Automotive

Lease vs Cash Purchase of New Lexus Vehicle

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[OP]
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Lease vs Cash Purchase of New Lexus Vehicle

We are looking at leasing vs cash purchase of a new Lexus vehicle. We are new to the whole leasing concept, so we want to make sure we understand this correctly.

We are using the calculator on Lexus Canada's web site: http://www.lexus.ca/lexus/en/shopping-t ... -estimator.

We are working with numbers that include taxes, levies, freight & PDI. We haven't talked about discounts yet, but I want to make sure I understand everything correctly before talking about discounts.

MSRP: $62100 + taxes & fees.
Vehicle price after taxes & fees (including Lexus factory delivery credit): $74060. This is also the cash purchase price including all taxes & fees. We are in BC.

Security deposit: $10000.
Due on delivery: $11170 (includes $10000 security deposit).
Term: 39 months
Rate: 2.0%
Annual KM: 16000 km
Lease payment: $1020

Lease end value: $32812.


Here's the way we understand this:

1. Basically, we pay $11170 upfront on delivery (which includes $10000 security deposit).

2. Then we pay $1020 per month x 39 months.

3a. After 39 months, we can return the vehicle. If we return the vehicle, we get $10000 back. In other words, we would have paid $11170 + (39 x $1020) - $10000 = $40950 to drive the car for 39 months. No additional charges/fees unless there is damage or excessive wear & tear.

3b. OR... If we decide to keep the vehicle at the end of the lease, we pay an additional $32812 + $300 Dealer Lease End Option Fee to buy it. I will assume this $32812 does not include tax. I will also assume the 10000 security deposit is applied to the lease end value. So, to buy out the vehicle, we would have paid $11170 + (39 x $1020) + ($32812 x 1.15 for tax) + $300 Lease End Fee - $10000 prepaid security deposit = $78884. In summary, over 39 months, I've paid $4824 more than the cash purchase option if I choose this method.

Do I have the math above correct?

Other questions:

1. Are there documentation/lease setup fees that the dealer must charge when leasing this vehicle?

2. Does the lease end value ($32812) include tax?

3. I understand that I am responsible for maintenance during the term of the lease, and I must follow Lexus' maintenance schedule perfectly. Can maintenance be done elsewhere (i.e. not at Lexus)?

4. If I were to return the vehicle at the end of the lease, I know that Lexus will do an inspection. Do they charge an inspection fee?

5. What if a total loss occurs during the lease? What will I have to pay Lexus?

6. What if a major accident (but not total loss) occurs during the lease? Let's say it's covered by insurance & repairs are done with recycled or aftermarket (non-OEM) parts. Will Lexus take the repaired car back without charging additional fees?

7. What if I want to end my lease early? What will I have to pay Lexus?

8. Are there other fees which I haven't captured above, which I can expect to pay during the lease, or when I return / buy out the car?

9. Overall, assuming we keep the car at the end of the lease, it seems not too bad of a deal to keep our money for 39 months (& invest it elsewhere) at a total borrowing cost of $4824 (over 39 months), compared to purchasing the car outright. This also gives us the ability to just walk away from the car at the end of the lease, if there was a major accident during the lease.

Thanks in advance, all you experts :D
8 replies
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1. Are there documentation/lease setup fees that the dealer must charge when leasing this vehicle? - no different than buying

2. Does the lease end value ($32812) include tax? - no

3. I understand that I am responsible for maintenance during the term of the lease, and I must follow Lexus' maintenance schedule perfectly. Can maintenance be done elsewhere (i.e. not at Lexus)? - yes you can take it anywhere. if something happens to the car and they can PROVE it was due to negligence on your part - then you will have to pay.

4. If I were to return the vehicle at the end of the lease, I know that Lexus will do an inspection. Do they charge an inspection fee? - no.

5. What if a total loss occurs during the lease? What will I have to pay Lexus? - not sure.

6. What if a major accident (but not total loss) occurs during the lease? Let's say it's covered by insurance & repairs are done with recycled or aftermarket (non-OEM) parts. Will Lexus take the repaired car back without charging additional fees? - yes as long as it passes the inspection upon return

7. What if I want to end my lease early? What will I have to pay Lexus? - yes, you're still responsible for all the payments for the lease duration that you agreed to. if you're going to lease another car from them, they'll get you out of the current lease.

8. Are there other fees which I haven't captured above, which I can expect to pay during the lease, or when I return / buy out the car? - if the inspection report finds anything, upon return, you will have to pay.
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5 / 6. Lexus will most likely want you to have GAP insurance. If the car is repairable, then you will have to go to a preferred and authorized Lexus repair bodyshop and parts must be Lexus OEM parts. If the car is a write off, then the car settlement will be dealt with between your insurance and Lexus Financial. IMO, I would not even want to take a chance of using aftermarket non OEM parts, way too much of a gamble and in a grey area which the return inspection may have problem with.

