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Discussion Starter · #1 ·
How is the actual lease price (monthly payment) calculated at the dealership? Is there a good online site that explains this?
 

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The residual value at end of lease is calculated and varies based on terms of lease, years, mileage per year etc. Then the difference betwen residual and negotiated starting price is what gets financed. check out the calculator here if you want to run some numbers.

Auto leasing lease payment calculator
 

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Discussion Starter · #3 ·
The residual value at end of lease is calculated and varies based on terms of lease, years, mileage per year etc. Then the difference betwen residual and negotiated starting price is what gets financed. check out the calculator here if you want to run some numbers.

Auto leasing lease payment calculator

So how is the residual value calculated? That lease payment calc looks useful, except I don't know where to look up the residual value or how to guessimate the lending rate (is that referring to the money factor? If so, how is that calculated?)

Basically, I'm trying to find out the best way to go into the dealer and work out a good deal for the monthly lease price. In the past, I've just talked solely about the monthly payment, but I've heard that's not wise and there are better ways to negotiate. Therefore, I'm trying to find out what's involved in calculating that monthly payment, so I'll know what I'm dealing w/ in negotiations.
 

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Basically, I'm trying to find out the best way to go into the dealer and work out a good deal for the monthly lease price. In the past, I've just talked solely about the monthly payment, but I've heard that's not wise and there are better ways to negotiate.
After considering how long I want to lease I've always tried to negotiate a deal where I put down the least amount of "up front money" and get the lowest monthly payment. To get the best deal you need (1) a low selling price, (2) a high residual value and (3) a good money factor.

I always lease. I always go to as many dealers as possible and get quotes. I go with the quote that is most comfortable. (You will have to determine "most comfortable". It might not be the lowest monthly payment.) For example, my wife decided that she wanted an SUV. (She had been driving E-class Mercedes for 15 years.) We went and looked at Honda Pilots, Audis, VWs, Fords, and Buicks. I actually got my best (most comfortable) deal with a Mercedes GLK. The GLK didn't give me the absolute lowest monthly payment but it was close.

The Mercedes dealership had several GLKs that they wanted to get rid of so that helped me to get a low net cap cost. The gave me the length of lease that I could live with. (36 months in this case) They gave me a good money factor (for customer loyalty). And finally, just about any Mercedes (or Porsche) has a good residual.

I ended up with a "comfortable" lease. I could have spent less money and had lower monthly payments on a number of SUVs but we liked the GLK. I figure life is too short to drive around in a car that you don't like just to save a few bucks. ;)

That's how I do it. I am sure we have some technical money folks on this forum who could give you better financial advice but I'm not one of them. On the other hand, I don't feel like I have ever been burned. :cheers:
 

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Discussion Starter · #5 ·
Thank you for the information so far!

The sale price seems like the only thing concrete that can really be negotiated (residual values and money factors seem either pre-determined or based on credit history), but my problem w/ that is if I'm dealing solely w/ the price regarding a lease, I don't know how that correlates over w/ the monthly payment, and that is what I'm really interested in since that's what I'll be budgeting with through the life of the lease.
So I guess that's why it's hard for me to negotiate w/ anything else other than the goal monthly payment I want to get to (I don't like putting any money down on a lease). It seems easiest to only talk about that value and then the dealer can do whatever they need to to get to that or close to that (adjust sale price, money factors, etc.)
Am I missing something though that I should be considering when dealing this way?
 

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Yes, negotiating the "purchase" price on a lease is one of the easier ways to lower monthly payments.

Residual is calculated based on estimated value of car at end of lease, and doesn't go down at the same rate you reduced the purchase price by, which is good because you want a higher residual for lower monthly payments. Its basically just pulled off a depreciation schedule that predicts that X model car, after X years and with X miles will at that time be worth X(residual).

Going to throw a couple example numbers out there to show what I mean.

For these, assume a 3 year lease term with 10,000 mi/year. So a Cayman S, with 30,000 miles in 3 years will have a residual in the 38,000-45,000 range, lets just say 40,000 in this case for both.

  • MSRP 70,000, no price negotiations, the lease is now 70,000-40,000 leaving your lease to finance 30,000 over 3 years plus applicaple fees.
  • MSRP 70,000, negotiated to 65,000, residual stays about the same at 40,000 now you're financing 25,000 over 3 years and will have lower payments.

These are simplified, but thats the basic effect of negotations.

Say if you had different lease terms that allowed you to drive 15,000 mi/year the residual would be lower as they would be valuating the car as if it had 45,000 miles at lease end instead of 30,000 miles, lowering the residual would increase your monthly costs. As say with those terms the residual ended up being 36,000, you would then be financing 34,000 over 3 years.
 

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Discussion Starter · #7 ·
Yes, negotiating the "purchase" price on a lease is one of the easier ways to lower monthly payments.

