Signed 2020 Lexus IS 300 42k MSRP

Year, Make, Model, and Trim: 2020 Lexus IS 300 RWD (black on black)
MSRP: $42705
Monthly Payment: $378 including tax
Drive-Off Amount: $1200 (3 MSDs)
Months: 36mo
Annual Mileage: 12k
MF: IDK what really happened because my friend’s credit was tier 1, not plus 1. Usually, Lexus dealerships bump up the credit tier if he’s like 10 points away but they were really strict about it. I recommended he make an MSD to lower down the MF so he made 3 MSDs ($1200).
Residual: 50%
Incentives: 6000 (including Lexus loyalty)
Region: SoCal
Leasehackr Score: 10.2 (if my calculation is right)
Leasehackr Calculator Link:

Congratulations. Looks like a solid deal. Any pics of the car?

A lot to like about this deal, but that 0.00100 MF is a deal breaker. The buy rate in SoCal is 0.00001, correct? Can Lexus mark up the MF by 0.00099? Ouch, that is an approx $1,900 mark up in dollars which kills the nice 11.8% pre-incentive. Am I missing something?

I figured this might be a good time to ask this question (cause I’ve always wondered since getting into this site and seeing how the hackers always seem to present it as a given for any deal), but why is the expected money factor always buy rate? Are the finance folks not allowed to make any money on a lease deal? And in this specific case, is an effective 2.4% interest rate (based on the calculator provided) really so horrible as to be a “deal breaker”…? No snark intended…I’m genuinely curious.

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I don’t have the papers with me so I just put down the values in terms of the dollar that my friend is paying since this is his car. He said MF on the paper was 0.00021

I really would love to learn about this more ^ @824 would you care to explain for newbies like me?

Curiosity welcomed and encouraged.

What is a good deal? Everyone searches this forum for past deal benchmarks. The common yardstick for a great deal is an aggressive (and attainable) pre-incentive discount at the lowest interest rate available (buy rate). A dealer can chose to mark up the MF, but the lessee should target a deeper pre-incentive to compensate for the mark up.

Here is how I look at MF mark ups. The calculator shows an 11.8% pre-incentive discount - pretty good. But that discount comes with a higher interest rate than I can get from another dealer based on past deals you can find here. The lessee is paying about $1,900 more in interest - this translates into an effective pre-incentive discount of approx 7.4% (at the buy rate). Looking at past IS 300 deals on here, others have done better than 7.4% at the buy rate.

You won’t know if you have a great deal unless you evaluate the pre-incentive discount and MF in your deal. These two negotiated variables represent the most critical deal points you negotiate. Never close a deal until you have wrapped your head around these two deal points.

If you friend wants to know if he got a good deal, he should share his rent charge, You can calculate the MF in your deal from there.

Thanks for the info. All of it makes perfect sense, and I certainly get that there’s a “six of one, half a dozen of the other” aspect to it in terms of balancing out the pre-incentive discount and money factor towards the goal of making a good deal. But as I mentioned before, most of the threads and comments I read on this site treat obtaining the money factor at the buy rate as a given. Even with the pre-incentive discounts a goal range is usually provided. But not with the money factor. And I’m still wondering how that became a thing. And as far as @james_kim goes, I hope his friend got a decent deal overall and the information you provided should help him to determine that.

Buy rate is not a given - but it is commonplace. To generalize, if your credit score earns you the buy rate many dealers will write your deal at the buy rate. If the dealer chooses to mark up your MF, you don’t fight it you simply adjust your target pre-incentive discount .

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This is what I understood, too. Maybe in the past (pre-COVID or right at the low sales in March - May?), dealers are more willing. But based on my discussions with a lot of dealers in the last few weeks, none of them will budge on MF.

Heck, even a few stopped responding to my email when I asked “why the MF is doubled?”.


Thanks again for your insight…makes sense.