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27 months is the cheapest with a down.....
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Posted by Mike Lynch [Email] (#81) [Profile/Gallery] (more from Mike Lynch) on Tue, 14 Mar 2006 18:23:47 Share Post by Email
In Reply to: lease cost at 36 or 39 months vs 27, Pat, Tue, 14 Mar 2006 16:11:44
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The final lease payment is a balance between the term and the residual. Sometimes the residual has a greater affect, sometimes the term. Lately the trend is for the 24 month residuals to be so high that it makes the shorter lease payment, 24 mos, almost the same as the 36 mos payment. Used to be the 24 month payments were always substantially higher, but now you have to look at it every time on a case by base basis.

The other reason that short term leases, less than 36 months, are in vogue is that factory ad leases are almost always quoted with a decent down payment or cap reduction. $2,999 due at signing means $299 1st payment + $595 acquistion fee, and the balance or $2,105 is down payment or cap reduction. For a 24 mos lease the cap reduction lowers the payment 1000/24=42 ish per $1,000 for a 36 mos lease it's 1000/36=28 ish per $1,000 so you see the down payment has a greater payment reducing affect on the shorter terms.

Now comes GMAC, no Saab financial anymore, who says that a 27 month residual is 1% less than a 24 mos residual. Well a 1% residual difference is overcome by a 27/24=12.5% term adjustment and 27 months is the lowest payment, especially with the advertised lease terms that have a fairly substantial down payment. This 27 month trickery has allowed Saab to include the metallic paint for $550 in the $299 payment without actually changing the rates or residuals, except that is for the special 27 month residual/term. 39 months is the 36 month residual less 1 point.

GMAC has different policies and terms than Saab Financial did. Though they are/were sister companies and used the identical lease contract, save for the logo, GMAC has a differing lease style. Saab used to waive security deposits for good credit for example, GMAC won't waive a security deposit at all unless you are a previous good GMAC/Saab (as in Lease Loyalty) customer, BMW is the same way. GMAC also has differeing splits for low mileage. Saab used to be a 1% difference for 15k to 12k, GMAC is 2%, but only at 36 mos. And a 24 mos 10k lease is +3%!! If you can do 10k on the ad lease instead of 12k the 2% makes a big differnce in the payment Saab used to prohibit 10k 24 month leases, GMAC allows them. Excess miles purchased by the mile above and beyond 15k at 15 cents per mile are refundable if unused with GMAC, not so previously with Saab.
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