Lease agreements: Tips, questions, and experiences

Wells Fargo is demanding collateral and payment guarantees in the form of promissory notes

even though a promissory note functions as a means of payment rather than security, and a collateral requirement could easily be interpreted as a deposit

goldengull3 said:Look, buddy, you aren't leasing a car—you're taking out a loan. There’s no down payment or co-signer involved in a real lease...

I wouldn't step foot in a "leasing" company like that ever again.

Every single "leasing" outfit out there asks for a down payment, a guarantor, a deposit, or just some other crap they rename to sound fancy.
That's why I'm telling you, there's zero actual difference between a loan and a finance lease, even if the title technically stays with the leasing company.

Keith Taylor4 said:Wells Fargo is demanding collateral and payment security in the form of a promissory note.

Technically, a promissory note serves as a method of payment rather than a form of security, and one could argue that collateral functions more like a deposit.

It reminds me of what my professor used to say back in college—that true leasing doesn't actually exist here in America.

goldengull3 said:Listen, buddy, you aren't actually leasing that car—you're just taking out a loan. A real lease shouldn't require a down payment or a co-signer...

Honestly, I wouldn't even step foot in a "leasing" firm like that anymore.

I really appreciate you looking out for me, but I don't think I quite see eye to eye with you on this one. We decided to go through Wells Fargo for our leasing, and we chose them specifically after sitting down and comparing their terms against two other major firms.

I totally agree with your logic that a lease *shouldn't* demand a deposit or a guarantor since the leasing company technically owns the vehicle, but apparently, this type of financial lease works a little differently. 😢

As for those legal loopholes you mentioned, my wife is an attorney (which is actually why we're doing the leasing in her name), so she’s been keeping a very close eye on everything. I trust her judgment on this! 😉

eve, mine was on a lease

so I rolled up to the dealership, picked out my ride, told them exactly what I wanted...

then two days later, I dropped off all the paperwork from my job...

after a little bit, they gave me a call and told me to head over to this notary office down the street...

I showed up, cut right to the front of the line, sat down, and signed everything...

then they called out my car info... I picked up the keys, sorted the paperwork, took the title down to Wells Fargo... and that was basically it

as for how much I'm paying, I honestly just track it through my quarterly bank statements 🙂

bluemaker said:I appreciate the concern, but I don't think you're seeing the full picture here. We’re going through Wells Fargo for this lease; we did our due diligence and compared their terms against two other major leasing firms before making the call.

In an ideal world, I’d agree with you—leasing shouldn't require a down payment or a guarantor since the leasing company holds the title, but apparently, finance leases aren't built that way. 😢

Back when I was finishing my graduate studies, I actually took a specialized elective exam on leasing. From what I learned, most of what people describe as "leasing" functions almost identically to a standard loan; frankly, any company offering them might as well call it a "gift" if they want to be honest about the structure.

True leasing is what brisknomad6 is describing. As for the banks and leasing companies over here in the States selling whatever nonsense they can get away with to blindfold consumers? Well, that’s a whole different headache.

bluemaker said:I suppose I agree with you that a lease shouldn't technically require a down payment or a co-signer, given that the leasing company actually owns the vehicle. But, from what I can see, finance leases seem to work that way anyway. 😢

Then why aren't people just using operating leases? Pretty sure most major dealerships offer them.

At their core, leases and loans are just two distinct paths to getting behind the wheel. One is about paying to use a car, while the other is about paying to actually own it. Naturally, both come with their own set of pros and cons.

If you go the purchase route, you're footing the bill for the full value of the vehicle, no matter if you drive ten miles or ten thousand. Usually, this involves a down payment, covering sales tax upfront or rolling it into the principal, and dealing with an interest rate set by your lender—think Chase or Bank of America. Your first installment typically hits a month after the ink dries on the contract.

Leasing, on the other hand, means you’re only paying for the depreciation—essentially the portion of the car's value you "consume" during the term. You can often skip the down payment entirely, and in most states, you only pay sales tax on your monthly installments rather than the whole sticker price. Instead of a traditional interest rate, you deal with a "money factor." Just keep in mind that leases often come with extra fees or a security deposit that you wouldn't encounter with a standard loan. Plus, your first payment is usually due right when you sign.

Link: http://www.leaseguide.com/lease03.htm

And so on. I know that for the self-employed or small businesses, leasing is often the smarter play because those payments count as a business expense, which lowers your taxable income. When you buy, you get a big depreciation write-off in the first year, then it tapers off—or something like that, I'm not a CPA.

Financial vs. operating leases... honestly, that sounds like some complicated distinction they'd make over here, because in Canada, it's pretty straightforward: you either lease the car or you don't. There isn't all this gray area. You know the residual value, you know what you're financing, and that's that. If you want to own it at the end, you buy it; if not, you drop it off and grab something else. Simple as.

Oh right, I completely forgot to ask—how does it work for small business owners and corporations when they go the lease or financing route for a vehicle? Specifically, what can be written off for taxes?

With Wells Fargo leasing, you have to account for the sales tax, which means there isn't an actual out-of-pocket cost for that portion... so the true monthly payment ends up being lower by the amount of the tax

Andrew Richardson8 said:Financial versus operating leases? Honestly, that sounds like a distinction unique to the way things are done over there. In Canada, it’s pretty straightforward: you either lease the car or you buy it outright. There isn't all this complicated middle ground. You know your residual value, you know your financing terms, and you move on. If you want to own the vehicle at the end, you buy it; if not, you hand back the keys and grab a different model. Simple.

