By on August 2, 2010

In the market for a new Toyota Corolla? Now is the time. Your friendly Toyota dealer will lease you a well-equipped Toyota Corolla for just $189 a month for three years. With a little shopping around, your monthly payments can be below $150. This may be a great deal for you. “For Toyota, the deal could be a financial disaster,” reports an aghast Freep. “To keep customers coming to its showrooms amid a series of embarrassing recalls, Toyota has been offering some of its best leasing terms in years.”

To make matters even more disastrous, CNW Research noted in a report that one Toyota program requires a credit score of “only 660 to qualify.”

Not that it will be your problem, but Toyota is betting that the vehicles will have superior resale value when they are returned. Experts say they are wrong. Automotive Lease Group estimates that that well-equipped 2010 Corolla leased in a typical 36-month deal that allows it to be driven 12,000 miles a year will be worth about 53 percent of its sale price when its lease term is up. Toyota pegs that at 63 percent. A $1,800 difference in the resale value. The thinking at Toyota most likely is that it’s better to offer a smashing lease than piling cash on the hood. Sell now, pay later.

Anyway. Not your problem. Now is YOUR chance to take Toyota to the cleaners. No law degree or acting skills necessary.

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16 Comments on “Freep: Bargain Lease Could Mean Financial Disaster For Toyota...”

  • avatar

    From the Department of Nitpickery: Actually, that’s an LA Times piece from last week. See:,0,1919077.story

  • avatar

    Ahhh, The Freep is back at it again. Don’t they just wish it would happen. Everytime someone spells doom for Toyota it comes back to bite them on the ass.

    Betcha Toyota’s numbers are closer to reality.

  • avatar
    Steven Lang

    Nope. They are sadly mistaken.

    From the link…

    $3,333 due at inception includes:
    – $3,134 cash or trade equity
    – $199 first payment
    – Security deposit waived!

    So let’s say you do manage to get a stripper Corolla CE for $150 a month (before tax, tag & title).

    That equates to $5400 in payments plus $3134. $8534.

    Paying $189 a month would put this lease in the 10k range. Either way you’re looking at spending enough money over three years to buy a base Versa on clearance (or a very low mileage S model) in exchange for owning nothing in three years time.

    The residuals for the Corollas should be in the 8k to 10k range. To be frank, this is a mediocre deal with the usual hefty down payments. If Toyota wanted to push for marketshare above all they would skip the down payment like Ford used to do with the Taurus and dump the prodigious levels of production to their rental fleets.

    They won’t do that. The days of stacking acres of inventory for the sake of accounting are long dead. Other than the usual good/bad purchases that dealers have to do, Toyota has no need at all to stuff their distribution channels.

    • 0 avatar

      I think Toyota will get fleeced on this.

      Ah yes, Mr. Lang, the good/bad order. One of the car industries most dispicable tatics they use against dealers. I am convinced that every G3 that my local Pontiac dealer ordered while those abombinations were in production was simply so GM would send them some G6s and G8s.

    • 0 avatar

      Steven, you are my hero. I also crunched some numbers and determined this to be a pretty crappy deal in the long term. There’s a reason it’s called “Fleecing”. Also, those credit terms are not great at all. I worked selling cars for a spell right when Nissan converted to a tiered leasing system. They saw the writing on the wall in the credit area and decided it was better to give bad credit consumers the option of getting it at a higher payment, rather than putting Nissan Financial in trouble when the you know what hit the fan.

    • 0 avatar

      The good/bad ordering scam exists in many industries.

      Harry Cohn’s Columbia Pictures made a lot of B features that were not great. Columbia’s saving grace were the Howard brothers, Moe and Curly, and their cousin Larry Fine. Three Stooges shorts kept Columbia in business. Theater operators loved the Stooges shorts, the Columbia feature films not so much. Cohn told operators that if they wanted to rent Three Stooges shorts, they had to take Columbia features as well.

      FWIW, the Stooges were on contract with Columbia and not particularly well compensated considering their value to the studio. It was only after television became popular in the 1950s and introduced the Stooges to a new generation of fans that they started making good money, mostly from public appearances and at least one feature film.

