'16 Lease Residuals (not for everyone, I know)

It's been a lazy Saturday, so I did a little research and put together a quick spreadsheet to "crunch the #'s" if anyone is on the fence of lease vs. buy, which I am. You can manipulate the numbers for your own case. Feedback appreciated if there are errors.

 

Excellent work as far as I could tell.
Couple of questions:
What is MSD?
Did you decide to lease or buy (ie what 2 numbers are you comparing)?

Thanks

 

My truck is on order--arriving mid October, so I will make the decision once I test drive. An MSD is a "multiple security deposit." They are basically a refundable deposit you make on a lease. You get the money back at the end, less any damage, etc. Each MSD costs the amount of the monthly lease payment rounded up to the nearest $50, and each reduces your money factor by .00008. Toyota Financial allows up to 9 MSDs. So the short is, MAX out the MSDs if you have the cash to do so. As the spreadsheet shows, you can save almost $1700 in interest payments over the 3-year lease. There are very few places where you can earn that kind of return on your money. The fact that Toyota allows MSDs, is one of the reasons leasing a Tacoma makes sense--that and the high residual values that you're quoted on your lease.

The point of the spreadsheet was simply to compare apples to apples leasing for 3 years vs. buying/financing and then selling after 3 years. If I knew I would be 100% satisfied with my Tacoma (this is my first Tacoma and Asian-brand car, I will ever own) and that I knew I would keep it for more than 5 or 6 years, then I would definitely buy. So based on my numbers, my lease payment would be $366/month (with 9 MSDs), vs. $329/month for buying. Note, that with buying, my payment is much higher than $366, but I'm taking the total of all my payments, and subtracting out the "built up equity"--ie. Total payments less the amount I would pocket if I sold after 3 years. However, in this spreadsheet, I forgot about the $3,000 down payment I would make when I bought, which, over 36 months is $83/month. So my monthly "cost" to buy is actually $412 ($329+$83) vs. $366 to lease. So, for me, if If I'm not certain I'd like to own the Tacoma for more than 3 years, it'll be cheaper for me to lease. (Of course, I plan to drive less than 12k miles/yr and will keep the truck stock, with the exception of tint.)

 

......ya not touching this one again lol

 

Thanks DasAuto for you insightful and thorough work. I am thinking of leasing for the same reasons as you are. Thanks again.

 

The lease side formulas aren't correct. The depreciation and residual should be based off the MSRP of the vehicle, not the negotiated price.

Otherwise this was super helpful as I'm going through the same process and have my own messy spreadsheet, but yours is much better formatted with all of the pertinent information.

 

With max MSDs, the current money factor (for excellent credit) works out to about 3% APR. Depending on configuration and mileage, you are mostly looking at 70-75% residual for 36 months for Tacos. So the lease is roughly equivalent to financing over a 10-12 year term at 3% APR. Considering that Penfed's loan APR for 7 years is 3%, leasing gets you 3-5 "extra" years of loan term versus financing with for the same APR. Leasing also effectively insures you against depreciation downside risk; such as if your vehicle is damaged in a collision, or your vehicle becomes less desirable in the used market for any other reason (recall, subsequent model updates, design flaw, etc).

You just have to pay the Acquisition Fee ($650) for the privileges above. Otherwise, there isn't much difference between financing and leasing overall.

I would never lease without doing max MSDs if the finance company offers them (Toyota/Lexus, M-B, BMW, Audi, and Infiniti). It's basically a CD paying ~10% APR; can't beat that in these days of <1% savings account rates.

 

You're right. Thanks for the feedback.

 

Do you happen to have updated residuals for 2017 Tacomas? Where did you get the pdf you posted from Toyota Financial? I asked the finance guy at the dealership where I ordered my 2017 Tacoma, which I thought would be a easy answer since these numbers are posted by Toyota Financial, but he won't give them to me until he talks to my salesman, likely to see what kind of deal I'm getting from him. Thanks.

 

Ditto on this. Thanks!

 

Interesting. I leased mine but im not going to go into details because fiscally I didnt make the best decision but it allowed me to get the truck I wanted for the monthly payment I wanted. My purchase price on the truck after the 24 month lease is $27,XXX.

 

I know everyone says it isn't good to lease if you plan to keep the truck. But can someone tell me specifically why?

I like the idea of leasing, if I can negotiate a deal well. Low payments allow me to invest more as I am younger etc. But I would mostly likely plan on keeping the vehicle and would probably be hard pressed to stick to the 12k miles a year.

 

You'll be paying a $650 acquisition fee that you wouldn't pay with a purchase.
The money factor on the Tacoma is ridiculous unless you use Multiple Security Deposits (MSDs).
Depending on your state, you could get taxed twice.

If you do it right though, it can definitely be the more attractive option than purchasing out right. Especially since during the duration of the lease, Toyota holds all of the risk of negative equity.

 

Exactly; leasing is just a $650 insurance policy against unexpected depreciation (due to market factors, collision damage, recalls, future feature changes, etc). The fact that it also frees up cash flow than can be invested to possibly recoup some or all of acquisition fee is icing on the cake.

"But it's a Tacoma; one of the slowest-depreciating vehicles you can buy." True, but how much of that slow depreciation has been due to lack of viable competition+Toyota's perceived reliability? What happens to resale value if the 3rd gen turns out to be less reliable than a Fiat, or if forthcoming Ranger/Frontier/Jeep pickup models end up being substantially better than the Taco? VW TDI models used to have incredible resale value, but that vanished overnight.

