HD tow package. Again, the dealer would not budge from that price. Well, it was a no-brainer, a well equipped new 2019 for what a comparably equipped 2017 was selling for. And, for $300, they would deliver it 400+ miles to our door the following day.

So, it is a sellers market-high demand, limited supplies. However, what I suspect is that we are on the cusp of runaway inflation including substantial vehicle price increases. That is already happening in home construction. Raising taxes on corporations is not going to help. And, of course, gas prices.

A suggestion for the OP. Would the leasing dealer be willing to extend your current lease at a negotiated monthly fee?

PS: Honestly, I didn't read bclemens "Before You Hear It Elsewhere" before writing this post. I just sense what we saw in 1981-82 when we were building a new home. A construction loan was 22%!

[dmctlc]

I think you have a lot to think about. One question I have is why a 350? If you want to haul something big then its the way to go. I'd work out a deal on buying your current lease outright and just sit tight until the 350 next generation is out then sell or trade the 150 in 2 years. But to me leasing a new 150 to "try it out" sounds like you're not sure what you want. I'm sure I don't have to point out the differences between a 150 and 350 are pretty significant, IMHO. Also have you shopped around for a better lease deal?

[GravelRider]

Update: I talked to another Ford Dealer, and found nearly identical pricing. I then talked to the original dealer a bit more today. Initial purchase price was very similar, but there were a lot more rebates at that time, that ended up with an OTD price difference of about $8k. They also had specific leasing incentives at that time that aren't available today. The mileage and length of the lease played a smaller role (about $40-60 more per month).

The residual value of my current truck is $31K. KBB estimates trade-in value at $31K and private party sale at $35k. I've looked around at the used market, and this appears to be a better deal than buying a similar used truck. The truck originally "sold" for $46k when I signed the lease. I paid $15k in payments, no payment at signing, so overall, I think I'm better off just buying this one back.

I looked up a loan calculator with amortization table, and I was trying to find a loan timeframe that would equal $420 per month payments, and stopped at 8 years before it got ridiculous. If I was paying for an 8 year loan (long time) with no down payment, I'd be paying $570 a month, and by 36 months the loan would be at $30.2k, but I would have paid $30.5k. Considering I only paid $420 per month the first 3 years, and if I then convert into a 5 year loan (same total of 8 years), it would be an identical $570 per month for the next 5 years.

What I think I've found out is that the question I should be asking is why my original lease was so cheap!