#1 LEASE TIP: Go in prepared.

The Auto Lease Tip Guide Let's face it, when leasing a vehicle, the toughest part of the process is trying to understand how the dealership came up with $369/month when it should be $326/month. And what's with the screen print out from 1997 from the program they use to calculate the payment? Can it be any more confusing?

There's a reason for that. The more they keep you off-balanced, the better chance they have to pocket more money for themselves. Remember, it's a business to them - and not the 501.c.3 (Non-Profit) type.

Here are 3 Steps that may help you to keep the process of leasing a vehicle at a manageable and understanding pace:
  • Step 1 - Get a Baseline: Assuming you have already negotiated the Sell Price (CAP Cost), Money Factor and Residual, ask the finance person to calculate the monthly payments based on the following information ONLY:

    (Do NOT allow them to include Down Payment, Drive-Off or any other Fees)

    This should give you a baseline to work from. And like with any calculated value, verify the numbers! Make certain they have only included the variables above and that those numbers are correct.

    1 The Net CAP Cost should be: Selling Price - (rebates + cash back). If the dealership is providing a rebate, this number should reflect those savings. If not, have them show you where those savings were entered. Your monthly payments are base on the Net CAP Cost.

  • Step 2 - Reduce your Monthly Payments: With a baseline established, now have them enter the amount of money you are willing to put down (up-front) to reduce the CAP Cost. 100% of the value should be used to reduce the CAP Cost.

    If your CAP Cost (Selling Price - (rebates + cash back)) is $22,500 and you put $1000 down against it, your Net CAP Cost (used to calculate your monthly payments) should be $21,500.

    Keep in mind: Your "Due at Signing" will include this CAP Reduction plus taxes on it. If you put $1000 down and your Local State Tax is 9.25%, your "Due at Signing" will include $1092.50.

  • Step 3 - "Due at Signing": The final step is very important. This is where they can add variables in places which could be the difference in paying what you should, or paying them a little extra each month.

    Step 1 gave you the baseline. Step 2 reduced your monthly payments by reducing the CAP Cost. Step 3 determines what you will need to pay up-front in order to drive the vehicle off the lot.

    Here is a list of items that you will typically pay up-front:

    The important thing to remember here is, adding fees at this point in the process should NOT adjust your monthly payments.

    2 Before you begin the process, ask the dealership if there is an Acquisition Fee for leases. If so, ask if it can be paid up-front (at signing). If the Acquisition Fee can be paid up-front, make certain they do NOT add it to the CAP Cost. Up-front Acquisition Fees will NOT affect your monthly payments. If the Acquisition Fee must be integrated into the lease itself, the Net CAP Cost should be: (Selling Price - rebates/cash back - Down Payment + Acquisition Fees). Also, do NOT add it to the up-front amount. Integrated Acquisition Fees WILL affect your monthly payments.

It cannot be said enough when talking about leasing a vehicle: The more you know and understand the process, the less likely you will be taken for a ride. Here are a few additional tips and lease secrets to keep in mind the next time you go to lease a vehicle:
  • Know your monthly limit. Before going to any dealership and spending a lot of time negotiating through a lease, run the numbers at home. Use industry averages for the Money Factor and Residual and find out what the Monthly Payments will be. If it is too high for your budget and you are not sure if you can get the Selling Price down to the level you need, find a vehicle that is priced more suitable for your situation.

    When speaking with a Sales Rep, avoid the conversation that includes you sharing your monthly budget with them. If they know what you can and are willing to pay, they will work extremely hard at getting you into a lease (regardless of the true numbers) at your budgeted amount.

  • Go direct - cut out the Rep. The Sales Rep is only there to help you find a vehicle and to explain the different options available for that model. The numbers are handled through finance, and the sooner you get there, the sooner you will be on your way to closing the deal.

    If you have ever bought or leased a vehicle in the past, you may already be aware of the "Twilight Zone" affect that occurs when the Sales Rep says to you, "Let me go talk to my finance guy." Ten minutes later (for a 30 second process) they return with a lease option that seems to be worse than the one they initially quoted you before going in.

    So ask to speak directly with the finance person once you have selected your vehicle.

  • Get a quoted Money Factor and Residual before running the numbers. Once you know the vehicle you want to lease, have the finance person give you a Money Factor and Residual based on the following options: 36 month lease, 12,000 miles per year, and a good credit rating - nothing more. This way you have a base to start with.

  • Always negotiate the Selling Price. There are not too many things you have control over in a lease, but the one that you do (Selling Price), is the one that affects your Monthly Payments the most.

  • A Down Payment that reduces the CAP Cost. When discussing a Down Payment (if one is applied), make certain that the full amount is applied to reducing the CAP Cost. Do NOT let them pull from it other fees and charges.

  • Ask to see the numbers. By law, dealerships are not allowed to hide any details regarding a lease from you. They are not, however, required to show you - if you do not ask. So ask to see a breakdown of all the numbers involved in the lease. Compare them to the worksheet you will take in with you.

  • Be prepared. Making a $300, $400, or $500 monthly payment for the next 3 to 5 years is not something you should take lightly. It is a lot of money that deserves a lot of respect. That respect comes in the form of doing the homework in advance, and going in prepared.

Be in the driver seat!