Understanding Car Leasing

Get the best deal on your next vehicle!

To get the best deal on a car lease, you must first understand the car leasing language. Do not let the dealer know you plan to lease the vehicle until after you have negotiated the cars purchase price. Most people who lease are unaware that their monthly payments will be based on the final agreed-upon price and several other factors that will be mentioned below.

The Car Leasing Language:

  1. Money Factor – is an alternative method of presenting the amount of interest charged on a lease with monthly payments. The money factor can be translated into the more common annual percentage rate (APR) by multiplying the money factor by 2,400. Money factor is also known as a “lease factor” or a “lease fee.”
  2. MSRP– Manufacturers Suggested Retail Price, is the price at which the manufacturer recommends that the retailer sell the product. *This price is never the sell price. Negotiate lower!*
  3. Residual Value– is the amount you can buy the car for at the end of the lease, if you decide you want to purchase the car. It also is an important number in the lease equation, directly affecting your monthly payment.
  4. Residual Percentage– derives its calculation from a base price, calculated after depreciation.
  5. Selling Price– the negotiated/agreed-upon price of the vehicle in which to lease or buy.
  6. Fees:
    • Acquisition: to cover the expenses they incur in arranging a lease.
    • Disposition: compensates the company for sending the lease to auction after the lease has ended. Most Dealerships will “waive” this if you return to lease again with them. 
    • Down Payment: completely optional. Some people like to put down a few thousand dollars so the monthly payment is less. *important* Monthly price changes, but overall price paid after the lease term is the same!
    • Documentation (tag, title, registration, license): these fees are also part of purchasing a vehicle as well. Besides dealer documentation fees, the rest are state and local fees from the government. 
    • First Months Payment: this is your first payment on the lease. 
    • Sales Tax: depending on the state, but most states the sales tax is based on the amount over the select term of the lease.

The Keys to Leasing a Vehicle

  1. Do your research on potential vehicles to lease!
    • Every vehicle is different. They will all have their own unique money factor and residual value based on the market. Search the vehicles money factor and residual value beforehand to get a rough estimate.
  2. Have a monthly payment price before you walk into the dealership
    • You know your financial situation, so stay firm to the max price that you are willing to lease a vehicle for per month.
  3. Negotiate the monthly price before you test drive
    • The Salesperson is going to want you to fall in love with the vehicle before you discuss price, and he will persuade you into leasing the vehicle even if the price is out of your comfort zone. You will hear them say: “No point in talking numbers if you don’t like the vehicle.”
      • Tell them vice versa: “No point in driving the vehicle if I do not know the numbers.” -or- Just tell them you have already took a test drive in that vehicle from a different dealership.
  4. Do not express high interest in the vehicle
    • Salespeople know they can fluctuate the price if you tell them it is the only vehicle you want or express how much you love the vehicle (even if you do).
  5. Get quotes from multiple Dealerships
    • Dealers know the minimum amount they can lease the vehicle to you for. Chances are the first dealership you go to, will not give you the best price. Let the salesperson know you’ve been to other dealers and a price range they have offered to you. This will generate competition between dealerships to fight for your business.

Is Leasing Right for Me?

  • Pros for Buying:
    1. Ownership of car after it is paid off
    2. No mileage restrictions
    3. Resell the vehicle for a new one
    4. Customization
  • Pros for Leasing:
    1. Lower monthly payments than buying
    2. Get a new car every couple of years
    3. Covered under warranty
    4. No huge costs (buying new tires, brakes, brake pads, etc)
  • Cons for Buying:
    1. Higher monthly payments
    2. Repair costs (post warranty)
    3. More maintenance on vehicle
    4. Responsible for trading or selling vehicle for a new one
  • Cons for Leasing:
    1.  Limited mileage
    2. Paying more for cars long term
    3. Turn in vehicle after lease is up
    4. Disposition fee

Best New Car Lease Deals of April 2019

According to: https://cars.usnews.com/cars-trucks/best-lease-deals

2019 Honda Civic
Lease Deal: $169/month for 36 months – $2,799 due at signing
2019 Volkswagen Tiguan
Lease Deal: $279/month for 39 months – $0 due at signing
2019 Toyota Corolla
Lease Deal: $139/month for 36 months – $2,999 due at signing
2019 Dodge Durango
Lease Deal: $259/month for 36 months – $4,179 due at signing
2019 Subaru Outback
Lease Deal: $239/month for 36 months – $2,239 due at signing
2019 Chevrolet Equinox
Lease Deal: $179/month for 24 months – $4,529 due at signing
2019 Ram 1500
Lease Deal: $219/month for 24 months – $4,179 due at signing
2019 Nissan Altima
Lease Deal: $179/month for 36 months – $2,699 due at signing
2019 Mazda CX-5
Lease Deal: $235/month for 36 months – $2,499 due at signing
2019 Hyundai Ioniq Electric
Lease Deal: $239/month for 36 months – $2,500 due at signing
2019 Genesis G70
Lease Deal: $359/month for 36 months – $2,699 due at signing
2018 BMW X2
Lease Deal: $239/month for 24 months – $4,164 due at signing

Lease Payment Calculator

This lease payment calculator will help give you the exact price per month for the vehicle that you want. Once you figure out several of the factors (mentioned above: money factor, selling price, residual, etc), you will be able to generate the payment price right from your phone (Microsoft Excel is preferred) while you’re at the dealership.

Show below is the excel document, and also how it is calculated