ADVERTISEMENT

OT: Car Leasing Thread

Leasing and not getting ripped off is a simple effort. Negotiate a price for the vehicle the same way you negotiate a purchase price of the car. From there a monthly payment can be calculated. Two things you will need to know is the residual value, and the money factor used to calculate the payment. Ask the dealer they have to tell you all of these. Multiply the money factor by 2400 to get your effective financing rate. Compare the rate to what you see cars being offered for sale.

The biggest mistake is to tell a dealer what you are will to pay per month. I always tell a dealer....give me you best price up front, no screwing around. Never fails they dont and i get up to leave. Last car i got another $2k off the car by simply standing up to leave,

But setting the price is the key part.
 
Negotiate like you are going to buy it, once you get a great price ask what the monthly payments will be and give the the old "you know what, how much for a lease based on that price?".

There you have it, pretty easy.

If you do not do this the lease will be based on the full sticker price
 
This is the 21st century. no need to play games with dealers, and pretending to leave. Negotiate everything beforehand, before you even step into the dealer. This is how I bought my last two cars.

use edmunds.com to solicit request for quotes from dealers. don't give them your real phone number. just make sure your email address is accurate. negotiate over email and ask them for their best deal. Some salesman will not negotiate over the internet. thats fine. focus on the ones who will.

Make sure you fix the purchase price first. This assumes that you know exactly what you want. Then you need to make sure the dealer isn't marking up the money factor, which they are allowed to do. So its important that you find out the 'buy rate' money factor. The residual is a fixed % of MSRP, so there is nothing to negotiate there.

Very important to read up on leasing. edmunds has a lot of information and you need to be up on your lingo. here's a pretty good link

http://www.edmunds.com/car-leasing/quick-guide-to-leasing-a-new-car.html

Its far easier to lease BMWs than any other make because there is a wealth of information on leasing BMWs, including spreadsheet templates at bimmerfest.org, which will help you get the best deal. Now is a good time to lease a 2016, as dealers are trying to unload them before they receive the 2017s. There are some people claiming to lease BMWs for 300-400, which is an excellent deal.

lastly, goto truecar.com to get the invoice price of the car. you can also go through the truecar process to see the price range you should be purchasing the car for.

Edmunds town halls on leasing various cars are also helpful. its also helpful to work with an honest car salesman. Try to get a referral or look for top rated salesman on the web.

Hope this helps.
 
This is the 21st century. no need to play games with dealers, and pretending to leave. Negotiate everything beforehand, before you even step into the dealer. This is how I bought my last two cars.

use edmunds.com to solicit request for quotes from dealers. don't give them your real phone number. just make sure your email address is accurate. negotiate over email and ask them for their best deal. Some salesman will not negotiate over the internet. thats fine. focus on the ones who will.

Make sure you fix the purchase price first. This assumes that you know exactly what you want. Then you need to make sure the dealer isn't marking up the money factor, which they are allowed to do. So its important that you find out the 'buy rate' money factor. The residual is a fixed % of MSRP, so there is nothing to negotiate there.

Very important to read up on leasing. edmunds has a lot of information and you need to be up on your lingo. here's a pretty good link

http://www.edmunds.com/car-leasing/quick-guide-to-leasing-a-new-car.html

Its far easier to lease BMWs than any other make because there is a wealth of information on leasing BMWs, including spreadsheet templates at bimmerfest.org, which will help you get the best deal. Now is a good time to lease a 2016, as dealers are trying to unload them before they receive the 2017s. There are some people claiming to lease BMWs for 300-400, which is an excellent deal.

lastly, goto truecar.com to get the invoice price of the car. you can also go through the truecar process to see the price range you should be purchasing the car for.

Edmunds town halls on leasing various cars are also helpful. its also helpful to work with an honest car salesman. Try to get a referral or look for top rated salesman on the web.

Hope this helps.

