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> The "trick" in negotiating a lease is to negotiate the total price of
> the car (i.e., lowest price) and then apply the same money factor
> and residual.
I couldn't agree more! Rhonda, I copied & pasted an earlier post I made on the same topic (whether or not a certain lease deal was good). Maybe it will help; maybe not. Let us know how you like your test drive.
============== begin copied post ===================
If you want a simple answer: I don't know if this is a good deal. Ignore the rest of this post :-)
If you want a more full answer: I still don't know! However, here's how I think you can figure it out. BTW, maybe you already know this stuff or don't care, but I've seen a lot of posts on this board in which people ask whether they're getting a good deal, and all they focus on is the payment + amount paid at the start of the lease. If you really want to know whether you're getting a good deal, you should know where the dealer gets each and every number it presents you. So maybe this post won't help you, but hopefully it will help someone, someday!
First step: What's the price they're charging you for the car (minus any promotional allowance)? For example, if MSRP is 40k and the dealer's invoice is 37k, you want to negotiate to a price closer to 37k, or maybe even a bit under it -- just as if you're buying the car. Others can comment where in that range your price should be. Then, you should be sure the dealer is passing on any promo allowance. I just leased a 9-5 SE Wagon in March, and there was a $2k allowance to further reduce the price of the car (or the "capitalized cost" in the terms used in the lease), so to be clear, I "paid" the negotiated price minus an additional $2k.
Next, you want to know the money factor on the lease. Money factor is similar to an interest rate in a loan. In March, the money factor for 9-5 SE Wagon was 0.00054. To translate this to a number you can compare to an interest rate, multiply by 2400. So, in March, the cost of financing was equivalent to a 1.296% interest rate. The money factor varies each month, and varies by model. If you want to be sure you're getting the best deal, ask your dealer what money factor they're using, and then call another dealer to make sure this is correct based on Saab's current lease offer. It *should* be the same for each dealer (assuming they're working off Saab's current lease offer), but one dealer I talked to said some dealers may play with this. I don't know if this is true, but I double-checked this before I leased.
Next, find out all the charges/fees associated with the lease. There shouldn't be any charges except the $495 or $595 bank fee, state & local government taxes/charges (in addition to sales tax and DMV fees, we pay a $5 tire fee in CA -- weird), and a ~$350 fee if you turn-in the car at the end of the lease. At least that's what it was in March here in CA. If you have good enough credit, you won't have to pay a security deposit -- ask about this.
If you're comfortable with your deal based on the above three things (price, money factor, and fees), then you probably did a damn good job. If you're up for some more pain, keep reading :-)
You can also set the mileage limit to fit your needs. You can have 10k, 12k, or 15k a year (there may be other options too). By adjusting the mileage limit, you adjust the residual value of the car (this is how leases work -- you don't have a choice here). In March, the residual value was 47% of MSRP for 15k, 48% for 12k, and 49% for 10k. This will then affect your monthly payment (if you don't understand this, see my note about the spreadsheet, below). If you're going to buy your car at the end of the lease, none of this matters much: 1) If you buy the car, the mileage limit doesn't matter, and 2) It doesn't matter much whether you raise the residual value and pay less money in lease payments, or lower the residual value and pay more money in lease payments -- the dollar difference is very small at the end of 3 years (at least it was with the numbers offered in March).
I created a spreadsheet when I leased my car. I used it to take the basic numbers (price, money factor, fees, etc.) and calculate the numbers that appeared on my lease agreement (such as residual value, payments, etc.), to make sure I understood it all and really was getting the deal I expected. If you're interested, I'll update the spreadsheet to make it so others would find it useful, and I'll post it.
, Thu, 17 May 2001 01:14:50
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