Lease wear & tear protection, you may want to consider getting it as well.
Temp. Banned
Feb 8, 2005
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booblehead wrote: 5 / 6. Lexus will most likely want you to have GAP insurance. If the car is repairable, then you will have to go to a preferred and authorized Lexus repair bodyshop and parts must be Lexus OEM parts. If the car is a write off, then the car settlement will be dealt with between your insurance and Lexus Financial. IMO, I would not even want to take a chance of using aftermarket non OEM parts, way too much of a gamble and in a grey area which the return inspection may have problem with.

Lease wear & tear protection, you may want to consider getting it as well.
i don't think the inspectors will know if you've used aftermarket brakes (or any other part)
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Dec 19, 2013
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The security deposit is refundable so you get it either way. You can apply it to the buyout at the end. Yep math is right. With negotiating, you can probably get the cost lower as well. This is why in this case, leasing is better than financing.

5. What if a total loss occurs during the lease? What will I have to pay Lexus?

This depends on if you have New Vehicle Replacement Plus or Limited Depreciation with ICBC. First one is self explanatory, you get another vehicle (this one I don't recommend for a lease). Limited Depreciation will cover the financial gap so you don't have to. I highly suggest getting this and it doesn't increase your premiums much. This will basically payout the full amount of the car to the dealer so you don't have to cover any. Limited Depreciation usually only for 36 months. NVRP usually is around $150 a year, LD is around $50.

If you want to end early, you can do a lease transfer or sell the car. Usually have to give some incentive, but depends on the current market. Lexus may cover remaining payments if you get another lease from them. Make sure it's a brand new lease and they don't roll over your payments.
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nineiron wrote: i don't think the inspectors will know if you've used aftermarket brakes (or any other part)
Not talking about brakes.

In the event of accident, let's say the front bumper was crushed and the repair shop used aftermarket front bumper which may create imperfections and/or big gaps. The inspector may have the car's history report (as referenced from Lexus financial) which have been indicated the car was in an earlier accident and the inspector may spend a bit more time checking the finished repair job. Of course, whether the inspector will have this kind of report is purely speculative but as I was saying, I would never take the car to an unauthorized Lexus repair shop at the beginning.
[OP]
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bomiheko wrote: 5. What if a total loss occurs during the lease? What will I have to pay Lexus?

This depends on if you have New Vehicle Replacement Plus or Limited Depreciation with ICBC. First one is self explanatory, you get another vehicle (this one I don't recommend for a lease). Limited Depreciation will cover the financial gap so you don't have to. I highly suggest getting this and it doesn't increase your premiums much. This will basically payout the full amount of the car to the dealer so you don't have to cover any. Limited Depreciation usually only for 36 months. NVRP usually is around $150 a year, LD is around $50.

If you want to end early, you can do a lease transfer or sell the car. Usually have to give some incentive, but depends on the current market. Lexus may cover remaining payments if you get another lease from them. Make sure it's a brand new lease and they don't roll over your payments.
I read up on ICBC's Limited Depreciation coverage. Sounds like they will reimburse you the original price you paid for the car (or MSRP) if the car is totaled.
So in a case where the car is leased - let's say it's totalled after 2 years. I would have paid $11170 (includes $10000 security deposit) + (24 months x $1020 per month) = $12214. ICBC would pay $74060 for the car (MSRP + taxes). Does ICBC pay Lexus directly, since Lexus owns the car in a lease-type situation? What happens to the excess amount that ICBC paid to Lexus (since I've already paid $12214 + ICBC is now paying them $74060 = total paid to Lexus by myself and ICBC is $86274)?
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Arrow wrote: I read up on ICBC's Limited Depreciation coverage. Sounds like they will reimburse you the original price you paid for the car (or MSRP) if the car is totaled.
So in a case where the car is leased - let's say it's totalled after 2 years. I would have paid $11170 (includes $10000 security deposit) + (24 months x $1020 per month) = $12214. ICBC would pay $74060 for the car (MSRP + taxes). Does ICBC pay Lexus directly, since Lexus owns the car in a lease-type situation? What happens to the excess amount that ICBC paid to Lexus (since I've already paid $12214 + ICBC is now paying them $74060 = total paid to Lexus by myself and ICBC is $86274)?
$10k security deposit doesn't count towards price of the car. You'll get the payments that you paid for back plus the fees in the beginning. ICBC pays Lexus then Lexus writes you a check for the remaining balance.
[OP]
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Wouldn't getting ICBC's Limited Depreciation coverage make it less likely for them to write-off the vehicle? (Say it's 2 years in, and the vehicle is a total loss. If you didn't have this coverage, ICBC would write it off if salvage cost + repair cost is greater than the value 2 years later, let's say $50,000. If you did have this coverage, ICBC would only write it off if salvage cost + repair cost is greater than $74060...?)

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