LEASE A CAR LIKE A BOSS!
Nobody likes to be taken advantage of and yet most of us at some point in our lives have gotten a bad deal. It’s very costly not being prepared and I absolutely hate losing money. Now I treat the deal like a battle and I ready myself to WIN.
We are on the verge of car war season my friends so let’s get you ready to win that battle!
1. NEVER ANSWER THIS QUESTION “So what do you want to pay a month?” Clever salespeople want you to focus only on low monthly payments because it gives them room to inflate things like the loan interest and length. This increases the dealer’s profit and you end up spending thousands more on the car.
2. Never let the salesman know you have a trade in. Wait until you have him write down the numbers you’ve agreed upon then let it be known you have a trade in. Know the value of that trade in before you walk in to the dealership then back it up with three documented sources (i.e. Kelly’s Blue Book, The Black Book, Edmund’s, Auto Trader.com etc.)
3. Pull your credit report and know what it is before setting foot in a dealership. Some salespeople will tell you that your credit score was not good enough to get a better interest rate…bring documentation to state otherwise.
4. Check the financing and sell sheets carefully and know which add-ons are truly unnecessary. You shouldn’t be charged for a hidden loan acquisition fee and other fees, such as “customer service” or doc preparation fees.
5. Get to know the basic terminology. You will need this information to calculate the best lease payment. You will need to gather the below information…google as much of this as you can, Edmund’s is a great source for a lot this information…I also went to a lot of chat rooms and spoke to experts in this area to see what these numbers should be:
MSRP of the vehicle- Also called the sticker price (NEVER pay sticker especially for a lease!). Capitalized Cost - The cost of the vehicle after subtracting any down payment or trade-in allowance (get trade in value ahead time by checking 3 different sources, bring that info with you) Term of Lease - The number of months you will be leasing (usually 24, 36, 39, or 48 months) 36 is best. Residual value - The amount the vehicle is worth at the end of the lease (document your sources on this). The money factor also known as the lease factor- This determines how much you’ll pay in finance charges each month during your lease. The higher the money factor, the higher your monthly payment and the more you’ll pay in total finance charges. Therefore, when shopping for a lease, you’ll want to look for the lowest money factor. The Money factor is always expressed as a very small number, such as .0029. To convert to an equivalent annual interest percentage rate (APR), simply multiply by 2400 which equals roughly 7%… which by the way is a really high interest rate. Try looking at bankrate.com to see what and where the best interest rates are, document your sources and bring them with you.
Example: You are leasing a car that has an MSRP of $27,000 and you being the master of negotiation got it down to $25,000. (IMPORTANT- ALWAYS NEGOTIATE the MSRP, it doesn’t matter if you are leasing) You will be leasing the car for 36 months. You have determined that the money factor is .0029, and the leasing company has predicted the residual value to be $12,500 at the end of 36 months.
Capitalized Cost - $25,000 Residual Value - $12,500 Money Factor - .0029 Term - 36 Months
What you need to calculate for your monthly lease payment is, price of the car, residual value, the money factor, and the length of the lease. Always ask the salesperson what the money factor is on their leases. It’s usually not discussed in a lease transactions because most customers don’t know to ask. But you my friend now know to ask about this. If a dealer refuses to disclose this very important information to you, find another dealer! Also, the money factor in a car lease is always determined by your credit score. The best scores get the lowest money factor.
Now let’s take a look at how each part of the lease payment is calculated
Depreciation The depreciation cost is actually the largest portion of your lease payment. Here’s how calculate this: (Capitalized Cost - Residual) ÷ Term of Lease Remember, Capitalized Cost is the negotiated selling price of the car. ($25,000 - $12,500) ÷ 36 = $347 $347 is your monthly depreciation cost
Interest The next part of the lease payment is interest. This is where the leasing company makes a large part of its profit. The calculation is: (Capitalized Cost + Residual Value) × Money Factor ($25,000 + $12,500) × .0029 = $109 $109 is your monthly interest payment
Taxes In most states, you will need to pay taxes on both the depreciation and interest payment. Here’s the calculation: (Monthly Depreciation Cost + Interest) × Local Sales Tax Rate($109 + $347) × 7% = $32 $32 is your monthly tax payment
Add it All Up Now we add it all together to come up with the final payment: $347 + $109 + $32 = $488 Monthly Lease Payment
So there you have it, now go make that deal and tell me how much you saved! On my last lease, the salesman told me I was getting a great deal leasing at 600 a month by the time I was finished with him I got it to 375 with a very low down payment, Knowledge is power my friends!
Alicia Fidelman Sales Representative Weichert Realtors 908-346-1783 [email protected]
You can always find my blogs on my social media tabs that are on my website at Aliciaproducesresults.com