So, as others have said, the price the dealership will give you in advertisements and when you show up is the Manufacturer’s Suggested Retail Price, which is much higher than the vehicle’s real-world value. Sales people’s job is to convince you this is the best price you will get, but it’s actually the worst.
I’ve also noticed that sales people will “Do the math in front of you” to convince you, but they end up hiding incentives you should be getting. For example, on my first trip to a Kia dealer, I decided I wanted the EX instead of the LX, which is only a small jump MSRP wise (3k-4k I think), but he quoted me a lease of 350 a month and 4k down, saying it was impossible to do anything lower despite my excellent credit. It turns out he was leaving out national incentives, which he later claimed that his dealership doesn’t participate in.
So, I’m going to list the different things you should pay attention to, using examples for the Kia Niro LX and where to find them. Everybody has been so helpful on this forum that I want to pay it back.
MSRP: This is the price listed on the Manufacturer’s site, and ideally what they would like to sell the car for, but the true value of the car is lower and you want to negotiate down to that value.
In this example, the MSRP for a 2018 Kia Niro LX with Advance Technology Package and Premium Black Paint is $26,435.
Sales Price: This is the price that you and the salesperson will agree that the car is worth (BEFORE INCENTIVES). Typically 10% to 15% below the MSRP is an appropriate amount. TrueCar lists the average sales price for our Black Niro LX with Tech as $23,640 and the “TrueCar Average” of $21,703.
MF (Money Factor): This is an interest rate that you will pay for having the car for the lease term, but is expressed as a decimal instead of a percentage. It varies greatly between manufacturers and states, so the MF for a NIRO LX in Florida is going to be different from the MF in California.
Kia also tends to have very high Money Factors for their leases, but every salesperson I have talked to was willing to negotiate down, but that will depend on your credit.
You can find the Money Factor for specific cars on the Edmunds.com forums, and for our Niro LX the standard “great credit” MF last I checked is .00224 for a 36 month, 12,000 mile lease. I’m currently waiting for someone to respond with updated numbers.
Document Fee: This is a fee for document processing. I’ve never tried to negotiate it and it is probably different for every dealership.
Acquisition Fee: I believe this fee is set by the manufacturer at $595 or $695 but a lot of dealerships knock it up to $995. In my negotiations with Kia dealers thus far, I’ve left it at $595 and they haven’t tried to knock it back up.
Miles/Yr: The mileage allowance for your lease, annually. The best deal will be on a 10k a year lease, but if you go over, it will cost you a lot more than you saved, so choose based on how much you drive.
Months: Lease length in months. The best incentives are given for 36 month leases, but occasionally you will see a good deal on a shorter lease.
Down Payment: This is how much you’re going to pay upfront against the cost of the lease. Advanced lease hackers occasionally do a “one pay” lease where they pay the entirety of the lease with the downpayment.
Taxed Incentives: In California, most incentives will fall into this category, I believe. The most common incentive is manufacterer lease cash, which is a taxable dollar amount “given” to you to reduce the cost of the lease. You can check Edmunds.com for current incentives.
For our Niro LX, current incentives are: $3,630 lease cash.
Untaxed Incentives: I have yet to run into any untaxed incentives, but hopefully someone can give us some insight.
Post-Sale Rebate: Same as above.
Zero Drive-Off: Select this checkbox if you want to “bake” all your fees into your monthly lease cost. This will raise your monthly cost, but decreases the amount paid at the dealership to zero.
Residual: This is a percentage representing how much “value” the dealership expects the vehicle to have left when your lease is up, expressed as a percentage of the sales price. The dealership wants to make sure that the amount you pay for the lease covers the cost of the “value” you used. This isn’t technically a negotiable value, but I’ve seen people lower it by a few points.
Lic/Reg Fees: These are state dependent and non-negotiable.
Sales Tax: County Dependent. Non-Negotiable.
Now, if we go plug in all our information that we’ve found into the calulator, the deal looks VERY different from that supposed $249/m $2499 down sale on a base LX.
Kia Niro LX in Premium Black with Advanced Tech Package
MSRP: 26435
Sales Price: 23640 (11% off MSRP)
Money Factor: .00224 (5.38%)
Document Fee: 80
Acquisition Fee: 595 (paid upfront)
Miles/yr: 12,000
Months: 36
Down Payment: 0
Taxed Incentives: 3,630
Untaxed Incentives: 0
Post-Sale Rebate: 0
Residual: 54%
License/Registr. Fees: 400
Sales Tax: 9%
Monthly Payment (Ex. Tax): 236
Monthly Payment (Inc. Tax): 257
Drive-Off: $1720
Disposition Fee: 400
Total Lease Cost: 10,727
As you can see, just with these basic numbers we’ve completely obliterated the downpayment, added 2k worth of upgrades and still maintained a monthly payment of around $250. Despite that, there’s still room for negotiation in the Sales Price and Money Factor, as well as local or dealership incentives I may not know about.