There are many vehicles where a lease payment over 1% is a strong deal and a strong value compared to other products in the market.
Personally, I think the takeaway should be “if you want to know if something is or isn’t a good deal, determine what a good deal actually is”. Everything else is just flailing in the dark.
Right, but 98% of the people don’t know how, or don’t want to do the research. They negotiate at the dealer. Maybe the 1% rule of thumb (WITH NO MONEY DOWN) can save them from a disaster. Maybe they leave the dealership and start doing some real research because the dealer quoted them $699 month on a $42k car and you know what, I’m over my head in this dealership but $699 is a hell of a lot more than 1%, I need a timeout here.
But it doesn’t do that. That are many cases where 1%, even with $0 DAS, is a disaster of a deal (well, not a ton of cases in the current market, but generally).
I guess I don’t see the point. Why dumb down the process to a metric that doesn’t actually help anyone for people that want to avoid doing anything?
If they want to go into a 5 figure financial commitment without taking the time to figure out if something is a good deal or not, that’s their prerogative, but pretending some useless number helps them in anyway isn’t any better.
It’s a shortcut for people that don’t want to do any work and are more concerned about feeling like they got a good deal than if they actually did.
yeah good point
I don’t really follow the 1% thing (more like 0.5%, lol) but I do know a bunch of people who aren’t quite into the ins and outs of leasing but they kind of have this in the back of their mind. I do agree it could save someone from a rash decision. If it does nothing else it can at least cause them to pause and reassess. Its tough to think of too many $40,000 cars that are a good deal at $600 a month for instance. It doesn’t mean that’s not market value, but if someone who doesn’t know much has something to help them at least apply some manner of objective thinking it might not be a bad thing. Using it to justify your deal after the fact would seem to be less productive.
well said.
In the current market, I think you’ll find that to be vastly more common.
As an example, though, I’d point to the Hyundai Palisade I was leasing at roughly 1.25% ($40k MSRP, $510/mo payment). Failed the 1% test, but it was a better product than every other competitor that I could lease for $500/mo. Hell, parked next to it was a $40k Honda Passport for a bit under 1% at $375/mo. The Palisade was a significantly better deal and value for the money. Both were very aggressive deals when they were leased.
With that said, I’d argue that leasing something (or not) based on the 1% rule is a rash decision. It’s a quick, dirty metric that one uses instead of taking the time to do the real work. If we’re going to use rash decisions to avoid rash decisions, you’re not making up ground.
Say what? Does always include 2018-2019?
I can’t think of a car that would be worth paying 2% on unless it was part of a lease-to-own/flip hack. 2% is paying 2/3 of the MSRP of a car in three years.
You’re saying something that we all already agree with you on. The 1% rule of thumb does not determine a good deal. Agreed. Doesn’t mean it’s not useful, with context.
And that’s my point. When there’s context, it ceases to be the 1% rule you’re relying on, but the context.
There are times when 1% of MSRP is spot on. It’s exactly representative of where one should be (or one should run away). Without the context, which can only be determined by actually working out what a good deal is, you never know where that is.
A broken clock is right twice a day. As long as you have the context of what time it actually is, a broken clock is a useful time telling device.
Somebody who leases this is making the decision to pay over half (54%) of MSRP for only three years of the car’s life. We can argue about inflated msrp and our current crazy conditions, but there’s a point where it just makes more sense to buy and 1.5% is in that range.
I was kind of going to go here, but decided I didn’t really want to put forth the effort in the discussion, LOL. I agree with you 100%…At a certain point no matter what metric you use, it’s simply not worth leasing the car.
I have a special alert for the keyword % rule …
I don’t think there’s any arguing that, other than there isn’t a cut and dry percentage where that is the case either. Now you’ve got to compare tax liabilities, costs of capital, differences in incentives, risk tolerance, lessor policies on buy outs, etc.
It’s potentially another stopped clock, just in a different time zone.
True enough, it just depends on how many times we want to split the penny😊. In the end, the more effort that is put forth and the more understanding, the better the end result is likely to be. Most people just aren’t going to do that though, and truthfully (selfishly) let’s hope it stays that way😊
What I don’t get is… people often cite the 1% rule as a quick and easy way to evaluate a deal for those who don’t know or care to do the research (which it’s not)… as though the research is rocket science. It’s really not very complicated at all. Am I crazy for thinking that?
Unless there’s a ton of people incapable of comprehending simple concepts, it’s just pure laziness.
