We must be really stupid
#31
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.
#32
Rennlist Member
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.
#33
Drifting
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.
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.
#34
Burning Brakes
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!
#36
Drifting
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.
#38
Money Factor
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.
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.
#39
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.
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.
#40
True, and that fact makes my friend Ed Bolian's accomplishment all the more remarkable.
http://jalopnik.com/meet-the-guy-who...8-h-1454092837
(For the record, and since this is a Porsche board, Ed's first choice was a 996TT. He discarded that for two reasons: easy to know what it is and report, and fuel capacity simply couldn't be made nearly as great as the MB.)
http://jalopnik.com/meet-the-guy-who...8-h-1454092837
(For the record, and since this is a Porsche board, Ed's first choice was a 996TT. He discarded that for two reasons: easy to know what it is and report, and fuel capacity simply couldn't be made nearly as great as the MB.)
#41
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.
#42
Burning Brakes
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.
#43
Race Director
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.
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.
#44
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?
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?
#45
Rennlist Member
Thread Starter
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.