I recently helped a friend lease a new car and be the sounding board and balance in this big emotional decision. It is no surprise that if you don’t practice certain skills and techniques, you will get caught off guard by the dealerships that do this all day long. I am not saying that every dealership is not trustworthy, but I would like to provide some key insights on how to save big $’s on your next car lease.
#1. Be Prepared, take your time to research, and do your homework
Before going into the dealership and test driving the next car of your dreams, make sure you understand all of the trim options available for the model that you have you eyes set on…You can get the MSRP and Average price easily these days on the internet, I like to use TrueCar as a starting point. You should also align on your mileage needs and term of lease.
#2. Negotiate each parts of the lease and do not share your monthly budget up-front
The biggest mistake I find most people making is sharing their monthly budget range too early into the discussions. This gives the dealership so many options to have you feel that you are saving in one part of the lease and then raising something else above market value to have you missed on a better deal. You will notice this is often one of the first questions a car sales rep asks for to gain information and leverage in the negotiation, for a good reason.
The sub parts of the lease that you should negotiate in steps are as follows:
#1. Total Purchase Price for model/trim selected,
#2. The down payment and/or trade-in value,
#3. The money factor or implied interest rate (knowing what credit tier you are in), and finally
#4. The residual value
#3. Create a Sensitivity table as your guide
As part of you homework and understanding the market value of each of the lease subparts mentioned above, I would strongly recommend creating a 2 way sensitivity table(see below) that you can reference in the heat of the negotiation. You can put any two variables in the table, just make sure you focusing on driving the conversation towards these two items
This table will help you establish your ranges of negotiation and go in with a walk away price. In preparing for the time at the dealership, you will understand the negotiation levers in advance and help you leave satisfied in getting a good price for the car that you want.
There are many items in a car lease that can affect your monthly payment. A little bit of preparation and discipline goes along way in getting the car that you want for a price that won’t break your budget.
If you are interested in getting my full excel template for a car lease calculation that supports the above example or the sensitivity table, please email me or leave a comment.
I am a finance professional with over 20 years of experience and very passionate about all topics related to finance; enjoying the aspect of teaching and educating others along the way. All in all, I will show you how big this money tree can get over time as I get the branches (Earn, Save, Invest) as high as possible…Click here to see my financial progress to date: How high is the Money Tree?
