So, this is something that I have probably explained to no less than 30 people in the last month. Given that, I thought it might be cool to make a video instead, and share with everyone how you see the true cost of a national “lease offer”, in this case, using the BMW i4 offer as an example.
This might seem like a basic concept for some people on the forum, but I can tell you from first hand experience, many new users who I speak to will always ask why the “BMW website price is better”.
If you want to learn how to take a “lease offer” you see online, and turn it into something more “real”, this video will explain how:
Every dealership is different. More importantly, every dealer group is different as well. It does not universally apply so quite frankly there is no one real answer to your question.
At the end of the day, there are hard costs associated with selling a car, the the sales guy who delivered it has to get paid, the finance manager who checked your taxes, did your paperwork, your approval, etc, has to get paid, the gas in the car needs to be paid for, the pre delivery inspection needs to get paid for, the wash and detail, etc, etc. If the car is sold for say, -$3,500 on the front end, they might justify that by making a little bit back on the back end (the money factor bump) to help pay for some of the hard costs.
Some dealers can justify more money off the front end (the % discount) by adding a little bit back in the reserve, because for their particular business model or dealer group, that might make more sense.
Quite frankly, I could probably talk for an hour about all the different ways a deal can be structured all for you to wind up at the same end number to the customer.
Maybe one day people will learn to realize that a marked up mf with a larger discount to offset it is better than buy rate with a smaller discount. I would take the mf mark up with a commensurate discount every day of the week.
Maybe one day people will learn to realize that a marked up mf with a larger discount to offset it is better than buy rate with a smaller discount. I would take the mf mark up with a commensurate discount every day of the week.
Please explain your reasoning on that statement. Thanks!
The larger discount results in a lower adjusted lease balance throughout the entire life of the lease (up until the final payment, when it final is equal). It means that you will always have a lower buyout option mid lease and a better equity position.
Its an advantage that decreases as the lease approaches maturity, but at the end, its a parity, so you never end up in a disadvantage.
Further, in some states, taxation is only applied on the depreciated value, so you have a reduced sales tax liability due to the lease biasing towards rent charge vs depreciation.
Same logic applies to lease to immediately buy situations. Send the dealer subliminal messages to mark up the mf. Telling them upfront that you know nothing about how leasing works usually does the trick!