Al and to the poster s few above- exactly right. Do 2 things...research and then get your best "purchase"!price.
Then get your lease based on that. Don't give your monthly payment max and don't ask for their best on first offer. If you get their best on first offer- you are dealing with an idiot.
In the other hand, if you did your homework and everyone says 375 per month is a good deal and you get 369. Enjoy it, make the deal(the salesman isn't making shot and only hopes for a end of month bonus on quantity) help the f-ing guy out and do it quick, smile and enjoy the ride and get a good deal
 
Last edited:
The focus on the purchase price surprises me. I think one of the major factors is what car company you are dealing with. For me there are many factors other than the purchase price. Here are some.

My experience leasing started with BMW (once) and GMC (once) and Lexus 8 times.
The reason I didn't go back to BMW was how they treated me at the end of the lease. They tried to get me to pay for normal wear and tear, like small scratches on the bumper. It got nasty. After I would not pay they offered a settlement. No more BMW.

The reason I did not re-lease with GMC was the second lease price. The first lease I got a great price, they probably had extra inventory, the second lease they wanted about 30 percent more for they same model car. No thanks.

Started with Lexus. Got a great deal the first time and every time since, and they make the very best cars, too.

Now the other factors to watch for:
1) what happens at the end of the lease. Is there an end of lease fee? How much? will they waive it if you lease another car? Lexus does.
2) How many miles per year are you getting? How much do extra miles cost if you go over your lease? Usually they will offer 10K, 12K or 15K per year. The lease price is more for more miles, but this is one point you can negotiate. Same with the cost of extra miles. Sometimes you will pay less for extra miles if you buy them during your lease rather than at the end. Also, most companies will waive small overages, and sometimes, larger ones if you lease another vehicle.
3) The length of the lease is also a major factor. There is usually one lease length that is the sweet spot. This is based on the residual value. You may think the lease amount will decrease on a straight line from a one year lease to a 2 year, 3 year, etc. This is not always true. Get the lease prices for 2 year and 3 year leases. 4 year if you want. You may find out as I have that 3 year leases are usually the best deal, at least with Lexus. You don't really care about the length of the lease, at the end, you are going to give it back and get another one.
4) There are other things that the dealer can vary besides the purchase price, specifically the residual value and the "drive off" amount. The same purchase price will produce different payment amounts based on differences in the residual value used to calculate the lease amount. Same is true with the drive off amount. I never plan to buy out my leases at the end so I try to get the highest residual value I can. The higher the residual value the lower the payment. Also, one of the ways the dealer reduces the purchase price is with the drive off amount, which can include a down payment and fees like license, sales tax, etc. Why would I want to make a down payment on a car I am never going to own? And why pay the fees and taxes up front when I don't have to? I always take a zero drive off amount. This makes the lease payment higher, but I have no cash out of pocket in the car.
5) It also helps to understand what happens when you lease a car from a dealer. First of all, the dealer is just acting as an agent for the leasing company. The leasing company may by owned by the manufacturer (best), like Lexus Finance, or it may be an independent financer like a bank. In the latter case the dealer is probably getting a kick back from the finance company, but you are paying it in your lease deal. Second, the dealer has no interest in the car after the lease is signed. What really happens is that the dealer is selling the car to the leasing company, just like they would sell it to you, and you are leasing it from the leasing company. You are never leasing from the dealer. Same when you return the car. The dealer may act as an agent for the leasing company when you return the car, but all decisions in regard to car condition, buyout, return fees, etc. are made by the leasing company, not the dealer.

Finally, my approach to leasing a car is different from what is posted above. I focus only on the monthly payment. The other numbers are completely irrelevant because I am going to drive the car for 36 months and then give it back. I want no cash out of pocket up front and I want to get the best monthly payment I can. The previous poster is correct that you should not name your desired payment, most of the time, but it can work to your advantage in some cases, especially if you are a little low. It gives them a target to shoot for, and they can manipulate some items, as I mentioned above. BTW: some will argue that the residual value is not variable. It is. No one knows what the car will actually be worth in 3 years. With my Lexuses the retail value at the end of the lease has always been higher than my residual value. The actual value of my last car was so much higher than the residual value, I actually bought out the car and sold it to a friend. The friend got it for a few thousand less than the retail value, and I made a few thousand cash.

