However, mathematically, NPV of total lease cost is correct. Assuming the term, mileage, DAS and MSRP are the same. This can be simplified by asking for only first month payment DAS, and comparing monthly payment only all in.
There are techniques discussed here to assist in further price discovery. I’d argue the reverse auction can be just as or more effective.
Yes if the objective is to simply compare leases.
No if you want a great or even good lease.
Most dealer quotes will be with in $500-1000 TCO depending on MSRP which is likely $1000s more than a good deal.
At the end of the day the total lease cost is what matters. However, as some others have pointed out - if you understand the lease formula and how each dealer arrived at the numbers, you can negotiate an even better deal. For example , dealer A marks up the MF but gives a much better selling price. Dealer B gives you base MF and an average selling price. Dealer A might have a better total cost lease. Residual isn’t going to change and either will acquisition , taxes etc on the same exact vehicle. But is that the lease you should pick? Probably not
So while you can just look at who has the better total cost, if you understand the lease calculation then you can push for the best numbers in both of the deals to arrive at the best deal ( the 3rd deal that you need to manufacture and push for). In the example above, your deal should be Dealer As selling price with dealer B‘s MF. You have to look at each of the variables and once you understand that, your deal should have the best possible number at every variable in the lease equation. It might be more work but it is possible.
nailed it!..exactly what I am doing with the help of the stuff I learned here because that is exactly what I am finding out in the ‘real world’ Dealer A will provide best discounts off of MSRP because they see me asking for all the details so they want to stand out with the highest MSRP to Selling Price discount, but have to make up for it somewhere so they simply raise the MF to bring the total cost of the lease back to “Dealer profit levels” but Dealer B will share with me the normal MF but share less of a discount off the MSRP while Dealer C will show me the lowest possible monthly payments and a slightly higher down payment but not give me any other details such as the Cap Cost, MSRP or the additional dealer fees…so its all a game of simply moving the numbers around the 4 boxes to keep the pricing at basically the same place give or take a few hundred off the total car price. BUT the key is identifying those few hundred dollars off and going with the best possible deal at the end of the day by figuring out all the numbers,that is why knowing this stuff is so important
The concept of NPV doesn’t apply here.
But yeah any child can tell whether quote A $1,000 + 35x$400 <> quote B $2,000 + 35x$365
To be so reductionist is to miss the entire point of lease hacking.
NPV does apply as a lease consists of cash flows leaving your checking account, cash that could be going into your investment account. I’m not advocating the need to calculate NPV, as simple 1st payment or $0 DAS will generally be best practice as long as your interest rate is below your investment rate of return expectations.
And since any child can do it, what is the answer?
“But yeah any child can tell whether quote A $1,000 + 35x$400 <> quote B $2,000 + 35x$365”
And by the way, what is the entire point of lease hacking?
I think you have a divide here of 5% of lease hacking purists that want to know all the mathematical alchemy that goes into a lease vs 95% of the members that are just looking to understand the basic strategies that will get them to save as much money as they can on their next lease
But what do I know
Agree, but you shouldn’t have to do any math, if you ask for 1st payment DAS as part of the quote, this removes the need for any other analysis.
The problem is that the basic strategy that will get them to save as much money as they can is to know the details of the lease.
Yup. The dealership will tell you exactly what they want you to pay.
Personally, I prefer the number I want me to pay
Sure or you can tell the dealer what you’re willing to pay with first month DAS only.
This is the negotiation strategy. I personally would’ve left money on the table for my last deal as there were no similar deals posted here with leases as cheap. Negotiation strategy is a separate discussion though from my point above.
No, all you’re talking about is quote-shopping. Whether the total cost of quote A is less than B, C and D doesn’t tell you anything about whether the deal is actually good or not.
Maybe they’re all gouging you by thousands… yet all you’re calculating by your simple strategy is whether one quote is cheaper by relative pennies on the dollar
Yup, that you determined by calculating what it should be because you had the numbers
But I didn’t do this and came out with a better deal.
If your dealer’s offer has payments lower than other deals for the same car on this site AND lower than other vehicles in the class, you probably don’t need to run the numbers.
It comes back to the definition of a good deal. How do you define it? Is it:
I think its a combination of 3 and 4. If you personally like the car and the comparison to other deals is favorable, then I’d say its a good deal.
Maybe the procedure should change to include comparing deals with other deals. Why get a $350 Honda Accord when you can get a 3 series for the same price.
I don’t mean to butt in here… but I think this thread is going off the rails (and in circles). OP, I think you’re looking for an easy answer, and trust me, I wanted one as badly as you seem to.
There is no shortcut to understanding a good deal, unfortunately. Let me be direct: you absolutely do need to look at all of the numbers — they all matter.
Total lease cost is a good comparison tool across IDENTICAL models only, as each car has different incentives, each dealer has different doc fees and rebate allowances (depending on your search radius)
Let me try to highlight this with an example:
I tell dealer A that I want my total cost to be, let’s say, 16k for an $45k MSRP car that I’m looking at. Dealer B has a similar car but the MSRP is $42k. Is 16k a good target for total lease cost on this one? No it’s not. Total lease cost could be 15k at dealer B and wouldn’t be a good deal. “Bang for your buck” at dealer A is higher.
Time passes and June turns to July. Incentives change. Rebates drop by let’s say 750 bucks. Is 16k a good total lease cost now? Well heck, it’s probably great if you can get it, but after adjusting for lower rebates and therefore higher Cap Cost, total lease cost on each car goes up over 750 bucks, as you now pay more interest on “more” car (and perhaps higher taxes, depending on the state)
Dealer C comes in to play and has a 45k MSRP car but WAY higher dealer fees and, for whatever reason, has 500 less lease cash available on the car in that zip code. All of a sudden, 16k sounds like a dream. Is the dealer offering you a “worse deal?” Buy rate MF is out of their control, residual stayed the same, and pre-incentive discount is the same. So what happened? 16k total lease cost now becomes “impossible” based on new incentives and market conditions. You can no longer compare total lease cost, because a “reasonable” 16k lease cost has now become “unreasonable,” yet nothing changed but for the passing of time and the captive changing their lease programs.
A little long winded reply but hope that helps.
Edit: didn’t mean to @ you specifically @jon1
If you didn’t run the math, then you have no way of knowing you came out with a better deal.
And if all you do is compare dealer offers, then your floor is the lowest number a dealer offers and you have no way of knowing how much further you can go.
Now there are pros and cons to negotiating based on monthly/das vs breaking your offer down, but never is it in your favor to remain ignorant to where those numbers come from.
This too. My above example assumes you know the buy rate MF and a reasonable pre-incentive discount.
I agree that its always better to know the numbers. My criticism of the standard guidance is that it seems to focus too much on whether someone gets a good deal on a specific car and not whether they could have gotten a different car for either less money or a from a higher class.
For pre-incentive discount, how can you really gauge this if you don’t use comparable deals? Whether you know the numbers or not, its difficult to find the floor of what a dealer is willing to do on pre-incentive discount which is why I use the reverse auction approach.
If you see trusted hackrs bless a similar deal (of course indexed for MSRP) in the same month, and your offer is much lower, then is it probably a good deal. I’m not being gouged by thousands.
Or in a different region or different incentives or different incentives taxes or different lease terms