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A lease car has a selling price that should be negotiated.
No one should be leasing a car at the MSRP.
Way too many fail to comprehend this concept.
The mistake way too many make is that they just go to dealership at state that they are willing to pay $xxx.xx per month.
This is a license to steal for the new car dealership.
This was my impression. My original post seems naive, and I should have worded it different. I know purchase price and lease-base price are not going to be the "same." The broader question I should have asked was whether you can negotiate the same way as a purchase so your lease is based off a lower price.
I mean, if you say, 'I want this payment or less for my lease," the dealer can always raise the residual value (within limits) to get you there. Or worse, raise the price of the car based on what you told him. But, they should also be able to lower the initial price to start with.
I made that mistake last night at my local dealership. I had a payment in mind and let it out. And, after pretending he couldn't do it, he said he could "get me there." Idiotic on my part.
I've been emailing other area dealers this morning asking them about numbers for a 15k, 0-down lease, not indicating anything about what I'm expecting for payments. Right out of the gate, I have two offers that are less than the dealer last night in terms of monthly payment.
So, I follow up and ask what is the price that you are basing that monthly payment on? What is the residual value? I say, "if you can move on the purchase price, you can move on the base lease price" (even if the movement isn't the same or as generous).
I'm new to this, so my wheeling-dealing is basically trial by fire. Lol.
Yes, you can negotiate the overall selling price of the car. However, for leasing purposes, I would focus more on the monthly payment and upfront out-of-pocket costs. Figure out what your (reasonable) monthly payment that you want is, and what you're willing to put down (shouldn't be anything other than maybe the first month's payment) and go from there.
For leasing, it really doesn't matter how they get to the payment, so long as the payment, out-of-pocket, and term/miles are correct.
Residuals are usually set by mfg and aren't negotiable. Dealers can pad the money factor so when leasing make sure they are transparent about ALL the lease numbers. Net cap cost, cap cost reduction, residual, money factor. These all play a role in how much you will pay each month.
Like I said above we always lease and we insist on getting a good deal. Not only do we negotiate the price of the car dowm, but we insist/demand that the dealer pay for certain costs. We put money down once years ago and haven't put money down since then. We made the dealer pay the tax too. I can't remember what else we got the dealership to pay for but we got a good deal by sticking to our guns and demanding certain things.
When we returned our previous lease Ford sent us a letter saying there was $350. worth of damage to the side panel and wanted us to pay for it. I sent them a nice letter saying that if they ever want our business again they would absorb the cost and they did.
You're not going to get something unless you ask for it.
Last edited by elliedeee; 08-30-2016 at 11:34 AM..
Reason: spelling
For those who buy out a leased car, the "lease purchase price" is essentially the residual/buyout amount plus the total of your lease payments (assuming dealer pays tax or you roll tax into lease payments)? If manufacturer's don't budge much on the residual amount, then the only way to bring the price down is a lower overall payment?
Yes, a lease should equal the price of the car. The reason payments are different is because of a residual. If the residual on a $25K car is $20K, the lease payments would be $138 a month (before interest/fees/taxes) on a 36 month lease. If the residual is $5K, payments would be $555 on a 36 month lease.
Residual + all lease payments= selling price of the car.
The residual varies WILDLY depending on how well each car is predicted to hold their value.
The residual is how much you owe at the end of the lease if you then want to buy the car.
The negotiation on the sales price should be the same for lease and purchase. As noted above manufacturer incentives to customer or incentives to dealer sometimes might vary but that should be taken into account separately. What makes leases a bit more "vague" is that you need to know residuals and base MF.
But, I've learned very quickly that you can't expect them to use the discount purchase price as the basis for your lease. So, for a 25k car where the dealer is currently offering clearance discounts (combination of dealer and manufacturer's discounts) of $3500, you can purchase that car for $21,500. But, you can't use $21,500 for the starting value for the lease (can you?).
Because my family has done so many leases followed by buyouts, I used to think that a lease was just the beginning of a purchase split into two phases - the lease phase where you "bought" part of the car via your lease payments and then the buyout at the end. Sure, it sort of does work close to this in practice. But, more accurately, it's three-year high-form "rental" (you have more property rights than a normal rental) followed by the actual purchase at the residual price. If the lease payments could simply be counted as "payments towards purchase or possible purchase" then you probably could use the discounted purchase price to start your lease.
This is probably incredibly obvious to most here. Lol.
My boss' parents leased a Sonata last year for zero$$ down and their payments are $179! How is this possible? The best I was able to get on a Kia Soul is $299 a month with no down payment. I was told I get the good credit "tier".
The lease payment is the purchase price minus the residual value with the interest rate factored in, allocated over the number of months in the term. If you can walk in and buy a $25,000 car for $21,500 (presuming none of that discount is due to manufacturer incentives that are expressly excluded from a lease), there is no reason you can't get the same $21,500 sales price for the car for a lease. The $21,500 would be the cap cost, and the lower that is, the better for you because the residual is subtracted from that and thus a lower cap cost reduces your payments.
The buyout amount won't change and can't be negotiated - the bank or the manufacturer sets the residual based on the term and mileage. Your two main negotiating points are the cap cost (selling cost of the car) and the money factor (interest rate). Don't go in to a lease with the expectation that you'll buy at the end - residuals are often artificially inflated to lower payments. If you happen to be in a good position to buy at the end, fine, but the point of a lease is to have the car for X years at the smallest out-of-pocket cost to you and let the bank carry the risk that the car will be wildly overvalued at the end of the term (which will happen more often than not).
TL;DR: When you go to negotiate a lease, don't treat it any different than a purchase. Figure out the selling price of the car first, then drill down on the monthly payment. Despite what the dealership may say, leasing versus purchasing doesn't make a lot of difference in the sales price of the car.
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