Jooyoung99

I wanted to share what I learned. I've been shopping for a 650S for the past 2 weeks and I was comparing at some financing options. One option that seems to be popular is an Open Ended Lease through a company such as Putnam or Prestige.

In summary, I think Open Ended Lease are complete rip off and the companies who provide them are very shady. I'm sure lot of people have good experiences with Open Ended lease, but it's definitely not for me.

In an Open Ended lease, here is how your payoff is calculated if you decide to payoff your entire balance or sell your car.

Purchase Price: $250,000
Down Payment: $35,000
MF / APR: .003 or 7.2%
Term: 60 Months
Balloon Payment: $100,000
Payment:$2,945 before Tax

Let's say that you want to pay off the lease the next day, here is how the formula is calculated:
$2945 x Remaining Payment 59 months: $173,755
Add Residual Value: $100,000
Termination Fee: $2,000
Total Payoff: $275,755.

Think about this!!! You paid $35K down on a $250K car, but the next day your owe $275K!!! WTF right? I don't understand their logic of charging all the interest upfront. By signing the dotted line, you have committed to paying the leasing company $60K in interest payment regardless when you payoff your balance.

In comparison, if you did the same thing on a closed end lease, the payoff would be total initial capitalized cost, so $250K + Fees - down payment = $225K, since the interest is charged on a monthly basis.

What bothers me the most is that on the lease contract this is not clear at all. I found out going through some lawsuits against Putnam by searching in Nexus Lexus. Be careful guys!! I was very close to signing the lease, but I'm so glad I held out to research how Open Ended Lease worked.

Serge944

That's one hell of a pre-payment penalty! Sounds like it should be illegal to me...

nlpamg

I've always wondered about these.

Good to know. Useful information as always. Thanks for sharing. I'd be interested in what you find on the 650S.

CAlexio

you don't want to live in a country where this is illegal... do your research, caveat emptor. thank you to the OP.

Serge944

Could you imagine if a home mortgage was structured this way. Instead of being amortized, your $1.0 million 4% 30yr mortgage would show a balance of $1.7 million on your first statement.

I'm just unfamiliar with this concept of being liable for the entire interest of the entire loan term, from the first day.

Daniel2001

Your info only applies in a default situation.

“In a default situation the lessee would owe the contract balance but any other scenario i.e, early termination or trade in would afford the lessee a discount off of the contractual balance”.

Which applies with any lease. I think you are looking at the worst case in a default repossession scenario.

sccchiii

NEVER, NEVER, NEVER sign a open ended lease agreement on a personal use car.

Open ended leases are offered because these outside lenders provide a dealer additional options for customers when they don't have a very good captive lender or no captive lender at all.

Jooyoung99

If all the information are clearly shown on the lease contract, I think it should be perfectly legal. But if you look at the contract, none of this information is actually shown. I called the leasing company and the guy was purposely vague and very unprofessional. It would be very easy for anyone to get trapped in this, and that part is what I feel should be illegal. And there are people who are suing the companies because of it.

One guy crashed his Ferrari and realized he owes significantly more than what he bought the car for. If you search Putnam in Nexus Lexus, there are various cases pending and settled.

Jooyoung99

No, you are wrong. It applies for any time you want to terminate the lease early. I have two friends who leased through Putnam and they both confirmed this.

farfromcommonGT3

This lack if clarity in leasing options is another reason why values on McLaren are artificially depressed. Ferrari has aggressive leasing on their cars, and Lamborghini financial is operated by Porsche financial.

If you want the car, Premier Financial Services has options, and speaking from a lot of experience, they are better in every way than Putnam.

Happy to discuss further. I have a 675LT coming and Premier is who I will be using to lease it.

Jooyoung99

You should definitely ask Premier how they calculate the lease payoff balance.

Ferrari also has open ended lease, but they don't charge all the interest up front. Also, they don't report to the credit agency, which is a plus for lot of people.

I really like Lamborghini financial. They now offer closed end lease for Huracan, not sure for Aventador.

Also, a big plus would be if the company supports lease transfers. Most don't allow it. Porsche let's you transfer the lease, but you are still on the hook if they new leasee defaults. But still it's better than not being able to do so at all.

farfromcommonGT3

I have leased several exotics from premier, paid them all off early, typically 6-12 months, and no issues whatsoever. In their initial quote, you see your entire depreciation schedule for the life of your lease, so guesswork is entirely removed. IMHO, transparency is the key to any high end transaction.

As I mentioned, happy to go into more depth.
Lamborghini financial has closed end for aventador too, including SV (!!)
They need to stop being SO good in fact though. This year will be expensive with that LT, an SV in Grigio Telesto, and a matching PTS RS in Telesto as well. I will lease the SV through Lamborghini financial and the McLaren and RS through Premier, as Porsche won't lease the RS (!)

Jooyoung99

Good to know. I will definitely check out Premier. Thank you for the information.

farfromcommonGT3

Juan Garcia is the best. jgarcia@premierfinancialservices ; I don't represent them or anything, just a Very satisfied client of theirs. You can tell Juan that I, Charlie Gray, sent you and he will make sure you get the best deal possible. I do several cars with them a year and they give me the best rates and residuals, and I assure you I always check because you never know til you do. Hope this helps!

C

Gef3rd

If you lease through Putnam you need to ask for an amortization schedule. They will provide it as an addendum if you ask up front. This schedule defines the payoff if you want to get out of the lease early. The basic "penalty" for early termination is a) they don't give you credit for first and last in the amortization schedule (thereby increasing your effective interest rate), and b) a one month payment penalty.

You need to read and understand everything you sign. If you read the end of lease language on a Ferrari Financial Services lease you will be surprised (and not in a good way). When I reviewed the language they said "Oh, we never enforce that". I asked them to remove the language and they said they couldn't. Part of this end of lease language reads as follows "If the actual Value of the Vehicle is less than the Residual Value, I will be liable for any difference up to an amount equal to 3 times the Monthly Payment".

Please feel free to pm me and I can run numbers/amortizations for you. I can also send you examples of a Putnam and FFS lease amortization.

If you do a search I think I posted something on Rennlist about leasing before.