In Electric Leasey-Land, Up Is Down And Suburbans Are Cheaper Than Tahoes

Okay, I admit: I subscribe to the Wall Street Journal. It’s not really for me; Mrs. Baruth works in finance. (Without which, as you pimps and players out there should know, there’s no romance.) Rarely do I read the whole thing. This past Saturday afternoon, however, I broke the pull-cord of my son’s TopKart. Then he ran out of gas for his motorcycle. Which consigned us both to an early afternoon inside the house, because I was too lazy to address either situation.

Imagine my surprise to find an advertisement for an independent leasing agent in the last of the Saturday sections, back among the lifestyle articles and the usual Dan Neil attempt to sound like a more fey version of Oscar Wilde. Those members of the B&B who were born prior to the release of “Appetite For Destruction” will remember that stand-alone leasing shops were once very big business. They bought their cars from franchised dealers, often well after they’d obtained the customer’s signature on their own paperwork, and they relentlessly cross-shopped banks for rate and residual deals.

Often, these firms focused exclusively on members of the professional class; the big hitter in central Ohio during the ’80s was un-self-consciously titled “Physicians Leasing Co.” They were largely driven from the field by the beginning of this century by aggressive captive finance providers like BMW Financial. The tendency on the part of most banks to view the end-of-lease termination process as an additional and very lucrative profit center, a tendency that became more exaggerated as the prime rate fell and banking profits sank accordingly, didn’t help their business model one bit.

Nevertheless, here we are, in $THE_CURRENT_YEAR, with a manufacturer-agnostic leasing company advertising in the WSJ. So let’s see what the deals are, and what lessons we can learn from looking at them.

All of the rates listed in the newspaper ad are supposedly for the same basic terms of 39 months, 10,000 miles a year, $0 down, with gap insurance. That doesn’t mean you’ll “Sign and Drive” like you would at a VW dealer; be prepared to pay the first month and a security deposit equal to or slightly greater than the first month’s payment. Its website offers quite a few more leases. It’s not explicitly stated whether all of these leases are under the same terms. For right now, we’ll assume that most of them are, since the rates quoted in the paper tend to match the ones quoted on the website. If you call, as I did, you’ll be told that they are sample rates and that they vary somewhat depending on the specific vehicle you choose.

The blessing and the curse of dealing with shops like this is that they really don’t care what car you lease, as long as it’s with them. It’s a curse because they don’t have a manufacturer aggressively pushing the metal, the way BMW Financial does, but it’s a blessing because their agnostic approach allows us to see which vehicles really do lease well. In order to “lease well,” a car needs a high residual and a reasonable amount of up-front discount. So, what can we learn from looking at the advertisement and the website?

Big performance sedans and trucks are residual cancer. Note that the entries for “Audi RS7” and the AMG Benzes are expressed in terms of cash discount, not rate. That’s because leasing an RS-series Audi or an AMG is an utter nightmare. The banks hate them. Not only do used AMG Benzes and the like have the residual value of porta-john toilet paper after a week on a construction site, they attract the most credit-challenged and shady customers possible. The same is true for the Nissan GT-R, another “cash off” listing on its website. They do have a lease price listed; it’s over $1,400 a month. Betcha it’ll do a new S-Class for less. Quite a bit less.

Suburbans lease cheaper than Tahoes! Just look at the website. LT Suburbans are $499, while the Tahoes are $579. Go up to LTZ trim on both, and they level out. But when you consider that a Burb stickers for more than a Hoe, that means that the banks would rather take a long-wheelbase model back at the end of a lease. The same isn’t true for the Denali XL and Escalade ESV, both of which cost more to lease than their SWB cousins. So what gives? Only this: There’s a strong contingent of people who buy used Suburbans for work in the building and hauling trades. Base-level Suburbans are a great residual bet. Something to consider, if you’re buying a full-size SUV.

The Lexus GX460 is the deal of the century. Lease a GXS460 for the same price as an Audi Q5? Where do I sign up? The same truck with a Toyota badge is even cheaper, like $200/month cheaper! Obviously, the banks would rather run a three-year-old Lexus across the block than a three-year-old Audi. It gives you a sense of how strongly the German manufacturers have to incentivize their in-house leases to compete with Lexus. But be careful; a few years ago, Lexus added a kind of loss-leader version of the GX to its lineup in order to keep the base sticker below $50,000. Make sure you can live with that relatively sane trim level before you sign on the line that is dotted.

Love That Land Cruiser residual. A new Land Cruiser costs… wait for it… $83,825. The Lexus version, yclept LX570, is $88,880. A six percent difference, give or take. But the lease? $999 for the Toyota, $1,259 for the Lexus. What gives? It can’t be that Toyota dealers are showing extra love to the independent lease shops, because they never do. Trust me. I worked in captive finance for a few years. It has to be down to residual. The extra payment, which adds up to slightly over ten grand, looks suspiciously like the five-grand price difference plus interest and a few extra bucks on top. Which makes me think that the Toyota and Lexus variants of this truck fetch the same money at auction. That’s confirmed for me by some quick searches of used Land Cruisers and Lexus LXes from ten years ago, which indicate that the “L” badge doesn’t add a penny’s worth of resale. So if you’re buying new, get the Toyota, but if you’re shopping used, the Lexus offers a few extras at no charge.

Of all these cars, the one I like is… Probably the Mercedes C63. $799 a month. That’s a pretty good deal. If you bought one on a five-year loan, you’d pay $1,300 a month. Over the term of this lease, you’d save close to $22,000, even once you throw in tax. At the end of 39 months, would I rather have a C-class with 21 months’ worth of payments left to cover, or twenty-two grand in my pocket and an empty driveway? You see? Sometimes leasing really does make sense.

The question that remains unanswered, however, is this: Should I lease with an independent? With very few exceptions, my answer to that question is always “haha fuck no.” Given a choice, you always want to deal with the captive finance company. They are easier to deal with all the way through the lease — and when the lease is over, its concern is getting you into another new car from that same maker, not screwing you out of five grand in charges for hairline scratches and worn trim. The best customer for an independent lease company is somebody who values convenience and choice over cost. You know, the kind of person who likes to just pick up a phone, say the car make and model, and have one show up at his office building later on that week. In other words, the kind of person who reads the Wall Street Journal. But that leads to one final question: Why do they bother delivering this paper to Ohio?