Lease guru's need your help
 

Last Tuesday I signed a lease through the dealer. The lease will actually be with NMAC (Nissan). Everything went very smoothly. They even complemented my credit rating.

Saturday I get a call from the dealer finance dept. and they tell me that I need to pay more Cap. Cost Reduction because the current Adjusted Cap Cost is more then my gross yearly income. They claim this stipulation is coming from NMAC.

I called two other Nissan dealers and they never heard of this situation or requirement. I also checked with 2 outside companies and they both said it's possible but it never happened to them.

Can any finance experts out there confirm whether this could be legit. Since this lease has basically been rejected can I just go get a lease somewhere else? Wonder if the dealer will ask for the car back while I arrange other financing.

Need input ASAP
Thanks

If you are done and completed with your paperwork, why do you have to rework this? Can you not just say "sorry, paperwork is done." :)

Best of luck.

Did you sign a lease or just an application for one?

You might want to read the material on the following website before you take any action:

http://www.carbuyingtips.com/lease.htm


There is a massive amount of info on this guy's site, but good stuff none the less.

After reading, you'll find that "cap cost reduction" means that, in addition to the various upfront fees, they now want you to make a downpayment on the selling price of the car (though your not buying the car when leasing, the "cap cost" is essentially the 'selling price' of the car). Thus, cap cost reduction means that you'll have smaller lease payments, BUT you'll be paying more upfront. The net result is that you'll still pay the same number of $$, but sooner rather than later. Perfect for NMAC since getting their payments sooner serves to increase their rate of return on the lease (referred to as the "money factor" rather than the loan rate).

My suggestion is this: have someone in your area who is competent in doing the math on car loans to run the numbers for you. If, after the 'cap cost reduction' the lease has a higher effective rate (i.e. money factor) than you would have to pay if you purchased (i.e. the loan rate), then you might want to purchase. Even if you don't care to purchase the car, the return to NMAC may be way higher than you need or care to be paying. I'd find a finance professor at a local university and check the numbers if I were you.

Good Luck

It's a signed "Motor Vehicle Lease Agreement". That's what I find confusing. The dealer accepted all the payments in good faith then when they filed it with NMAC it was rejected.

That's what I'd like to say to them but I want to have as much intel as possible to argue the issue.

Many banks, NMAC included, do not lik to loan more than what your yearly gross income. It is entirely possible that NMAC is requiring this stipulation. However, most finance managers know this up front, and will not contract you unless they are pretty sure they will get it approved. It could just be a ploy to get you to pay more money. If the monthly payment does not go down with more money from you, you are getting snowballed.

That's another thing I don't get. You're not borrowing on the Adj. Cap. Cost you're borrowing on the difference between that and the residual. To me that is the number they should be looking at.