How does the Lease process work from the Dealer perspective? Did I get this right?..
#1
Track Day
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How does the Lease process work from the Dealer perspective? Did I get this right?..
I am trying to understand in detail how the lease process works from the dealers perspective and where the dealer makes money on it.
This is my current understanding:
1) Dealer buys car from factory with some discount and/or subsidization. This might be as much as 25% off the MSRP !?!
2) Every month (!?!?) the dealership gets a rate sheet from Porsche Financial Services (PFS) which states for each model and year money factor and residual. What is the exact date PFS releases these?
4) Dealer can mark up the Money Factor -> Profit margin here for the dealer
5) Dealer cannot change the residual. Fixed by Porsche Finance
6) Dealer might sell additional packages such as prepaid maintenance plan or wear and tear insurance to customer -> profit margin here for dealer.
8) The dealer sells the car to PFS for the selling price/gross cap cost that was negotiated with the customer.
10) Lease End:
Let me know what your comments, corrections, additions are on this
This is my current understanding:
1) Dealer buys car from factory with some discount and/or subsidization. This might be as much as 25% off the MSRP !?!
2) Every month (!?!?) the dealership gets a rate sheet from Porsche Financial Services (PFS) which states for each model and year money factor and residual. What is the exact date PFS releases these?
- Money Factor. This is not universal for all models and can be lower for subsidized models. Currently, 0.002 for 2017 models and e.g. 0.00083 for subsidized 2016 Cayman.
- Residual in percent. Depending on mileage per year and lease term. +/- 2% for every 2-3k miles difference ?! +/- 2% difference for every 3 month lease term difference !?
4) Dealer can mark up the Money Factor -> Profit margin here for the dealer
5) Dealer cannot change the residual. Fixed by Porsche Finance
6) Dealer might sell additional packages such as prepaid maintenance plan or wear and tear insurance to customer -> profit margin here for dealer.
NOTE: with prepaid scheduled maintenance plan, customer is entitled to 1% higher residual
7) Customer signs lease contract 8) The dealer sells the car to PFS for the selling price/gross cap cost that was negotiated with the customer.
??? Does the dealer get other incentives for closing the lease deal or for negotiating specific attributes of the lease deal, such as large down payment ???
9) From this point on the dealer has no obligation towards the customer anymore (except for maintenance) and the customer pays PFS the lease fees.10) Lease End:
- PFS has the car inspected for excessive wear and tear and damages.
- Who does this inspection? Service department of dealership on behalf of PFS? Can I choose an inspector?
- Does the dealer have any interest or profit coming from the inspection?
- Does the dealer care if the car does not have a clean carfax anymore? He does not own the car anyways, PFS does, right?
11) Car is returned to the dealership.- Purchase option: Customer buys car from PFS for the residual stated in contract
- Customer does not buy the car: What happens with the car? Does PFS sell it back to the dealership?
Let me know what your comments, corrections, additions are on this
#3
Track Day
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mhh, that means if at 11) the end of the lease the customer decides to buy the car, the dealer can reject this and buy the car himself instead?
#4
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What mitch9000 means is that the dealer gets 1st dibs if the customer chooses not to buy out the lease.
#5
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I am trying to understand in detail how the lease process works from the dealers perspective and where the dealer makes money on it.
This is my current understanding:
1) Dealer buys car from factory with some discount and/or subsidization. This might be as much as 25% off the MSRP !?!
This is my current understanding:
1) Dealer buys car from factory with some discount and/or subsidization. This might be as much as 25% off the MSRP !?!
2) Every month (!?!?) the dealership gets a rate sheet from Porsche Financial Services (PFS) which states for each model and year money factor and residual. What is the exact date PFS releases these?
- Money Factor. This is not universal for all models and can be lower for subsidized models. Currently, 0.002 for 2017 models and e.g. 0.00083 for subsidized 2016 Cayman.
- Residual in percent. Depending on mileage per year and lease term. +/- 2% for every 2-3k miles difference ?! +/- 2% difference for every 3 month lease term difference !?
3) Dealer negotiates selling price/Gross Capitalized Cost with customer -> Profit margin here for the dealer
4) Dealer can mark up the Money Factor -> Profit margin here for the dealer
5) Dealer cannot change the residual. Fixed by Porsche Finance
6) Dealer might sell additional packages such as prepaid maintenance plan or wear and tear insurance to customer -> profit margin here for dealer.
8) The dealer sells the car to PFS for the selling price/gross cap cost that was negotiated with the customer.
4) Dealer can mark up the Money Factor -> Profit margin here for the dealer
5) Dealer cannot change the residual. Fixed by Porsche Finance
6) Dealer might sell additional packages such as prepaid maintenance plan or wear and tear insurance to customer -> profit margin here for dealer.
NOTE: with prepaid scheduled maintenance plan, customer is entitled to 1% higher residual
7) Customer signs lease contract 8) The dealer sells the car to PFS for the selling price/gross cap cost that was negotiated with the customer.
??? Does the dealer get other incentives for closing the lease deal or for negotiating specific attributes of the lease deal, such as large down payment ???
9) From this point on the dealer has no obligation towards the customer anymore (except for maintenance) and the customer pays PFS the lease fees.
10) Lease End:
10) Lease End:
- PFS has the car inspected for excessive wear and tear and damages.
- Who does this inspection? Service department of dealership on behalf of PFS? Can I choose an inspector?
- Does the dealer have any interest or profit coming from the inspection?
- Does the dealer care if the car does not have a clean carfax anymore? He does not own the car anyways, PFS does, right?
11) Car is returned to the dealership.- Purchase option: Customer buys car from PFS for the residual stated in contract
- Customer does not buy the car: What happens with the car? Does PFS sell it back to the dealership?
#6
Track Day
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Thank you for your comments!
What is usual for both subsidized and non-subsidized vehicles according to your knowledge?
Do you know if there is a way for the customer to obtain these rate sheets from PFS directly? Does the rate sheet also state the MFs for the lower tier credit scores, or only top tier?
I understand length of lease and mileage only influences the residual, not the MF, is that correct?
What is the maximum amount of time the customer can request the inspection before lease end? 1 month? I am asking since it would be beneficial to have it done early, with the customer present, to discuss any damages judged by the inspector and get them fixed before returning the car
Correct. Rates are based on a calendar month, but sometimes will extend to the 1st or 2nd of the following month if the month ends on a weekend. Money factors are also dependent on the customer's credit score.
Money factors and residuals vary by the length of the lease and mileage, and all of that can have an effect the dealer's profit, but not enough for most dealers to be incentivized to push you one way or another.
#10 and #11 should be switched. If the customer is returning the car, it goes to the dealer, and PFS has it independently inspected within the week or two following. The dealer is not involved or incentivized in the inspection process. The car is not inspected if the customer is buying the car.
#7
Rennlist Member
How does a lease work if after one year on a two year lease, the buyer wants to trade the car in for a new model? What are the options for the buyer, dealer and PFS?