The Truth About Third Party Lease Companies

leased vehicle end of lease leasing

A Houston caller last week started our call saying he wanted to lease a new F-150 and was going with a famous third party lease company, not affiliated with a dealership.  I sort of jumped on him, then apologized, explaining to him that this was not a good idea.

I enjoy pointing out car dealer ads to my radio listeners that I find false or offensive. For one thing, people seem to enjoy the education, and it gives me satisfaction to think that maybe I can dissuade someone from doing business with a dealership that practices deception.

Third-Party Lease Companies

There are a lot of independent or third-party lease companies in every market that advertise. I am not a fan of these operations and never have been-they add another layer of profit to the consumer that I find needless. I field a lot of questions about these companies, and the reason is their ads make it sound so appealing. People who listen to my show often hear me say that if it sounds too good to be true, it probably is.

For instance, some lease companies promote a “guaranteed trade-in value at the end of the lease.” While technically this is true, every lease has a residual value, which is a guaranteed amount as long as you stay within the obligations of the lease. It sounds great, but the reality is you get this with every lease.

Lower Payment Claims

The big claim with lease companies is that payments are “40% to 50% lower than buying”. In most cases, this is a true statement, but again this is the essence of a lease, to begin with. Leases are calculated by taking the sale price of a car, then deducting the residual value amount. Of course, the payment will be lower, but you also will not own the car. At best you will have some equity, in most cases, you will not. It is not fair to make a claim of lower payments without a true comparison to the overall cost of leasing versus buying.

Some lease companies throw payments out to the public that sound really good, but most people do not catch the “fine print”. It is usually a very long-term lease, with very short mileage limits per year. For me, the beauty part of a lease is going the shortest amount of time possible, which allows you to avoid the maintenance costs you incur as a vehicle ages. Three years is just about perfect to avoid any repairs or maintenance costs, you might even get away without buying a set of tires.

Crunch the Numbers

I saw an ad online recently from a third party lease company that looked great at first glance on a new BMW. It was a $35000 car, for just $469 per month with just $2000 out of pocket. That is a pretty attractive payment for a hot Beemer. A deep dive shows it to be a 60-month lease, so the total amount of the 60 payments is $28,140. You paid $2000 down, so now you’ve spent $30,140 on a $35,000 car. So what is the problem? Simply put, at the end of the lease you probably won’t have anything to show for the $30,000 you paid out. If you want to own the car at the end of the lease, you can buy it for $15,750. If you do buy the car, now you’ve spent almost $46,000 on a $35,000 car.

No Manufacturer Involvement

I want to point out, too, that no third-party leasing company can buy from an automobile manufacturer. They buy from local dealers, who make a profit selling the cars, then the lease company adds in another layer of profit. Just about all the manufacturers offer lease incentives and special interest rates to their dealers that lease companies cannot utilize.

In fairness, most lease companies offer some nice services, like coming to your home or office with your new car. Just know you are paying for those services every time you make a payment due to their markup. I just want you to know the facts.

Photo Credit: argus/Shutterstock

  1. Steve 7 years ago

    Once again I must take issue with your article. Third party leases serve a purpose and serve a certain market segment. Yeah, that’s a broad, open statement, but, hey, you started it. Are they all honest and upfront? No, but the same can be said for dealerships offering leases. Why didn’t you mention that?

    Also, your leased Bimmer example neglects to mention that if the customer purchased the car instead of taking advantage of the convenience of the lease, he would have paid almost the same $46K for the car with finacing, especially with that $2,000 down payment.

    For the most part, I enjoy your articles and insigths.

    Thank you!

    Steve H.

  2. Mike 3 years ago

    Hi. I am looking for an institution that would provide a third party lease, not a company that delivers to my door, but more like a bank offering a lease. Do you have any company/bank names?

    • Michele Sanders 3 years ago

      Mike, I don’t know of a bank that does this, they just don’t have the infrastructure to administer leases and most are not licensed to do so. I wouldn’t recommend it anyway, click:

      What About 3rd Party Lease Companies?
      Let me know if I can help you, I am certain you can get the best deal by going through one of my Certified Dealers.

      Jerry Reynolds, President
      Car Pro Radio Network

Leave a reply

Your email address will not be published. Required fields are marked *


Copyright ©2018 Car Pro. All rights reserved.                                                      Team Access          Privacy          Terms of Service          Technical Support

Log in with your credentials


Forgot your details?

Create Account