Can someone explain why this lease is so expensive?

[dirtbiker]

I'm just finishing up a 3 year 15k miles/yr lease on a 2018 Ford F150. I am planning to buy (not lease) an F350 for my next truck, as I need it for towing, but I want to wait until the new generation is out first. So, I decided to look into a 2 year lease on the new generation F150 to see how I like it before buying the 350 in two years. My current lease costs me $420/month, and that was with $0 down. For the 2 year lease on a similarly priced model to the one I currently have, they're charging me $833/month with $1500 down. The only difference is this quote was for 2 years instead of 3, and 18k miles/yr instead of 15k. I expected the monthly cost to go up a little, but not double, and I expected total cost to decrease, since when I return it, the truck will be used only 2 years and have 9k less miles.

So, to recap

For 3 years and 45k miles, total cost is $15k.
For 2 years and 36k miles, total cost is $20k

What gives? I asked the sales guy, and he said they're squeezing the payments into a shorter time span, so it's more per month. That makes sense in a loan, but not in a lease. What am I missing?

I'm not looking for financial advice on whether this is a wise/stupid purchase, just looking for insight on how they price vehicle leases. Thanks.

 

[Koolau]

I'm just finishing up a 3 year 15k miles/yr lease on a 2018 Ford F150. I am planning to buy (not lease) an F350 for my next truck, as I need it for towing, but I want to wait until the new generation is out first. So, I decided to look into a 2 year lease on the new generation F150 to see how I like it before buying the 350 in two years. My current lease costs me $420/month, and that was with $0 down. For the 2 year lease on a similarly priced model to the one I currently have, they're charging me $833/month with $1500 down. The only difference is this quote was for 2 years instead of 3, and 18k miles/yr instead of 15k. I expected the monthly cost to go up a little, but not double, and I expected total cost to decrease, since when I return it, the truck will be used only 2 years and have 9k less miles.

So, to recap

For 3 years and 45k miles, total cost is $15k.
For 2 years and 36k miles, total cost is $20k

What gives? I asked the sales guy, and he said they're squeezing the payments into a shorter time span, so it's more per month. That makes sense in a loan, but not in a lease. What am I missing?

I'm not looking for financial advice on whether this is a wise/stupid purchase, just looking for insight on how they price vehicle leases. Thanks.

No expert, but my first guess would be that depreciation is front loaded. Imagine the limiting case. You want to lease for one week - not 2 or 3 years. When you return the vehicle after one week it has depreciated (pick a number - what? $6000?). What would they charge you to lease on that basis. Just a guess, so YMMV.

 

[Sunset]

Wouldn't it be cheaper to buy the F350 now and in 2 years:

• Keep it as the "new generation" is buggy/bad, so you "saved the lease payments

or

• Sell it and buy the new F350, as trucks depreciate slowly ?

 

[corn18]

Ask them to see the lease terms: purchase price, residual price and money factor. That's all you need to determine how it's priced. And trucks are hotter than white steel right now. I was tempted to sell my 2015 2500HD because it's worth more than I paid for it last year, but the new HD trucks are ungodly expensive.

 

[Aerides]

A quick google shows that's a typical lease rate for that truck (insane if you ask me). And why it's more for 2 years vs. 3 does not make mathematical sense, unless there is some inventory imbalance for that year already?

 

[RetireBy90]

So I’ve never done a lease so take this with a big bag of salt

A lease is just a way to purchase 2 or3 years of the truck. It is just a financing vehicle to finance the difference between purchase price and what they expect to be able to sell it for in 2 or3 years.
So big difference is the depreciation is paid for in 2 years rather than 3. So let’s say $9K of difference in sale prices, over 3 years that is $3K per year, but with 2 year it is $4,500 per year or $375 a month. 2 year is $250 a month. Add in financing and any other costs loaded front end.
Still $400 per month more sounds excessive. Perhaps part is that they are selling all the trucks they can produce today, in 2018 not the shortage. Perhaps there was a discount in 2018 that isn’t being offered today?
Just some thoughts here.

 

[Sunset]

OP - What is the cost to lease one for 3 years instead of 2 ?

Perhaps it will be nearly the same price. Maybe they decided to charge you the cost of 3 yrs in a 2 yr lease.

As all leases I ever see on TV are for 3 yrs, maybe 2 yr leases are rare and odd and deserve higher price per month.