      I wonder if the Stooges received any residual payments from television airings of their shorts that continue to this day. I know that their images are now controlled and licensed by their families.

  • avatar

    “only 660″…are you saying that’s too high? In the car finance world, 600 tends to be the median. 660 is fairly high, but nowhere near the 720+ required to qualify for a lot of the low-rate financing offers from the past few years.

    If Toyota wants to lease to low-risk customers at break even (or loss) in order to maintain market share, then so be it. 63% value retention after 3 years may sound a little optimistic, but I’ve seen a lot of cars at 50% after 5 years, no problem.

    • 0 avatar

      CNW Marketing Research is saying the 660 is too low. That Toyota is taking a risk by leasing to people with FICO scores as low as 660.

      660 is in the cutoff for an “acceptable” rating. And a score below 620 is considered “high-risk”. Considering Toyota has a strong financial arm, 660 and above is hardly a major risk. This is not sub-prime lending.

      But this is CNW Marketing Research we are talking about. A dubious if not usually inaccurate source of automotive knowledge. Not only are they composed of a motley crew of unprofessional amateurs, but they provide “marketing research” for hire, i.e. they’ll say whatever you want to hear.

  • avatar

    That’s awfully nice deal for a brand new car, but it’s still a lease, and it’s still a Corolla. I’m sure it’s screwed together just fine, I’d just rather own a Civic for $50 more per month. If the next Corolla is a little smaller, a little lighter, and a little better-looking, maybe. But this generation is a train-wreck of beigeness.

  • avatar

    IMO, you should never have a downpayment on a lease. So the $3134 upfront cost makes this a pretty bad deal. Now as Steven said, without the upfront cost, $189/mo would be great, if you wanted a rather basic car.

  • avatar

    The residual of 63% is a bit optimistic but this is a common practice among car makers that need to lower their prices without being seen to be discounting. This is simply the realization by Toyota that the Corolla is no longer a very compelling vehicle in this segment and they responded with a subsidized lease to keep the inventory moving.

    Is is a subsidy? Definitely yes. Will it lead to “disaster”? No, I’m sure the Toyota bean counters have factored is in already.

  • avatar

    Low lease rates are just another way of offering an incentive. An artificially high residual is industry-standard for lowering lease payments. Usually the bean counters have a good idea what the residual will really be and book the difference into revenue or marketing expense. Leases come back to “bite” the companies only when something comes out of left field, such as the impact of soaring oil prices on the residuals of large cars and trucks.

  • avatar

    I’ve thought about a Honda Fit, or a Versa, or for the first split second I saw this car, even the fugly Corrolla crossed my mind.

    But then I realized I can work on cars…and a BMW E30, E34, E39, E46, or Mercedes W126, or W201 would just be sooooo much more fun to spend money on.

  • avatar

    Here in Georgia, they’re advertising a 36-month lease deal at $119/mo for a 2010 Corolla LE 4AT. It requires $3019 at lease signing and a credit score of 650 or higher. The ‘lease-end purchase’ price is $12,306. But my local dealer has at least five of these exact models on SPECIAL for $13,575 right now (about $4k off sticker)! I get a feeling they won’t be worth $12,306 after three years of use….just a hunch…

    I’ve actually been stuck driving a 2010 Corolla STANDARD for the last two weeks as a rental car. The only optional equipment it has is the “Upgrade Package” which adds Power Windows and Power Door Locks. It doesn’t even have Keyless Entry or Cruise Control! I can’t wait to get my Mazda3 back from the body shop at the end of this week….I hate this thing!

    I’m not sure why anyone would buy one of these things, even at $13,575! And $119 per month might be tolerable, but what potential Corolla-lessee has $3019 to plunk down???

  • avatar

    I had been wondering about this as well. They offer their RAV4 for $209 a month $1140 down and give you a 2 year maintenance plan (the first 5 trips to the dealer for service are free). I am trying to get Honda to give me a similar deal on the CRV.

  • avatar

    Here the deal is $169/mo for the RAV 4 but with $2834 down. The CRV LX 2WD is $239/mo with $1999 due at signing. Both for 36 months and with 36k miles. The Toyota 2yr/25k Free Maintenance deal expired on 8/2/10 (here, at least)….did Toyota renew the offer?

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