Residual is calculated based on estimated value of car at end of lease, and doesn't go down at the same rate you reduced the purchase price by, which is good because you want a higher residual for lower monthly payments. Its basically just pulled off a depreciation schedule that predicts that X model car, after X years and with X miles will at that time be worth X(residual).

Going to throw a couple example numbers out there to show what I mean.

For these, assume a 3 year lease term with 10,000 mi/year. So a Cayman S, with 30,000 miles in 3 years will have a residual in the 38,000-45,000 range, lets just say 40,000 in this case for both.

  • MSRP 70,000, no price negotiations, the lease is now 70,000-40,000 leaving your lease to finance 30,000 over 3 years plus applicaple fees.
  • MSRP 70,000, negotiated to 65,000, residual stays about the same at 40,000 now you're financing 25,000 over 3 years and will have lower payments.
These are simplified, but thats the basic effect of negotations.

Say if you had different lease terms that allowed you to drive 15,000 mi/year the residual would be lower as they would be valuating the car as if it had 45,000 miles at lease end instead of 30,000 miles, lowering the residual would increase your monthly costs.
OK, so that basically concludes what I was thinking in the last post I made (residual isn't a negotiating factor, nor is money factor).
So, the only real negotiating factor is the purchase price. Like I said though, I have a hard time negotiating that because as I'm going through the negotiations, I don't know what that will correlate to regarding the monthly payment I'll make while leasing. (IE---lets say I get to a purchase price that I think is reasonable, but then after calculating the monthly payment, that $ amounth ends up being something other than what I expected).
That's why I'm wondering if it's just best to talk nothing other than what my monthly payment will be, rather than really discuss the purchase price at all since that really doesn't affect me since I'm not buying it.
See what I'm saying? This is the way I've negotiated leases in the past, however, I've heard from a number of people that I should negotiate the purchase price instead; I'm just having a hard time seeing why that is since I won't be able to calculate the correlating monthly lease payment in my head on the fly during the negotiation

I know this is a lot of hoop-lah, I just want to go into my next car deal best prepared! :thanks:
 

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Discussion Starter · #8 ·
Maybe I should throw out my probable situation (atleast I hope so sometime in the near future, I really love the CS! :banana:):

The CS I'm digging right now would be about $75k MSRP after all the options, and I'm probably going to want a 36 month lease, 15,000 miles/year, w/ no money down (other than what would be required, aka first month's payment, etc.).
So what should I expect to pay and/or what would be a good deal? I'm wanting something between 1100-1200, but not sure if that will be feasible
 

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Maybe I should throw out my probable situation (atleast I hope so sometime in the near future, I really love the CS! :banana:):

The CS I'm digging right now would be about $75k MSRP after all the options, and I'm probably going to want a 36 month lease, 15,000 miles/year, w/ no money down (other than what would be required, aka first month's payment, etc.).
So what should I expect to pay and/or what would be a good deal? I'm wanting something between 1100-1200, but not sure if that will be feasible
I think you'll be able to find a lease with those terms in the range of that monthly payment. The other part of the lease that effects monthly is the money factor which can vary dealer to dealer, I don't believe its negotiable and they don't always have to disclose it either. More or less that dictates what you're paying in fees/profits to the dealer. Typically its a percentage that gets calculated like you would interest on a mortgage.

To get your best price, I really suggest going in with a "I'm going to buy it" attitude and then talk lease terms after negotiating the price. If you go in saying you want a target monthly payment the dealer has no incentive to give you the best deal, instead they just have to find a car that will fit into your upper range.
 

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Maybe I should throw out my probable situation (atleast I hope so sometime in the near future, I really love the CS! :banana:):

The CS I'm digging right now would be about $75k MSRP after all the options, and I'm probably going to want a 36 month lease, 15,000 miles/year, w/ no money down (other than what would be required, aka first month's payment, etc.).
So what should I expect to pay and/or what would be a good deal? I'm wanting something between 1100-1200, but not sure if that will be feasible
Well in that case assuming the car is a 2010 CS you would be looking at the following:

Note* if the 6-speed MSRP is over $75k it would change the payment slightly due to the MRM set by PFS.*

6-speed: MSRP$75k, 36 month term, 15k miles per year, $0 down = 1214/mo+tax

PDK: MSRP $75k, 36 month, 15k per year, $0 down = 1234/mo+tax

Porsche has a special mid engine lease rate that is spectacular. If you were to receive $3000 discount that would put your pre-tax payment sub $1150/mo. Hope it works out for you.
 

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Everything on a lease is negotiable…cap cost of the car, residual, and money factor.

Even though you might get some rock bottom special Porsche interest rate, do not hesitate to ask the dealer for a lower monthly payment by adjusting the numbers. If there is no Porsche special, mention his using another leasing bank or that you will try an independent leasing company to get the same car. He will try harder since even though the dealer gets his money for a unit sold no matter how you get it, he will make more money if he sets up the lease.