An example, from my current lease. It turned out that Lexus had, because of the dock strike, only a small number of 2016 cars in this country in the fall of 2015. Therefore, the demand was high and prices were too, and deals were scant. I had the advantage of having leased 7 previous cars from the dealer. BTW: I never worry about color of the car. While I have color preferences, they are no where near as important as the features. The features I wanted were just about everything they had to offer, although there were some of only minor importance. It turned out that they had just the car I wanted. When I first inquired, the salesman quoted me $896 per month. My previous lease had been $800 for a car worth about $3000 less list price. I told him absolutely not and that I wanted to deal with the sales manager. The sales manager always makes all the decisions anyway so why not get to them as fast as possible, whether buying or leasing. He came back from the sales manager and asked if I would pay $796 for the car (monthly payments). I said yes and got the newer more expensive car for $4 per month less than my old lease. When I saw the lease, I understood why. The residual value of the new car was $8000 higher than the last one, even though the list price only went up by $3000. They manipulated the residual value to get me the price I was willing to pay. Later, I found out they were also anxious to sell that car because they thought the color combination would be unpopular. I could care less.

One more thing. You probably know that buying a new car from last years model year can save you a lot of money. Same is true of leasing. When I lease cars for my wife and daughter I frequently take the previous model year (i.e. 2015 in December 2015 after the 2016s have come out). My reasoning is that it is still a new car, and they are only going to drive it for 3 years and give it back. It is not always a good deal to buy these cars because the car's value drops significantly the minute you drive it out of the dealer's lot, but when leasing, that becomes the problem of the leasing company, not you.

Whew, didn't plan on saying this much, but hope it gives you some suggestions.
 
Consider one-time lease payment up front. The $$$ isn't doing you much in the bank, but I git $1600 off a $17000 (total of lease payments).
 
Wow - lots of good info.

We are considering leasing instead of buying our next car, since my wife wants another Ford Explorer but monthly payments look a bit high if we buy again. We have never leased before. How much a month do you actually save by leasing rather than buying, assuming the car is in the 50-60K range?
 
do you research. That is the key. Negotiating with a car dealer is tough since they negotiate 100s of cars a month and know there break even cost. You won't know the real break even for the dealer but only public info. They may have factory to dealer incentives that are not published, a rental payment coming up for the vehicles on the lot so a certain date of sale matters, dealer vs dealer contests, or other things we are not aware of.

Using True Car or another service can get you the best price. Then you can look online from leasing companies to see what they can offer. Be aware of what the residual price of the vehicle should be after the 36 months. You are paying the difference between the cost of the vehicle and the residual cost. Then there is the finance rate. With a purchase you can get under 2.5% many times. With leases some dealers try to take advantage with rates above 5%.

Here is an example for residual for a $30k vehicle.
- 60% residual is financing $12k over 36 months
- 55% residual is financing $13.5k over 36 months

the difference here not even factoring in the finance rate is about $40 a month over the 36 month period.



sample finance rates:
https://wallethub.com/edu/auto-financing-report/10131/
 
So for a 3 year lease, if the value of the car is closer to it's original value 3 years later, the lease should cost less than a car which is worth a lot less 3 years later? So actually cheaper to lease cars that depreciate less, even if the original price of the car is much higher?
 
  • Like
Reactions: rubigtimenow
So for a 3 year lease, if the value of the car is closer to it's original value 3 years later, the lease should cost less than a car which is worth a lot less 3 years later? So actually cheaper to lease cars that depreciate less, even if the original price of the car is much higher?

This is true. But, again just considers actual value after 3 years. The residual value in your lease used to calculate your payments can be different and will usually be lower, making your payments higher.