 

[pb4uski]

What is the buyout on your current F-150 lease? Given what has happened in the truck market over the last 2 years, I'm guessing that your current F-150 is worth a lot more than your buyout.

If you don't hate your current ride then perhaps your best bet is to exercise the purchase option and use it for 2 more years then trade it in for a new F-350.

 

[Sunset]

Another thought:

Ever notice how people who don't need money are offered tremendous deals on low interest loans, while people who desperately need money only get higher interest loans.

Maybe the truck dealer thinks you are a desperate lessee, can't afford to buy a truck, not even buy out your current lease, therefore has no other option than to take the high priced 2 yr lease.

 

[NW-Bound]

I expected the monthly cost to go up a little, but not double, and I expected total cost to decrease, since when I return it, the truck will be used only 2 years and have 9k less miles.

So, to recap

For 3 years and 45k miles, total cost is $15k.
For 2 years and 36k miles, total cost is $20k

It does not make sense. The residual value of the truck after 3 years/45k miles HAS to be less than the value after 2 years/36K miles.

If that were not true, a used vehicle would cost more and more as it ages and gets driven to the ground.

 

[Bamaman]

My job in a previous life was managing some of Ford's largest fleets and teaching Ford dealership personnel how to sell leasing to customers.

The prices on modern pickup trucks have risen so fast that the "common working man" really has difficulties affording monthly payments. They're having to go to leasing to afford the monthly payment.

Retail customers know how to purchase vehicles, but with leasing it's the monthly payment that matters. And that lease payment is negotiable.

If you look at it, leasing is nothing but financing 100%-115% of the cost of the vehicle with a balloon payment. It's the spread between the Acquisition Cost (sales price) and the Lease End Value (balloon payment) plus the money factor that makes up the monthly payment. The dealer only has control of the Acquisition Cost.

But the truth is that modern vehicles cost so much, and a F350 has a wide variance in cost--from $50,000 to $75,000 depending on options and models. These big trucks cost twice what an average vehicle on the market costs. For example, you can pay $20K down on a F350 Lariat, and the payment's going to run over $1000 on 60 months.

What's such a vehicle worth to you?
How long are you going to keep the truck?
What yearly mileage are you going to put on it?
Do you absolutely need a "heavy duty" pickup to tow with? Half tons can now tow pretty heavy.
Are you looking for an XLT with a 7.3 engine or one of the high line diesel pickups?

I have an 18 year old F250 Lariat crew cab which was one of the last 7.3 diesels built.
The value in an expensive truck is to buy one that perfectly suits your needs and keep it for the long run. My truck has 160K miles, and still has a lot of life left in it. My 2020 F150 2.7 STX daily driver is as nice of a truck as I need, and it cost the low $30's after a $3,000 coupon received in the mail and a bunch of sales incentive programs.

It's easy to see that dealer lots are very low on inventory due to problems with outside components manufacturers. And 1 ton trucks on lots are either strippo models or loaded to the gills--ultra expensive. Prices and lease payments are products of supply & demand, and Ford doesn't have to throw substantial sales incentive/APR programs on these trucks right now due to lack of inventories.

Don't worry about the design and quality of the next generation F350's. The cabs will remain the same with changes in sheet metal, interior design and far out electronics. They will remain the top dog in this very heated retail market.

If you must have that 1 ton, I would suggest you take time to order the 2022 model as soon as they start accepting orders. And order the truck that fits your exact needs. I'm just thankful I already have a diesel pickup that will fit my needs for another 18 years.
Whether to lease or buy is a decision you'll have to make. But remember that the lease payment can always be negotiated lower.

 

[dirtbiker]

Thanks for your input everyone. To answer a few questions

I didn't inquire how long to lease for 3 years vs 2. I'll look into that.

I'm not sure what my buyout is on my current lease. I may just go this route, as it will probably make the most financial sense until I'm ready to buy the 350.

Maybe he thinks I'm a desperate lessee? It's the same dealer I leased the first one from and never missed a payment or anything. I dunno.

