zirrah

FWIW, money factor always seemed like a way to make people confused vs financing and thus create an advantage for the dealer. Your average joe hasn't a clue about it nor how to convert it into an APR.

philg3

So true. I've never leased a car -- always purchased, and eventually sold them privately to go on to the next one. Leasing was always a mystery to me. I just ordered a 991.2 Turbo, and considered leasing -- mainly thinking I'd get a new one every 3 years or so, but I got sticker shock at the numbers. The quote did not have the APR / money factor rate disclosed or the residual value, but it was easy to figure out it was a bad deal.

What initially intrigued me to consider the lease was my son just leased a Ford Explorer with an APR of 0.25%. Money is cheap these days, but not with a Porsche lease.

MJBird993

Exactly.

True that.

FWIW, I've spent time in both CO and NYC and they both have their charms and drawbacks.

The OP's point got lost in the quickly escalating hostility (can't we all just get along?) but as mentioned, Porsche does what they do because they can, and they are in business to make a profit. Can't fault them for that.

Don't like it? Buy used, buy Toyota or whatever works for you.

dflowerz

Yeah the money factor way of calculating interest does seem a little like a scam. I agree that the 911 is a high end car and they are selling well. As long as they sell well the money factor will be higher. If suddenly they had a lot of competitive brands or sales dropped then the money factor would drop. Bottom line is it is expensive in a number of ways to own a 911, which is why I am doing my first lease. Worth it to me to be able to walk away if, after three years, the 911 has lost it's charms. If not I plan to pay cash for the residual. But that is a long way off. I don't even have the car yet!

Valkuri

Deleted

Vise

Agreed. In case you're not aware money factor is a US only thing too... I've never quite understood it myself. For leases in Canada the dealers are required to list the interest rate. Makes it pretty easy to figure out who is gouging on lease interest vs those who are not.

Also interesting to see the different rates at one brand ie. significantly higher interest rates on the newest/most premium models (ie. BMW M cars) vs the more pedestrian models.

shewu

FWIW the Camry is also not too shabby of a DE car ;-)

997s07

The money factor is an interest charge. But interest on what? The financial theory behind it the risk that the the bank (PFS in this case) takes.

The money factor is applied to the residual value + the cost of the car sold. The bank buys the car, it pays out the cost of the car - it is a loan on the books - so it will gather interest charges. So why apply the interest charge to the residual value of the car? That's how the bank mitigates the risk of the residual value not being the actual value at the end of the lease term. I can see how the latter charge can be seen as a scam, but it is not. One way the bank can mitigate the risk is by undervaluing the residual value of the car, making the depreciation portion of the lease payment higher. The other way is to charge a higher money factor which actually costs less to the consumer on average.

There is no question that PFS is milking the system - I would never lease a Porsche.

zirrah

I did not know that about Canada, thanks for the information. It is interesting to see the rates on the latest/greatest, always the most pricey of course.

c_Gio

Enjoyed the read, nice post. Didn't know.

c_Gio

I think it's a finance law (or rule). There are fees/overages w leasing that when totaled up would mess with the APR's implied cost of the money. All the more so with open ended leases (which PFS does not offer, but they are out there--say a FMV residual). The one size fits all approach is not using APR on any lease... I guess the short answer is there is no APR as this isn't a loan.

Different animal = different language, but not more or less confusing. One thing leases & loans have in common is either the payment fits in your family budget or it doesn't. Easy.

ezdriver

Reason is: Somebody had to buy the car to make it available for lease/rental. The dealer sells the whole car at full negotiated price to the lending institution. The institution lays out that cash to take possession of the vehicle ... and has that cash tied up in that vehicle until the car is disposed off eventually. Is the lender entitled to collect some interest on that money for the time that it is "invested" in that car? Yes.

STG

You guys have I realize, you're not going to lease any car without a "rental charge".

Not like you're going to lease it with only paying depreciation. Look at who is taking most the risk too? Future resale and accident ding. The lender. There is a cost to it.

Dewinator

It's starting to make sense now, thanks guys!

I guess the lease "interest rate" or money factor can be broken up into:

- Risk Free Rate
- Default Risk
- Risk of actual value less than planned residual

I'd guess that #2 and #3 are both higher for the Porsche than the Toyota, hence the higher rate?

991carreradriver

Sorry, I don't agree. The risk factor is made up by the calculation not the MF itself. There are two components used in arriving at a lease payment. The first is simply the selling price less residual divided by the term. The second component is the selling price plus the residual times the MF. So, the risk for a higher end car is taken into account with the second component of the formula.