Automotive

Required extended warranty on leased car?

  • Last Updated:
  • Jul 28th, 2021 1:54 pm
Deal Fanatic
Aug 4, 2005
8164 posts
805 upvotes
Brampton
Like other mentioned the dealership is lying about the extended warranty. I suggest shopping at a different dealership now.

Also like other mentioned, you don't need to lease to build credit. Finance a car instead and use a credit card as much as possible for purchases. Just alway pay on time and don't carry any balance to get charged interest. Also if shopping for a home soon, maybe it's better to shop used. This depends on your financial situation.
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Jul 26, 2007
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Embrace wrote: I have been using credit card for like 4 years and not sure why they rejected my application with the reason that I have limited credit history. Probably I will need to call Equifax to understand. If I can figure out I already have some sort of credit history, although I don't have any loan, that will eliminate the need for building credit history and I may go with cash.


I shopped around before going in and this dealer provided the lowest quote already. I will see how it turns tomorrow. I want the car but honestly this makes me want to back off.
If you want to build credit or just want to check and get a rough idea, sign up with borrowell for Equifax and creditkarma for TransUnion.

Apply for multiple credit cards and use them once a month. Each cc co will send data to EF and TU, thus increasing your score if you make the min or pay off the monthly bills on time.
Sr. Member
Nov 13, 2016
686 posts
356 upvotes
I read that lot of posters advice against down payment for lease on this thread and would like to understand the rationale behind it. I haven't leased with down payment before - so I assume the down payment is applied to the total lease amount over the period of lease and the monthly payments are calculated based on the balance. So effectively you are saving lease interest on the down payment. With regards to write-off - most insurance cover you for the total invoice value of the vehicle for the first 36 months and the depreciation is applied after that. In this case since the lease is 24 months, OP will be covered by the insurance for 100% of the invoice value by insurance - so any down payment and lease payments made by the OP until the loss date will be refunded in full to him by the leasing company. So where is the risk?

Curious minds would like to know/learn.

CD.
Deal Expert
Mar 25, 2005
21997 posts
2807 upvotes
Canadadesi wrote: I read that lot of posters advice against down payment for lease on this thread and would like to understand the rationale behind it. I haven't leased with down payment before - so I assume the down payment is applied to the total lease amount over the period of lease and the monthly payments are calculated based on the balance. So effectively you are saving lease interest on the down payment. With regards to write-off - most insurance cover you for the total invoice value of the vehicle for the first 36 months and the depreciation is applied after that. In this case since the lease is 24 months, OP will be covered by the insurance for 100% of the invoice value by insurance - so any down payment and lease payments made by the OP until the loss date will be refunded in full to him by the leasing company. So where is the risk?

Curious minds would like to know/learn.

CD.
Monthly interest is calculated off the car's value- the net value is irrelevant as this is not financing. No interest is saved here.

There is no automatic 36m depreciation waiver- its an option you must purchase. While it will pay out the full value of the car, the downpayment is completely lost.
Sr. Member
Nov 13, 2016
686 posts
356 upvotes
Kasakato wrote:
There is no automatic 36m depreciation waiver- its an option you must purchase. While it will pay out the full value of the car, the downpayment is completely lost.
That's what I am trying to understand - if the full invoice value is paid to the leasing company, the leasing company refunds all the money you paid for the vehicle - so how is the downpayment lost? If you tell me that leasing company will only return my monthly leases paid - then it makes sense - but it also becomes a claim against the leasing company - since they got overpaid. Technically they have to refund the amount to you.

CD
Deal Expert
Mar 25, 2005
21997 posts
2807 upvotes
Canadadesi wrote: That's what I am trying to understand - if the full invoice value is paid to the leasing company, the leasing company refunds all the money you paid for the vehicle - so how is the downpayment lost? If you tell me that leasing company will only return my monthly leases paid - then it makes sense - but it also becomes a claim against the leasing company - since they got overpaid. Technically they have to refund the amount to you.

