Does the 1% rule apply to a 24 month 15k miles deal?
I’m of the perhaps controversial mind that the 1% rule is misleading for a number of reasons, all of which are, oddly, not related to your queastion at least directly.
That said, because of deprecation vs. discount to MSRP the optimal lease term can vary greatly. For example, the higher the discount the more likely it is that a shorter term lease can price better than a longer term lease.
As for mileage, it depends on its impact on depreciation. In some models, adding 5,000 miles per year to a lease can cost 1% in depreciation, but in some instances the tariff is substantially higher.
Some cars simply lease better for a number of reasons, such as the ability to use MSD’s to decrease the money factor (interest rate). Some cars simply do not lease well.
What this all means is that some cars can be leased for closer to 0.5% and some cars lease for closer to 1.5%.
Thus, a substantive answer to your question would require details, such as the make and model you’re considering and your location (which can impact not only tax but incentives and pricing leverage at the dealership).
If you wish to volunteer more information, perhaps some of us can comment more specifically in terms of your unique requirements.
Thank you for the reply Steve2. I’m considering a cx5 for 24/15,000 in SoCal for around $30k MSRP.
My first choice is an Explorer XLT, but after reading the boards, it seems like there’s a consensus that Ford is a bad idea. Also considering the Lexus Nxt and Hyundai Santa Fe. I can’t really imagine myself keeping the CX5 or the Santa Fe for 3 years…
Trying to convince myself to be sensible and save money, but I spend a lot of time in my car, I want to enjoy it!
As the end of models years is about here (or here, depending on vheicals), and as the end of month golden window approaches, you are positioned at a good time to do some aggressive shopping.
That said, my recommendation is to optimize more for your enjoyment of the vehicle than for the percentage of MSRP you get for a specific vehicle. After all, as long as you’re within budget and the deal is fair (you’re not being ripped off), then enjoyment of the car is the goal.
In other words, if I loved a car that leased for 1.2% but disliked a car that I could get an awesome deal on at 0.7%, I’d opt for the former (assuming both were in budget).
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Great advice! I really appreciate it.
If I do go for the CX5, how much of a difference can I expect for a 24/15 vs 36/15?
That depends on what the residual value is at the end of the terms. Do you those numbers?
Also don’t forget the non-lease expenses. Insurance, maintenance, etc. You can save $20/mo on one car vs another but then end up paying $500 more a year for insurance. Or for example Toyota covers 2 years of free maintenance for all its cars, while Mazda doesn’t. Some cars have run flats which will need to be replaced much more quickly than normal tires, even within a 2-3 year lease.
There are a lot of factors to consider, even though most people just focus on the one big item…the monthly cost.
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And depending on where you live and road conditions, it might be wise to add coverage for run-flats – so add that to the monthly cost.
The standard lease term is 36/12, so it gets harder to get to the benchmark with 24/15.
24 months is a great idea if the manufacturer is offering a fat rebate like 3 k conquest or 4k lease cash. That way the discount is applied to “fewer” months…
I just finish a two years lease, I loved it. All I had to pay for was a flat monthly payment, insurance, and gas.
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Then you probably shouldn’t lease either.
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I don’t think I’d agree. There are probably 50+ new vehicles that I would enjoy driving but I won’t enjoy any of them if I think that I left $500 or more on the table. Thanks to leasehackr I can feel confident when I strike a deal that I did not get ripped off. My budget has nothing to do with that and I’m not going to settle for a “fair” deal when other people are getting great deals.
That being said the 1% rule is just a rule of thumb to provide a quick reality check. It’s not the ultimate test but it is certainly a good benchmark.