tallers

AudiCare 1% added in residuals above.

DucatiSim

So the rates are better?

GiantEli

On a 36mo, yes, but the residual is a point worse, canceling it out. Effective lease rates would remain about the same.

Mathemagician

Ultimately this is a very slight improvement for the buyer, though. Even though you would spend about the same (actually about $2-4 less per month with the new rates depending on the price of your car), you would be charged less interest and more depreciation. In essence - more of your payment is going towards paying off the car vs. paying finance charges. If you turn your car in at the end of the lease with zero equity, it won't matter - you just save the $2-4 per month in payment. However, if you buy the car at the end or buy out your lease early, your payments will have reduced your outstanding balance by more than they would have using last month's rates. You would owe about $500 or so *less* at the end of 42 months based on the new rates. This could be extra equity depending on how well the car actually holds value compared to the projected residual and what you do at the end of the lease. At any rate, this is a slight improvement in both 36 month and 42 month programs.

DucatiSim

Thanks! Hopefully they get better next month also.

GiantEli

Excellent point. As a lease-dumper (i.e. I don't ever intend to purchase the car at the end of a lease) the change in rates/residuals is rather meaningless. However, if you did intend to "lease with an option to buy" (like Fletch's rubber gloves), this represents a slight net improvement, pending any auction rate changes at the time of lease end.

Mathemagician

It can also help the "lease dumper" in those cases where you end up deciding to get out early for some reason and need to buy out the lease. However, the impact is smaller since you haven't had as much time for the difference in interest charges to add up. Bottom line, it is pretty much always better to spend more dollars on depreciation vs. finance charges if the total payment is the same. At worst, it makes no difference to you, at best, it can benefit you in those cases where equity matters. That's why I favor a hot money factor over an inflated residual in general. Of course, I'd like to have both.