Using True Car or another service can get you the best price. Then you can look online from leasing companies to see what they can offer. Be aware of what the residual price of the vehicle should be after the 36 months. You are paying the difference between the cost of the vehicle and the residual cost. Then there is the finance rate. With a purchase you can get under 2.5% many times. With leases some dealers try to take advantage with rates above 5%

I don't like the True Car concept. It is based on giving you the average price people paid. This can be far from the best price and is much closer to what the dealer wants you to pay. There is a reason why dealers love True Car. If you think you can negotiate a better deal than the average person, True Car gives you nothing but some basic info from which you can start.
 
Lots of good info above. I've both leased and bought. I agree - understanding the residual and calculated interest rate (compared to competitive market rates) is key-- and the fact that these days you can negotiate just about everything via e-mail without having the pressure of being in the dealership.

a couple things I've learned:

1) know exactly how many miles you are going to drive each year (and over the life of the lease). Don't guess - KNOW! the per mile charges can add up FAST

2) Is there any chance you might want to buy the car at the end of the lease? Then don't lease - buy the car now. You can almost always get a better deal buying at the start as opposed to leasing-then buying.

3)What are you going to do when the lease ends? I know lots of people who lease every 2 years - they love it (get a new car every couple years and they don't mind the fact they pay a lease payment every month with nothing to show for it). But, if you don't want to spend money and have nothing to show for it down the road - don't lease (buy a more affordable car).
 
  • Like
Reactions: patk89
Some pros and cons of both off the top of my head:

You can save hundreds a month by leasing. As a result, for what it cost to buy a normal car you can lease a luxury car or you can lease a normal car and save a ton of money. But yes, long term you will save more per month since you will at some point pay off the car and if you are the type who likes to drive their car until it is no longer worth repairing, then buying makes more sense. However, the older the car the more repairs you will have to pay for, which is something you never worry about with leasing (unless you screw something up). Also, something that no one brought up, insurance for a lease car is a little more than a car that you are buying.

One more thing to think about, the way that most car makers re-fresh their models and the way that tech is improving every year, the models are upgrade worthy after three years. Car makers are treating cars like smartphones, most people get a new one after 3 years. Leasing allows you to do this without breaking the bank. Leasing will make more sense if you want the latest and the greatest.
 
  • Like
Reactions: drewbagel423
this is all great info. My current lease is up in 2 months and I'm planning on trading it in for a new Ford Escape. I don't remember doing a lot of negotiating 3 years ago but I'll be going in prepared this time around.
 
This is the 21st century. no need to play games with dealers, and pretending to leave. Negotiate everything beforehand, before you even step into the dealer. This is how I bought my last two cars.

use edmunds.com to solicit request for quotes from dealers. don't give them your real phone number. just make sure your email address is accurate. negotiate over email and ask them for their best deal. Some salesman will not negotiate over the internet. thats fine. focus on the ones who will.

Make sure you fix the purchase price first. This assumes that you know exactly what you want. Then you need to make sure the dealer isn't marking up the money factor, which they are allowed to do. So its important that you find out the 'buy rate' money factor. The residual is a fixed % of MSRP, so there is nothing to negotiate there.

Very important to read up on leasing. edmunds has a lot of information and you need to be up on your lingo. here's a pretty good link

http://www.edmunds.com/car-leasing/quick-guide-to-leasing-a-new-car.html

Its far easier to lease BMWs than any other make because there is a wealth of information on leasing BMWs, including spreadsheet templates at bimmerfest.org, which will help you get the best deal. Now is a good time to lease a 2016, as dealers are trying to unload them before they receive the 2017s. There are some people claiming to lease BMWs for 300-400, which is an excellent deal.

lastly, goto truecar.com to get the invoice price of the car. you can also go through the truecar process to see the price range you should be purchasing the car for.

Edmunds town halls on leasing various cars are also helpful. its also helpful to work with an honest car salesman. Try to get a referral or look for top rated salesman on the web.

Hope this helps.