We do a lot of RVing with a tow-behind trailer. My current F150 works, but is far from ideal. We're close to maxing out payload, and I can feel the suspension being worked hard. From a safety standpoint, I'm below all the towing parameters, but I like a cushion. We also plan to upgrade to a fifth wheel in the next few years as the kids get bigger, and that will require a 3/4 or 1 ton truck. The price difference is so slight between the 250 and 350 that it just makes sense to go with the 350, especially since I'm looking at the heavy diesel engine option (which robs payload capacity). If it weren't for the towing, I'd be plenty happy to stay with a half ton.

 

[Qs Laptop]

Have you gone to another dealer and gotten another quote?

I've leased nine vehicles in the past 25 years. You'd be surprised at the high-ball price you will receive at your initial visit to the dealer. You need to get a quote from another dealer.

 

[Sunset]

..
I'm not sure what my buyout is on my current lease. I may just go this route, as it will probably make the most financial sense until I'm ready to buy the 350.

....

I've never leased, but have read other people's info on leasing.
I would think the buy-out or purchase of the vehicle you are currently leasing is stated in the original paperwork.

It's possible your current leased truck is worth more than the end of lease purchase price due to current demand, so you could buy it, and then turn around and sell it for a profit or use it a couple of years and then sell it for more than originally thought.

There may be a way to squeeze out the profit without actually buying it and selling it but I don't know.

 

[ncbill]

Thanks for your input everyone. To answer a few questions

I didn't inquire how long to lease for 3 years vs 2. I'll look into that.

I'm not sure what my buyout is on my current lease. I may just go this route, as it will probably make the most financial sense until I'm ready to buy the 350.

Maybe he thinks I'm a desperate lessee? It's the same dealer I leased the first one from and never missed a payment or anything. I dunno.

We do a lot of RVing with a tow-behind trailer. My current F150 works, but is far from ideal. We're close to maxing out payload, and I can feel the suspension being worked hard. From a safety standpoint, I'm below all the towing parameters, but I like a cushion. We also plan to upgrade to a fifth wheel in the next few years as the kids get bigger, and that will require a 3/4 or 1 ton truck. The price difference is so slight between the 250 and 350 that it just makes sense to go with the 350, especially since I'm looking at the heavy diesel engine option (which robs payload capacity). If it weren't for the towing, I'd be plenty happy to stay with a half ton.

If you want a lease but need more towing capacity you should consider a Tundra...since they haven't been updated recently both Tacomas & Tundras currently lease reasonably well...I used the broker in this thread (works with a PA dealership, can ship nationwide) to get a Tacoma TRD Sport 4x4 crew cab for ~$300/month (24/12, $0 down, all taxes/fees rolled into the monthly payment) back in 2019:

https://forum.leasehackr.com/t/toyo...-camry-248-venza-269-high-xle-337/106422/4025

Why 24/12?

More incentives at the time...cheaper than 36/10.

 

[corn18]

What does the new F350 have that you are waiting for? I pull my 35', 10,000 lbs 5er with a 2015 Chevy 2500HD gasser. That's its sole purpose in life other than misc truck duties in between towing trips. Cost me $24k last year and it does a great job. Hellofa lot cheaper than a new F350.

 

[dirtbiker]

Update: I talked to another Ford Dealer, and found nearly identical pricing. I then talked to the original dealer a bit more today. Initial purchase price was very similar, but there were a lot more rebates at that time, that ended up with an OTD price difference of about $8k. They also had specific leasing incentives at that time that aren't available today. The mileage and length of the lease played a smaller role (about $40-60 more per month).

The residual value of my current truck is $31K. KBB estimates trade-in value at $31K and private party sale at $35k. I'll probably be better off just buying it out.

 

[Aerides]

The residual value of my current truck is $31K. KBB estimates trade-in value at $31K and private party sale at $35k. I'll probably be better off just buying it out.

I did that once, when my lease was ended but my next car was still a couple years away from market. And with low rates right now maybe finance it for a better deal? I was able to do that just over the phone with the leasing company and it was pretty painless.

 

[Jerry1]

Update: I talked to another Ford Dealer, and found nearly identical pricing. I then talked to the original dealer a bit more today. Initial purchase price was very similar, but there were a lot more rebates at that time, that ended up with an OTD price difference of about $8k. They also had specific leasing incentives at that time that aren't available today. The mileage and length of the lease played a smaller role (about $40-60 more per month).

The residual value of my current truck is $31K. KBB estimates trade-in value at $31K and private party sale at $35k. I'll probably be better off just buying it out.

Yeah, but I just saw an ad on the tv that it’s Ford truck month.