CD
Insurances pays out the gap to make the leaser whole, hence its "gap insurance." The gap is simply the outstanding balance; not the entire value of the car.
Member
Dec 27, 2006
456 posts
230 upvotes
Canada
Kasakato wrote: Monthly interest is calculated off the car's value- the net value is irrelevant as this is not financing. No interest is saved here.

There is no automatic 36m depreciation waiver- its an option you must purchase. While it will pay out the full value of the car, the downpayment is completely lost.
That’s not 100% true. The payout is not COMPLETELY lost. Sure, a portion of it will be lost but you will get most of it back because you’ve paid down the balance with the downpayment and by making your lease payments. The difference between the insurance settlement and the current lease payout will be refunded to you. That’s how it works with Toyota leases.

Interest and tax portion of lease payments are lost. Another risk is that the insurance company settles for a lesser amount than the price you for your lease for, which is possible and is something they try to do.
[OP]
Newbie
Oct 4, 2020
14 posts
8 upvotes
peteryorkuca wrote: If you want to build credit or just want to check and get a rough idea, sign up with borrowell for Equifax and creditkarma for TransUnion.

Apply for multiple credit cards and use them once a month. Each cc co will send data to EF and TU, thus increasing your score if you make the min or pay off the monthly bills on time.
I have multiple credit cards and I have Equifax report too. I am now thinking they probably pulled incorrect report, because I don't see any trace of a recent hard inquiry.

As advised by everyone, I have told them that I no longer wanted to proceed with the deal. I did not reveal the reason why. They said they would get back to me on the amount I can get back after deducting costs for their efforts. I don't know how much they would charge.
[OP]
Newbie
Oct 4, 2020
14 posts
8 upvotes
One thing I haven't mentioned is that the bill of sale I agreed on earlier did not have the extended warranty and down payment. These are the items they sneaked into the new bill of sale without informing me beforehand.
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Jul 12, 2003
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Toronto
Embrace wrote: One thing I haven't mentioned is that the bill of sale I agreed on earlier did not have the extended warranty and down payment. These are the items they sneaked into the new bill of sale without informing me beforehand.
Have you sign that new bill of sale?

Make sure those are off before you sign it and take delivery.
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Embrace wrote: They said they would get back to me on the amount I can get back after deducting costs for their efforts. I don't know how much they would charge.
WTH? And you were OK to give them free money like that?
They are not entitle to anything, what fee?

I would ask for full money back. Don't get throw off by them, they probably know you are a new comer and want to screw you as much as they try to.
Talk to their General manager and say your Financial Manager try to scam you saying extended warranty is a must buy with the car, give all my money back or I will "advertise" your dealership for free.
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[OP]
Newbie
Oct 4, 2020
14 posts
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I thought getting full deposit was not an option, so I said I would discuss when I hear back from them tomorrow. He said he needed to check with the bank about my licensing. Is this true, when I haven't agreed to the new bill of sale?

I signed the old bill of sale, which was for financing but afterwards they said I was not approved so I guess it was not valid anymore. Is there any problem with the old bill of sale I signed? If not I can email them asking for a full refund.
Last edited by Embrace on May 13th, 2021 6:18 pm, edited 1 time in total.
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Financing not approved, the bill of sale is void, you are entitle to get 100% of money back, Not $1 left to them.

Stay firm on it.
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[OP]
Newbie
Oct 4, 2020
14 posts
8 upvotes
Thank you for confirming. He said he needed to check with the bank about my licensing. Is this true, when I haven't agreed to the new bill of sale?
Deal Addict
Jan 8, 2007
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Edmonton
Canadadesi wrote: That's what I am trying to understand - if the full invoice value is paid to the leasing company, the leasing company refunds all the money you paid for the vehicle - so how is the downpayment lost? If you tell me that leasing company will only return my monthly leases paid - then it makes sense - but it also becomes a claim against the leasing company - since they got overpaid. Technically they have to refund the amount to you.