I've been doing this for years. Always works. Make dealerships bid against each other.

First, decide what car you want, even the options. Then send an email to 5-10 nearby dealers, Tell them the exact car you want, that you are going to buy it no doubt, that you are sending this same email to other dealers, that you know what their costs are (even list them) , and ask for them to provide a price, their cheapest, because the cheapest price wins. Make clear that this is simply about the lowest price. Be polite.

You'll get responses. It's easy for the sales people (try to get the senior sales person), and they want to win. Don't let them deviate. Get their offer. If you've picked 5-10 dealers, you'll get a number of useable responses and, when you do, you can decide whether to go back to the leaders for a last, best offer, telling them that they need to get better.

Works.
 
  • Like
Reactions: rutgersal
Buying vs leasing - Looks like if you can't afford the monthly payments on a car you want, you are better off leasing (or getting a cheaper car).
 
Lastly, your monthly lease payment should be in the ballpark of 1% of MSRP, give or take $20. thats how you know you've received a good deal.

The point about mileage is a good one, so its important to know your approximate mileage up front, as you can be penalized as much as $.25 per mile if you go over on some recent leases.
 
Lastly, your monthly lease payment should be in the ballpark of 1% of MSRP, give or take $20. thats how you know you've received a good deal.

The point about mileage is a good one, so its important to know your approximate mileage up front, as you can be penalized as much as $.25 per mile if you go over on some recent leases.


Is this true? If so, it's a good measuring stick.
 
Consider one-time lease payment up front. The $$$ isn't doing you much in the bank, but I git $1600 off a $17000 (total of lease payments).


the more money you put down on a lease, the more exposed you leave that money

if your car gets totaled, the leasing company will get paid for the car and you will receive nothing.

you will lose the remaining time of that lease and the down payment you put down.

Personally, if you want to put money down on a lease (I would only do it for a trade-in since you will get the sales tax deduction).

I just leased my first car a few weeks ago. It comes down to these basic things

1.) Sales Price
2.) Money Rate (APR) ** 3% APR works out to 0.00125 money rate ||Calculated by APR / 2400
3.) Residual Value (the higher the better it is lease than buy)
--Term and Mileage will effect the residual value
 
  • Like
Reactions: drewbagel423
Lastly, your monthly lease payment should be in the ballpark of 1% of MSRP, give or take $20. thats how you know you've received a good deal.

The point about mileage is a good one, so its important to know your approximate mileage up front, as you can be penalized as much as $.25 per mile if you go over on some recent leases.

That was what my lease was... plus tax.

I did all over the internet and on the phone. So when I finally stepped foot on the dealership I just sign some paperwork and drove away with the new car. I put ZERO down, I never even gave them any credit card information or anything. Everything was rolled into the monthly payment.
 
NEVER put money down on the lease unless it is a trade in, you are giving your money away if you do this (if you wreak your car).

Not worth the risk and you are not really saving any money, at the end of the lease you will end up paying the same in total anyway.
 
Last edited:
NEVER put money down on the lease unless it is a trade in, you are giving you money away if you do this (if you wreak your car).

Not worth the risk and you are not really saving any money, at the end of the lease you will end up paying the same in total anyway.


yes the only thing you are saving is the interest of the lease on the downpayment...

if you are getting a low lease rate of 3%.. it is not worth the risk
 
So from what I am reading , negotiate the best sales price, then find out residual value and money factor.
1-is the lease price the difference between residual value and money factor and sales price?
2- is there a website that I can find either dealer price or what others are paying. I found some prices on true car.com but not sure

Thanks
 
Just had to replace my MDX (wife totaled it). Volvo was offering some national lease deals with no money down on 2016 XC90s. I didn't go down that avenue, but the monthly payment seemed reasonable (10,000 mile/year cap). Are those national deals competitive or should you ignore them and go down the path of establishing the price and residual? I ended up using the internet to purchase the XC90 outright but for the first time, the leasing option was very interesting. Especially with no money down.
 
