SEA Stinger
Active Member
Here's a rhetorical question: Suppose I take out a zero-down loan on a new Stinger and then sell it after 36 months. Who do I talk to in order to get a refund on all the interest charges I had to pay on the residual value of the car (i.e., the price I sold it for)? 
Answer: Nobody!!!
In this hypothetical example, during the three years I owned the car I had to pay interest on the entire balance of the loan. Even though I only used it for three years. During that period, the car was an asset whose full value was in my possession.
The same principle applies to leases. The lessee has possession and use of the full value of the car (asset), and thus is responsible for paying interest expense for its full value (net of down payment and amortization), including the residual value. There is simply no getting around the fundamental economics of this.
In other words, the recurring complaints that leasing companies shouldn't apply money factors to the residual value of a car are off base. There are no free lunches on loans or leases, and claiming that there should be one for leases is misguided.
Money factors on leases do tend to be higher than interest rates on loans, but that's a different issue.
Okay, rant over now. We now return to our regularly scheduled programming.
Answer: Nobody!!!
In this hypothetical example, during the three years I owned the car I had to pay interest on the entire balance of the loan. Even though I only used it for three years. During that period, the car was an asset whose full value was in my possession.
The same principle applies to leases. The lessee has possession and use of the full value of the car (asset), and thus is responsible for paying interest expense for its full value (net of down payment and amortization), including the residual value. There is simply no getting around the fundamental economics of this.
In other words, the recurring complaints that leasing companies shouldn't apply money factors to the residual value of a car are off base. There are no free lunches on loans or leases, and claiming that there should be one for leases is misguided.
Money factors on leases do tend to be higher than interest rates on loans, but that's a different issue.
Okay, rant over now. We now return to our regularly scheduled programming.
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