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How do car dealers make profit on leases?
So Ford have a Fiesta that supposedly costs a recommended price of £14540. They ask £178 a month and 3 months upfront = 6764. So they take the car back at the end. The car has depreciated by %60 say after 3 years of lease. So it is now worth to Ford to sell on: £5816. So they lose £8724 in depreciation. How is it that I read dealers prefer to lease as they make more money? It looks like a big loss to me, as they have to front the depreciation and in this case arent charging enough to cover it??
6 Answers
- AnonymousLv 76 years ago
They essentially charge a monthly car payment and can sell it when the lease ends. Also dealers can price things to take into account overhead costs. For example, if you finance a new car at a very low interest rate, they most likely won't let you combine it with any of the other incentives and discounts on offer at the same time and talking down the price will be harder.
- 6 years ago
Well first off most cars dont depreciate at 60%, its more around 40%, so its still worth 60% of the original value. Even its its only worth 8724, dealers dont ask what its worth they ask more, typically around 110 to 120%, because theyre a dealership and they can. plus the lease has ALL KINDS of penalties. anything wrong with the car when they take it back costs you extra. chips/scratches/dents/excessive wear, every mile over your contract (say 3 years/30000 miles) costs you extra. you also have to go to the dealership between 2 and four times a year to do the routine maintenance (which they overcharge you). If you dont you pay a penalty on that as well. All the small fine print in the contract is where they make a lot of their money.
- The BladeLv 56 years ago
I was thinking as Ford leasing with Ford Lease, their own financing company, does Ford still sell to them, or just give their own cars at cost value (say it costs Ford £9000 to make the car) But stilll lease it as 14540 rrp? Also I get the damage bit, but that also lowers the price that Ford can get for the car at the end? I guess they overcharge though to cover that and more right?
- Anonymous6 years ago
Dealers make money on the sale of the car. Lenders make money on the lending of money.
Leases are sales, the car is sold to the lender.
- Skoda JohnLv 76 years ago
Dealers simply sell the car to the finance company.
Any marks are charged extra. Any excess mileage is charged extra.
- Anonymous6 years ago
ok its one of the another way to get profit from client