That said, I wouldn't necessarily lease a Taco. TFS' money factor even after max MSDs is above 3%. You can finance at 5yrs@<2% at many credit unions (PenFed, for instance).

 

New member here!

I am not a Tacoma owner(yet). I'm still waiting for VW to buyback my car because of the emissions scandal. I'm sure many people, including the members of this site know about it. Anyway I've been doing a lot of research on leasing, and so far this forum alone has helped tremendously so I thank you all for the useful info. I understand the terms whether it be MSD, Residual, MF, etc... Just need some clarification. When it comes to the residual value, is it based upon the MSRP or the price you negotiate?

Example, the truck I want has a 71% residual, but I'm not 100% sure on what number. MSRP for the truck I want is a SR5 DCSB 4x4 $34500 x .71 = $24495. Lets just say (notional) I negotiate $500 off, so $34000. Does this new number become the starting point to caluculate the 71% residual? Or is it only MSRP, but the negotiated difference is just simply subtracted? I'm asking because this can change the numbers by a varying degree.

Lease 36/12k
1) $34500 x 71% = $24495
2) I negotiate $500
3) $34000 x 71% = $24140
4) Depreciation = $9860

Or

1) $34500 x 71% = $24495
2) I negotiate $500
3) Residual is still $24495
4) $10005 - $500 = $9505

Does this make sense? If I'm doing anything wrong let me know. Thanks again guys

 

Residual is based off Msrp. Whatever you get discounted just lowers your payment(or total lease value) of the truck.

Check out edmunds and search 2017 Tacoma lease questions. Give them the exact truck specs and they can get you a residual and money factor for different year/mileage scenarios. They are a great resource.

Also ride with g . Com has a good lease calculator but in general the Tacoma is a great option to lease because of the high residual

 

I work for a leasing company, and reason's for leasing varies from person to person. Unfortunately, dealerships use a cookie cutter approach to leasing. Many times the factory sets the buyout/residual/payoff at the end much higher than the truck will really be worth, making it a bad deal to buy it out at the end. You pay retail twice. Some leases allow the dealership or lender at simply increase the payoff/buyout without notifying you. I don't think Toyota does this, but US Bank, Ally, GM, Ford, and Chrysler do this regularly. I've seen it a lot. A client of mine had a Jeep leased, and they added five grand to the payoff, just because he wasn't leasing another Jeep product.

With a lease, you are putting the risk of resale value on the bank, and guaranteeing that you won't be upside down at the end of the lease. If you drive the correct mileage, and keep the truck in good condition. If you have an accident, and the car fax is trash, you don't care, just turn the truck in at the end and go get another. If you get one of these trucks with the howling diff they can't fix, you can just ride out the lease and turn it in. I believe Toyota sets the residual that is realistic, so you may even have equity in the truck at the end. If the buyout is fair, then it isn't a terrible idea to lease then buy it out. In Texas, you pay tax on a lease buyout, so you are taxed twice.

A lease is more attractive if the manufacture heavily incentivizes the lease with low rates, and tax credits. These are usually cars they need to sell, not Tacoma's. If you aren't wanting to keep a vehicle longer than 3 years or so, I would lease. Make your payment, BUILD IN ENOUGH MILES, and you have no worries about resale down the road. I have some VW client's that are super happy they leased them. Just make sure you BUILD IN ENOUGH MILES, and verify on the contract that they are allowing you the mileage you want. Dealerships are about selling cars and maximizing their profit. Not making sure your lease is set up right, based on your driving habits. Did I say BUILD IN ENOUGH MILES?

 

Yeah I dont think you will ever see a lease incentive for a tacoma. The tacoma is actually a pretty good lease deal since the residual is so high and it is actually worth even more IF you put down money deposits. I've looked at vw and ford and although they provide a lot of incentives the lease cost still ends up being a lot more than say a tacoma because the residual is so bad.

 

All you are doing in a lease, is paying for the depreciation of the vehicle plus interest. Also putting the resale risk onto the lender. The difference in the payment on a 48 month lease and 48 month purchase, is simply the equity you would have at the end of the purchase. I used to get back a $6000 tax return, until I realized I can dial back my withholdings, and have $500 more in my pocket every month. Lease vs. buy is a similar comparison.

Wealthy people don't lease luxury cars for the lower payment, but because they were $10K upside down on that 7 series, when they traded it after 3 years into a long term finance contract. A lease payment can be higher than a loan payment. What mitigates this, is if the manufacturer has a super low rate, and an inflated residual, lowering the payment. Those type of leases are a disaster if you trade out early, drive too many miles, or want to buy it out at the end. They are great if you turn it in, and go get another. Unless you plan to keep it 6-8 years, never finance a Lincoln, Cadillac, BMW, Mercedes, Jaguar, Land Rover, etc.

 

Indeed. My BMW 3-series is nearing lease maturity, and the resale value is on track to be ~$3k less than the lease residual. I'm glad BMWFS is eating that "extra" depreciation and not me! With German cars, there is virtually no way to come out ahead by financing and holding; you might start to eek ahead of serial leases around year 6/7, but that's when the high-$ repairs start popping up. If you want a late-model German vehicle, the only sound options are leasing a new one or buying CPO.

The Tacoma story is totally different, but it can still be favorable to leasing if you are investing that extra cash flow into something with a great return.