G’s Guide To Auto Leasing
This guide is meant to show you through the auto leasing process. I put together this “guideline” based on my past experiences with leasing. Some experiences were good, others were less than perfect. Overall, I learned a lot about the leasing process and I think these recommendations will have a positive impact on your leasing experience. If I missed anything or if you disagree with some of my steps, please feel free to leave a comment.
Finding the Car
I usually start my research by visiting Edmunds.com and CarsDirect.com to get model/trim/options/pricing information about the car I intend to lease. You need to know exactly what you want because each option can change the price dramatically. CarsDirect.com does a better job letting you pick the correct combination of options for a specific trim.
Get Your Credit Score. Knowing your credit score is important because it qualifies you for the lowest money factors. I typically let the dealer I am working know that my credit score is “XYZ” and I am looking for car “ABC”. Telling the dealer your credit score lets him know in advance that you are prepared to make a deal and you aren’t wasting their time negotiating. You also don’t want to have your credit run multiple times from dealer to dealer, so finding out ahead of time will keep your credit score from getting too many inquiries (personal inquiries do not hurt your credit). Typically, I don’t even deal with dealers want to run your credit before working with you. You let them run your credit ONLY when the negotiation is complete and you ready to begin paperwork. If you credit is less than perfect, leasing is no for you.
Locating a Dealer. Once you are set on the car, you have a couple of options. You can go to the manufacturer’s web site to search for all local dealers OR you can use sites like Cars.com or Edmunds.com to find local dealers.
Email Dealers, Don’t Call or Visit Dealerships. Try to email your dealer to locate the car with the colors/options you want, let them know the term you want (months and miles per year), then ask for the following:
- MRSP (to make sure it doesn’t have ‘extras’ on it).
- Sale Price (start with invoice, or $500 below invoice and go from there)
- Money Factor
- Residual Value
- Acquisition/Bank Fee
- Dealer Doc Fee
- Other Fees (such as DMV, tire, etc…)
- Is there a disposition? Gap coverage? (these are important things to know!)
- Taxes (depending on which state you live in, find out if you have to pay those up front and/or if you need to pay for the entire car or just the depreciation)
Once you have those numbers, you can calculate your own payments to see if there are any discrepancies between your numbers and theirs.
If your payments are still higher than you like, ask for the option to make “multiple security deposits” or MSDs. You basically pay security deposits to lower the Money Factor. This will lower the interest paid on your lease but increase your up-front costs. The good news is you will get that money back at lease-end. If the numbers are still not to your satisfaction, try having the dealer thrown in some free oil changes to help you offset the costs.
Only work with dealers that are up front with you. A pleasant leasing experience is worth something, believe me. It will make you feel better bringing the car in for service and you won’t feel angry driving around in your car because you feel like you got ripped off.
Avoid “All-In-One” Quotes. By those I mean “$1999 down, $399/month” type of quotes…the ones the dealers love to quote you. You want to avoid those because it’s easy to start losing track of what you’re actually paying for since everything is bundled and nothing is itemized. If this seems like nit-picking, it is, but you must realize that for every $100 paid in bogus charges, you are doing so with interest (and maybe even tax) if you roll it into your lease payments.
The Numbers look Good, Now What? If you haven’t gone in for a test drive, go ahead and schedule a visit to your dealer. You probably want to visit the person you’ve been dealing with, that way he/she will already know you and won’t go in to “sales-mode”, so you can enjoy your test drive.
Got a Trade-In? If you do, negotiate after the new car and keep it separately. I usually use this as a “deal breaker” if the offer isn’t good enough (to see if they will bump out the trade value to make a sale). If you don’t like the offer, remember you can always get it appraised elsewhere or sell it on your own. You can get a good idea as to how much your trade is worth to a dealer by going to Edmunds.com and appraising your car at “average” condition to get a more “realistic” idea of the value of your car. If you are still financing your car and the offer is lower than balance of your loan, you will have to pay the difference. If its more than your loan, the dealer will either give you the option to apply it to your new car or cut you a check (have them cut you a check). If you are trading in a lease, the process is generally the same. The only difference is that you need to find out what your “Buyout” is from your bank and see how close the dealer offer comes to it. If your leased vehicle has low miles and is in great condition, you could get some money back.
What Should I Pay Up Front/At Signing? I normally advise people to pay the 1st Month Payment + Acquisition/Bank fee, DMV fee, Doc fee and Tire Tax (Some states will ask for taxes to be paid upfront instead of monthly). Sometimes you maybe be assessed other fees, so double check what they are and make sure they aren’t bogus. Try not to put any money towards cap cost reduction, after all, this is a lease. In the event of an total loss accident or theft, you could lose a significant part of all the money you have put down (some or all).
Beware of the Finance Guy/Gal. The Finance Guy/Gal is the dealer’s last ditch effort to sell you stuff you may or may not need. Seriously, do you really need anything more than the standard bumper-to-bumper warranty on a lease? You don’t need Lo-Jack on a lease, specially if the lease will offer GAP coverage, so there isn’t a reason to get something like that.
Make sure you READ the papers you sign. You got time, after all you negotiated online before you showed up to the dealership, so READ, make sure the numbers are correct and ask questions. Once you sign, the deal is binding by those terms.
Have further questions? email me at g@ridewithg.com.
Posted in *Leasing 101
July 1st, 2008 at 1:50 pm
G, I think you hit a homerun with this one. Getting over that hump of leasing your first car can be tough. But once you do and you understand the system it’s a piece of cake.
July 1st, 2008 at 4:59 pm
Thanks B. I spent a good week writing this and cross-checking with other sites to make sure I didn’t miss too many major points. There some minor issues like what happens to MSDs if you trade-in your car before the lease ends…another topic, another time.
I wanted to start off the month with this because the fun summer of leasing has begun!
Like you said, I do hope this guide helps first time lesses so they don’t feel intimidated.
July 2nd, 2008 at 5:38 am
and what does Limo rentals have to do with consumer car leasing?
July 2nd, 2008 at 8:22 am
Crazy spammer. That’s what it is. Looks like I’m going to have to moderate comments from now on…getting rather tired of these creeps trying to get free ads space by dropping links in comments.