 

[38Chevy454]

Sounds to me like they are making you take all the risk for the end value on the lease. With no risk, and all potential profit to the dealer. I agree that if you can get by with your current truck, buy it at the end value price and use it for the next couple years. Then when you do get ready for the bigger 5th wheel trailer, go truck shopping at that time. Or keep your eye on deals for trucks in the next couple years and be ready to pounce on the new/used truck when you find it. Your current F-150 will sell no problem at any time from now into future as long as you keep it up and good shape.

 

[ivinsfan]

Sounds to me like they are making you take all the risk for the end value on the lease. With no risk, and all potential profit to the dealer. I agree that if you can get by with your current truck, buy it at the end value price and use it for the next couple years. Then when you do get ready for the bigger 5th wheel trailer, go truck shopping at that time. Or keep your eye on deals for trucks in the next couple years and be ready to pounce on the new/used truck when you find it. Your current F-150 will sell no problem at any time from now into future as long as you keep it up and good shape.

I'm laughing because the OP has started some threads about changing jobs, saving and big student loans.


In them he mentions his family "camps" because it's a low cost way to vacation. New 5th wheel, new F350? Doesn't sound very low cost to me. This a good example of Millionaire next door, buy a big tent, rent at a national or state park or get a motel or VRBO for the family. The per night cost will be so much lower.



Trucks are always expensive, we farm and get by with a 2005 Superduty and a field runner F150 ..1997 style. We also have a 12 year old minivan with the extra seats removed for parts runs to town.

 

[iloveyoga]

Reading this makes me remember how much I dislike going to the car dealer. It's time to look at a new car, but I am holding off for now.....

 

[dirtbiker]

I'm laughing because the OP has started some threads about changing jobs, saving and big student loans.


In them he mentions his family "camps" because it's a low cost way to vacation. New 5th wheel, new F350? Doesn't sound very low cost to me. This a good example of Millionaire next door, buy a big tent, rent at a national or state park or get a motel or VRBO for the family. The per night cost will be so much lower.



Trucks are always expensive, we farm and get by with a 2005 Superduty and a field runner F150 ..1997 style. We also have a 12 year old minivan with the extra seats removed for parts runs to town.

I thought I was clear in the OP that I'm not looking for financial advice on this. I guess I should have also specifically mentioned that I'm not looking for snide comments either. You spend your money and vacation how you see fit. I'll spend mine how I see fit. I'm still living below my means, saving about 30% of our pretax income, on track to pay off our mortgage in just under 10 years, and paying about $60k/yr toward my loans. Could I buckle down and save even more? Sure, I could. But I choose not to. I'm trying to strike a balance between working toward FI and enjoying the fruits of my labor.

 

[ivinsfan]

I thought I was clear in the OP that I'm not looking for financial advice on this. I guess I should have also specifically mentioned that I'm not looking for snide comments either. You spend your money and vacation how you see fit. I'll spend mine how I see fit. I'm still living below my means, saving about 30% of our pretax income, on track to pay off our mortgage in just under 10 years, and paying about $60k/yr toward my loans. Could I buckle down and save even more? Sure, I could. But I choose not to. I'm trying to strike a balance between working toward FI and enjoying the fruits of my labor.

I'm sorry you took it as snide. I've read and posted on several of your threads from Hi, I'm new and asking for advice, to your Millionaire next door thread ( hence the mention of TMND) to your new thread about changing work situations and the stress that comes with that.



Just think of me as the Angel on your shoulder whispering in your ear about some of your past posts and feelings about money. It's your money and your decision but IMO it's OK to comment about previous posts and comments that posters have made. Note, last I remember reading, you guys were up to about 300+K a year income, albeit with some significant debt. It's not a question of if you can afford it, but is this something that fits in with your long expressed goals and plans. Only you can decide that. I remember on the MND thread posters commenting about the danger of lifestyle creep and the very human habit of justifying the material things we think will make our life better.



On the truck front most likely doing the buyout is going to be the best call for you right now.

 

[CRLLS]

FWIW, I just read tonight that Ford is not shipping the F150s due to a chip shortage. Thousands of F150s are being partially built and then held until the devices become available and the rucks can be completed. IMO, it may temporarily increase the value of the off-lease trucks, (maybe?)

THis info may slightly tilt the financial decisions.