Do not tell them what you can afford to pay. Low-ball them because they can adjust the numbers to be just over your number to gouge you for maximum profit.

Don't get confused with the process. Ask questions to get the lowest possible payment. Walk away to think about it unless you are sure you have the right deal.

There are way too many sites about leasing, but this one should help:

Auto Leasing Introduction for Consumers. Learn How To Be Smart About Car Leasing. Lease Guide
 

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Yes, everything is negotiable I was able to get a new BMW z4 3.5 that stickered for 65.5K for a lease pymt of 650 a month on a 30 month lease.
Cap Cost was 58k
Negotiated MF to bank rate 2.1%
no money down
Remember to contact several dealers so you can have them bid off each other
In the a end, the a deal took 5 min to complete
With dealers happy to deal, you have the upper hand-do not forget that
Cheers
 

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Everything on a lease is negotiable…cap cost of the car, residual, and money factor.



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The residual is the one thing that is not negotiable. Different lease companies may have different residuals, but most are based off the same guide and it is carved in stone. You can lower the residual if you want, by setting up more mileage to to reduce the lease end price, but that would raise the payments. The purchase price is negotiable and the money factor is sometimes negotiable--depends on the lease company and if it is a special mfg lease rate.
 

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The residual is the one thing that is not negotiable. Different lease companies may have different residuals, but most are based off the same guide and it is carved in stone. You can lower the residual if you want, by setting up more mileage to to reduce the lease end price, but that would raise the payments. The purchase price is negotiable and the money factor is sometimes negotiable--depends on the lease company and if it is a special mfg lease rate.
There are people getting a lease with the ill-conceived notion of planning to buy their leased car after the term. They get the residual as low as possible so their buyout is the lowest possible. The money factor goes up so the initial high interest rate becomes even higher. Getting the lowest this and that all comes down to the most important thing, the lowest monthly payment.
 

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What credit score is PFS looking at on a lease? I have zero debt, zero debt to income ratio.
 

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I had about a 735 and passed with flying colors on getting the .00146 mf which required PFS Tier I credit. Also note that auto dealers run auto specific credit which is typically higher than your regular credit score - the dealers captive finance arm is most concerned that you have paid your car installments and mortgages on time - so I think my auto score was actually about 40 points higher. If you need any help with leasing, I think I got a pretty good deal after doing lots of negotiation. Ended up with a 2009 Cayman, arctic silver over beige with boxster S II wheels, PCM 3.0 nav, sound plus, XM, self-dim, heated seats, ipod stuff, bluetooth and a few other goodies. Price was just over $64,000 and I finalized a deal at a shade under $56,000 as cap cost, put down $1,000 and got best mf - so the price was $640/mo without taxes, which will depend on which state you are in.
 

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I'll take you up on it. What do you think of this 'lease special' on a 2010 Cayman S:

2010 Cayman S 6 Speed Lease Special

$916 Per Month

MSRP - $71,910.00
Less Dealer Discount - $3,500.00
Sale Price - $68,410.00

Stock #AU780171

Arctic Silver Metallic, Black Leather interior, Bose 5.1 Surround Sound, Power Seat Package, 19" Carrera S II Wheels and more.

Offer Expires May 31, 2010

Lease Term 36 Months with 10,000 per year mileage allowance. W.A.C. through Porsche Financial Services

1st Payment of $916.00, $3,000.00 plus Tax, Title & License Fees Due at Signing.
 

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Seller discount should be better and I would certainly like to know if Porsche is throwing any money in the pot (i.e., trunk money). I think you can do better than $3,500 off MSRP. You need to run invoice off Edmunds or truecar and start your negotiations there. ALso difficult to tell if your deal is good without knowing what the mf is - after the CAP cost, money factor drives the lease price. For example, when I was comparing cars and deals, I also was looking at the S5 - the car was actually LESS money than the Cayman, but Audi Financial would not budge from their .00310 mf at the time, thus the payment was around $900/mo. Additionally, some dealers take the current best mf and then add on .0003 or some other small percentage, that way they can make money on the financing. Never allow them to do this, you can always find out the best current rate - right now I think it is high at .00320. Finally, DO NOT put $3K down. I rarely put money down, this time I threw in $1K to get my final payment with tax exactly where I was comfortable. But essentially you are just throwing away money, especially if the cars gets totaled in an accident. SO - most important for you, work on getting a better CAP cost and then work on putting down a small CAP cost reduction (the down payment, called a "decap"). Might also want to see what kind of support there is on leftover 09's. PM me with any questions.
 

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Discussion Starter · #20 ·
I also never like putting money down on a lease, so I'd stay away from that and either have them roll it into the payments or work out a lower cap cost
 
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