CD
See below. You're right. If you get proper insurance you get it all back. Most people don't get the right insurance, or they don't know about it. Also whole point of a lease is to minimize your capital exposure, so that hopefully you can take your capital and make it work for you elsewhere. You don't save hardly anything on interest with leasing by putting a few grand down. Also if you want to get out of a lease, it's virtually impossible to have someone replace that down payment for you. It's a lot easier to say here's 3 month's payment, take my lease over than it is to ask someone for $3000 back even though your payment maybe more attractive.
Kasakato wrote: Insurances pays out the gap to make the leaser whole, hence its "gap insurance." The gap is simply the outstanding balance; not the entire value of the car.
There's a bit of confusion here. You're right GAP insurance does as what you described.

However, you can also purchase full replacement insurance at additional monthly costs and that will pay out the entire value or a new car. So if you get that insurance you get everything back minus tax and interest. There have been RFD'ers that have written off leases on here recently that have got all their money back with this type of insurance.

Really everyone buying a new car should have this.
Deal Fanatic
Apr 16, 2007
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Financial District B…
chopsticksonly wrote: also you shouldnt put a downpayment on a lease - that will be money you lose. you're better off paying more security deposit to reduce your lease payments or pay the higher monthly
That is not true whatsoever.
Any downpayment on a lease or otherwise known as a capitalized cost reduction reduces the lease finance amount.
Each $1000 down equals approx $30-35/month on his lease term.

example: With his lease + $3k down his lease payment could be $400/month
with no cap cost reduction (0 down) his lease payment will be $490/month

So you do not lose a thing when putting money down on a lease
Wish misinformed people on this forum would stop pedalling that falsehood that money down on leases are lost
Last edited by mikeymike1 on May 15th, 2021 5:00 pm, edited 1 time in total.
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Deal Fanatic
Apr 16, 2007
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Embrace wrote: One thing I haven't mentioned is that the bill of sale I agreed on earlier did not have the extended warranty and down payment. These are the items they sneaked into the new bill of sale without informing me beforehand.
One thing you should know is any 'conditional' finance/lease stipulations from any lender including TCCI would entail a reduction of the capitalized cost.
A conditional agreements main purpose is to 'reduce' the financial risk and financial exposure due to a marginal credit applicant.
There's no way, notta, forgetaboutit chance that TCCI would demand an extended service plan (additional cost) be added as a condition to lease acceptance.
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Sr. Member
Nov 13, 2016
686 posts
356 upvotes
Kasakato wrote: Insurances pays out the gap to make the leaser whole, hence its "gap insurance." The gap is simply the outstanding balance; not the entire value of the car.
That's correct about GAP insurance. However I am referring to OPCF 43 endorsement which is the waiver of depreciation for the first 36 months. It's usually $30-$40 per year but helps in total loss cases.

Additionally last year I was paid out the full value of my car (paid to leassor) and they returned all 18 months of lease payments, including taxes.

CD
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mikeymike1 wrote: That is not true whatsoever.
Any downpayment on a lease or otherwise known as a capitalized cost reduction reduces the lease finance amount.
Each $1000 down equals approx $30-35/month on his lease term.

example: With his lease + $3k down his lease payment could be $400/month
with no cap cost reduction (0 down) his lease payment will be $490/month
Of course we know putting downpayment will lower the monthly payment.
If the car is a buy (finance), then there is no problem, you are the owner of the car, you will have to pay it off eventually unless you sell it.

For a lease, you don't own the car, there is less reason to put a lump sum of money on a car that you don't own. Lease is just like a long term rental.
Yes, you can lower the lease payment by putting a down payment, however for any reason like if your car got stolen, totaled because of an accident, your downpayment is hooked at the financing/leasing company. You are struck to have to finance or lease any other car with that company since they still have your downpayment money. Maybe you can get the money back somehow, but why the hassle? Money is always better at your pocket than other's.

unless the lease rate is very high and putting downpayment make a good difference with the saving, otherwise, it is almost need a good idea to put a downpayment on a lease.
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