Actually, operating leases aren't some local quirk—those contract structures actually originated in the US. It’s just that you probably haven't had much reason to utilize an operating lease yourself. What you're describing is the classic financial lease. An operating lease is more akin to a rental; say you need a piece of heavy construction equipment for a six-month project—meaning it's used for far less than its actual depreciation lifecycle—you opt for an operating lease, 🙂 blast through that tunnel you're working on,
and then simply return the machinery.
However, I will concede one point: in America, lenders often bundle various types of credit under the vague umbrella of "leasing."

Look, the difference between operating and finance leasing is pretty simple. Like goldengull3 said, operating is basically just renting, while finance leasing is nothing more than a loan. Operating makes sense if a business needs gear for a specific window of time and doesn't give a damn about actually owning it.
In the books, you don't list it as a company asset. Instead, the lease payment is just an expense, you calculate sales tax on the monthly payment, there's no depreciation, and no long-term debt showing up...
With finance leasing, though, you pay the sales tax upfront when the vehicle or equipment is delivered based on the total value. That gear becomes a company asset, you deduct interest as an expense, you deal with depreciation, and the debt stays off the main balance sheet.
I still say finance leasing—since it's really just a credit line—isn't worth it for an individual.

goldengull3 said:Look, operating leases aren't some uniquely American quirk—those contracts actually originated right here in the States! It’s just that you probably haven't had the chance to use an operating lease before (what you're describing sounds like a standard finance lease). An operating lease is more like a rental; say you need a piece of heavy construction equipment for just six months—meaning it's much shorter than its actual depreciation cycle—you grab it on an operating lease, blast through that 🙂 tunnel you need to clear, and then just...
hand the machine back...
But honestly, here in the US, people tend to lump all kinds of different loans under the vague umbrella of "leasing."

For instance, I bought my car with a loan. I finance the entire vehicle, and once the debt is paid off, it's mine. That's a loan. Right?

I could have gone with a lease instead, say for three years, with a mileage cap of 20,000 miles per year (so 60,000 total over the term). When those three years are up, I return it. Of course, I can choose to buy it out too. If I went over that 60,000-mile limit, I'd just pay a penalty fee for every extra mile driven. That's what a lease is.

So, if a finance lease is essentially just a loan, why on earth do we even call it a "lease"? Because based on how you're explaining it, I don't see any real difference between a finance lease and a regular old car loan.

Andrew Richardson8 said:So if a finance lease is basically just a loan, why even call it leasing? Based on how you guys are explaining it, I don't see any actual difference between a finance lease and just taking out a standard car loan.

That’s the whole point—there isn't one.
The only real difference is that getting approved for a lease is faster and way less of a headache.

So here’s the deal: we did our homework, and it turns out Chase is asking for a co-signer for both finance and operating leases, and from what we can tell, other major leasing companies are playing by the exact same rules. It seems like the hiccup is because my wife is a self-employed attorney, and since she's currently out on maternity leave, she’s just receiving about $1.50 a month from the government. I guess the banks are worried about what happens once her maternity benefits wrap up—that’s the only thing that makes sense to me.

The requirements they have for a co-signer are pretty strict; besides needing a minimum salary of at least $1333, they won't allow any more than one-third of your monthly income to be tied up in debt. We actually bought an apartment through a mortgage using my salary about a year ago, and after I cover the monthly payment of $1.25, I’m still left with $1.75. But according to their math, I don't qualify as a co-signer because my debt-to-income ratio is over that one-third threshold, regardless of how much cash I actually have left over each month. And honestly, they don't seem to care that we have about 20,000 dollars sitting in five different accounts at Chase with a perfect track record of on-time payments and less than a year left until the savings goal is met. This is all for a car with a total value of roughly 13,500 dollars.

Because of all that, we ended up having to find an additional co-signer from within our immediate family.

It’s been a pretty frustrating experience overall. So, that’s the "simple" reality of getting a lease in America.

Whatever
God bless America 👎

Check my inbox

bluemaker said:Total headache. That’s just how simple leasing works here in America.

Honestly, just living in the States is frustrating enough (full disclosure: I’m an American woman, Catholic, and I love my country). Why would leasing be any different? 😁

Compared to taking out a loan, leasing is "easy."

I just want to know who the hell is actually getting all these loans if the average salary is only around $4,500?!
but we've already been down this road...

Andrew Richardson8 said:So, if a finance lease is essentially just a loan, why bother calling it a lease? Based on how you're explaining it, I fail to see any meaningful distinction between a finance lease and a standard auto loan.

In the real world, a finance lease isn't a loan. What we deal with here in America is an entirely different beast.

Corporations find this type of leasing advantageous for tax write-offs—though I'll leave the granular details to some specialized accountant—but for the average individual, there isn't much of a practical difference...

A legitimate finance lease works like this: you walk in, pick out your car, sign the paperwork, drive off the lot, and then you start paying installments, just as was stated above. If they demand any upfront payment beyond basic things like notary fees for your signature, then you aren't looking at a true finance lease.

😁 Leasing is basically just renting a car without needing a massive down payment or a mountain of collateral, where you just pay a monthly fee for the usage. RENTAL. It’s a rental. At the end of the term, you either buy the thing out for some hefty, predetermined lump sum... or you hand the keys back and pray they don't charge you an arm and a leg for every little scratch on the bumper. The car isn't yours—it never was—it's just on loan. I suppose it's like a long-term rental from a place like Enterprise for maybe three years. Then you either buy it, which usually comes at a pretty steep price, or you walk away. I guess I don't really follow what you guys mean when you talk about those other kinds of leasing setups? 🙄 🙄

😁 P.s. Leasing is great for corporations since they can write it off against taxes. For the average person, though? It’s a bit of a headache. I guess you have to wonder if people actually bother reading the fine print in those contracts... most don't, I suppose.