So from what I am reading , negotiate the best sales price, then find out residual value and money factor.
1-is the lease price the difference between residual value and money factor and sales price?
2- is there a website that I can find either dealer price or what others are paying. I found some prices on true car.com but not sure

Thanks


there are three components of the lease price
- depreciation - this is the difference from your capitalized cost and the residual
-rent - this is the interest that is paid on the amount
-any applicable sales tax

the rent isn't based on a simple interest formula. there is a leasing formula

for invoice pricing, the most freely available are edmunds and truecar. otherwise you can go to messageboards dedicated to a brand, and there might be good info there.

as said previously, bmw fans visit http://www.bimmerfest.com/

ford fans visit
http://www.blueovalforums.com/forums/

mercedes fans visit
http://mbworld.org/forums

edmunds also has car forums which have good info.

here is an article from edmunds which shows how to calculate your lease payment

http://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html
 
Just had to replace my MDX (wife totaled it). Volvo was offering some national lease deals with no money down on 2016 XC90s. I didn't go down that avenue, but the monthly payment seemed reasonable (10,000 mile/year cap). Are those national deals competitive or should you ignore them and go down the path of establishing the price and residual? I ended up using the internet to purchase the XC90 outright but for the first time, the leasing option was very interesting. Especially with no money down.

you should always go down the path of knowing what the ballpark numbers should be and negotiating your own deal. typically, a salesman will size you up and charge you as much as he can, afterall, he is there to make money and maximize profit on the deal. as long as you show you have a good grasp of the terminology, you'll get the best price.
 
Leasing and not getting ripped off is a simple effort. Negotiate a price for the vehicle the same way you negotiate a purchase price of the car. From there a monthly payment can be calculated. Two things you will need to know is the residual value, and the money factor used to calculate the payment. Ask the dealer they have to tell you all of these. Multiply the money factor by 2400 to get your effective financing rate. Compare the rate to what you see cars being offered for sale.

The biggest mistake is to tell a dealer what you are will to pay per month. I always tell a dealer....give me you best price up front, no screwing around. Never fails they dont and i get up to leave. Last car i got another $2k off the car by simply standing up to leave,

But setting the price is the key part.

Before I go to the dealer, I usually look up the lease rates on edmunds. Most car models have a discussion forum associated with them on the edmunds website and the lease numbers (money factor and residual) are usually posted there.

I looked at edmunds, and for 36mos, 15k miles, they gave numbers like 1.50% APR and 49% residual, with $2500 lease cash. What do I do with those numbers? Are they good?
 
lots of good information here

Some key points discussed:
- do your research (edmunds / truecar, etc...)
- understand the residual value and money factor
- 1 poster pointed out no down payment. This can be important because if you get into an accident and the vehicle is totaled you don't get that money back, especially of there is a gap between the value of the remaining lease payments and the insurance payment.
- talk to multiple dealers since they will compete with each other.
- prior model year. can get you a discount vs the newer model year. If the vehicle is being redesigned in the new model year (ie. 2017) then you will get a greater discount for a 2016 model.
 
I used to sell cars.
Nobody got our best offer until they got up to leave.
This. As the buyer you have all the leverage. They have more to lose than you do if you don't make a deal. Even if their best offer is the best around you can go back and they'll be happy to take your business. If you focus on the monthly payment they'll just move the cost around. As others are saying focus on the price of the car, then go from there.

I'm a nice guy, almost to a fault. But when it comes to buying/leasing cars don't be afraid to be a dick. Think about that extra $50 a month works out to an extra $1800 over the life of the lease that you can spend on your kids or family if you need inspiration. You're not there to make a friend, you'll never talk to this person again. you're there to make a deal.
 
i see an offer where the total lease payment and purchase option equals to 20% discount to MSRP. Does that make sense?
 
There's not enough information in your post to determine. You need to read up on leasing at edmunds.com
Things that sound too good to be true usually are.
 
ADVERTISEMENT
ADVERTISEMENT