BoBo

Any ideas how much round about it would be on 31,400 (a4 2.8)? Any negatives I should be considering? I'm considering this method due to bad credit.

Thanks for any info,
Rich

anne

I've done it (on a VW). You pay less because you won't be paying any finance charges. Go for it.

boxster

it's usually not zero. I've worked for and with several different leasing companies and usually the discount is equivalent to 2-3 percentage points. So, for example, if the lease rate was the equivalent of 9%, on a pre-paid lease, they may use 6% or so.

Some companies (such as Lexus) will also provide a discount if you give them more than one security deposit. Lexus is constantly advertising their "multiple security deposit" rates here.

anne

you're right... I forgot about that.

CharlieG

Lease charges are made up of two parts. The first is the portion that you will amortize during the lease term and is the difference between the capitalized cost and the residual value (plus finance charges of course). The second is simply the cost of financing the residual balance. You may eliminate the first by prepaying the lease, but you won't eliminate the second.

- Charlie
98.5 1.8TQMS (15,000 miles)
99.5 2.8Q Avant (picking up on Monday)

DavidG

Everyone seems to forget that when they save finance costs by paying up front, they are also depriving themselves of the investment earning potential of that money. Only pay up front when you don't think you can earn a return greater than the effective interest rate of the financing.

Although this year is a bad example, it's been very hard NOT to have averaged considerably more than 6-8% on one's investments over the last few years, even in a conservative mutual fund.

At the very least, with a very, very conservative investment strategy, you can achieve returns that equal what you'd be paying in finance charges. In this case, it doesn't matter if you pay up front or finance. However, financing at least keeps the money in your own control, rather than having given it away already. This can make for better cash flow or availability of funds in an emergency.

Bottom line: consider the lost potential for earning money through investing before you try to simply save on finance costs.