DetailsGrl

Hi all...first time poster, so please be gentle....

I’ve been leasing Lexus vehicles for nine years, now at the end of the third lease...which means time to jump back into this. Looking back at how I’ve approached the process in the past, it’s obvious I’ve been short sighted about the fact some of this stuff is negotiable.

Yes, I know I’ve been a dork, so let’s not go there.

The dealer just shot a lease payment number to me that’s absurd, so I’m coming back with specific questions. Are any of these out of line? Am I missing something that should be on the list?

1. What is the MSRP on the vehicle?

2. What is the cap cost on the vehicle?

3. Exactly which trim package in being priced out, and which specific option packages are included (ex: PM versus LL, or Premium Package versus Luxury Package, etc.)?

4. What is the proposed down payment amount you used in figuring the numbers?

5. What is the proposed monthly lease payment amount without sales tax factored in?

6. What new or additional incentives apply to the RX350 in this year’s December to Remember event that didn’t exist in October/November? In January 2010? February 2010?

If any of these are out of line or there’s something missing, please don’t hesitate to chime in. The questions shown are the result of me poking around online, trying to better educate myself about how to negotiate a decent lease (especially now that my old sales guy is gone and a new one’s in his place).

Heaven knows, if you have suggestions for how to approach this, I’m all ears.

Thanks in advance for your terrific wisdom! I’m so glad to have found this forum.....

jeffmust

Details -
People overcomplicate lease transactions and I've found that just as many dealership sales people fail to understand the numbers; they usually have a go-to Lease Guy in Finance or just use the dealership's lease software to do the calculations. So don't feel lost - you're the customer and you're the one spending Big Bucks!

You've leased before but here are some additional items for you -

a. To compare one dealership's lease offer to another's, just add the drive-off money to the total of your lease payments for the lease term. This assumes both dealerships are proposing on the same $$ sticker price vehicle.

b. It's a balancing act between drive-off cash and monthly payments; some deals look great because "I got $0 drive off!" - sure you did - but I'm also sure that the dealership paid your DMV fees and other items some way, some how. By adding the drive-off to the lease total, you get a quick and easy feel for which offer is best. Sounds like you have no trade in so that makes the comparison pretty easy.

c. You should pick out the option packages you want - that's not the dealer's part of the deal. Check lexus.com for your zip code and you'll see what's available locally in a couple of standarized packages. If you want specific options and are prepared to wait several months or more, you could do that - but often the discount is far less on an ordered vehicle.

d. Assuming you lease thru Lexus Financial Services, they currently have a $700 acquisition or bank fee; this is typically non-negotiable. It can be added to your cap price to spread over the lease term or to your drive-off cash.

e. The current money factor of .0022 (5.28%) for Tier 1+ buyers can be reduced by use of MSDs - Multiple Security Deposits if you can spare the cash. In addition to other drive-off items, you give Lexus anywhere from 1-9 security deposits, each one the same as your taxed monthly lease payment rounded up to the nearest $25, and for each of them the dealer will reduce your money factor by 0.0008. For example, if you had a monthly lease payment of, say, $595 with tax, that would get rounded up to $600. If you gave the dealer the maximum 9x that at delivery ($5400) plus other drive-off fees, it would reduce your money factor to 0.00148 (.00220 minus .00072) or 3.55%.

Typically this would save you somewhere in the area of $60 per month; over 36 months, that's approx $2160 left in your wallet/purse, tax-free. And then at the end of the lease you get your $5400 back (assuming there's no unusual wear & tear on the returning vehicle). So it's a 40% return, tax free, over 3 years. Not bad.

f) Don't forget, if dealers in your area fail to discount RX350s at least 9-11% off sticker this time of year, you can easily shop dealers elsewhere for that gross cap cost and they will ship the vehicle directly to you. Happens all the time.

g) As for incentives, as of today, just the residual percentage (12k miles/year at 62%; 15k miles/year at 60% assuming you don't get rear entertainment option) and money factor of .0022 are offered from November's program. They either started the Dec-2-Remember promo early or, because RX's are selling well, decided to leave it be.

Good luck!

DigMyM35x

I would do a quick search online for a lease calculator. As mentioned above, there are a few things that you need to know in order to calculate a lease.

Money Factor
MSRP - Final with all of the options included. Use Edmunds for a pretty close estimate.
Sale Price
Cap Cost Used (I would start with the lease scenario using just the sale price and you can decide if you want to put any additional money into the transaction up front -differing opinions on whether you should do that or not but I always start with $0 and then decide what I want to add after that).
Residual
Term
Sales Tax - know what the amount is and how it is paid in your state. This varies.

Once you have those numbers, use the online calculator you found in your search and put those numbers in.

Typically, with a Lexus lease the money factors and residuals are pretty set. As the previous poster mentioned, you can do some things to impact those but, again, I would find out what they will be with $0 in and then decide if you want to do multiple security deposits or anything like that.

So that leaves the only 2 real ways that you can impact your lease payment - negotiate a lower sale price or put money into the transaction (to lower your cap cost).

Now you should be able to compare apples to apples with any other dealership. This will also help you compare your actual sale price to the MSRP to see if you are getting a good enough deal to move forward.

Really - I would focus on the sale price as your primary goal and then everything else after that.

Good luck!

Jay

DetailsGrl

You guys are the best--thanks for the terrific feedback and ideas. Have already found an online calculator and am poised to start plugging in numbers.

Unfortunately, both local dealerships (the only two in the state) are owned by the same people, so any apples-to-apples comparisons will require out of state dealers...ie, different taxes and probably different trim/option combinations (living in a northern tier state that gets loads of snow means everything here has AWD, for example). If I inquire in the next dealership south--four hours--it will be rather unusual to find AWD as an available option on their lot. Definitely want to avoid ordering a vehicle, since my leverage includes end of the year pressure (and, working against me, a lease that expires on 12.31.09).

Which begs the question: Just how far will most dealers be willing to ship a car? If I point toward those who typically stock options and trims that fit my climate, the nearest is about 5.5-6 hours out (again, crossing state lines)...from there, it's further yet. Is there a point where dealers say "She's far away, we probably won't get the lease, no need to negotiate"...?

As always, your wisdom is deeply appreciated. Thanks!

jeffmust

DG -

Shipping is shipping - won't make much difference to the shipping dealer (other than shipping cost of course) whether you obtain the vehicle in Rhode Island or California or anywhere inbetween. Buddy of mine in Texas just ordered from a dealer I recommended in So.CA and the shipping cost was $700 I believe; your mileage will vary.

As for AWD that you need, I was amazed to discover that so many RX350s here in the greater Los Angeles area are AWD since we get so little inclement weather. So getting that item will not be a problem. With that said, there are only a few available option packages out here - AWD and then with nav or no nav, with ML audio or no ML...that's pretty much it for this vicinity.

As for taxes...I believe you'll not pay the out-of-state taxes, just your local ones when you register the vehicle. So that shouldn't be a concern. On your expiring lease - you can usually extend a month or two at the same payment if your new vehicle's delivery is a ways off.

If you're interested in getting a quote from this end of the country, email me at GTVert02 at A O L and I'll get you some contacts.

Jeff

DetailsGrl

I'll drop you a line, happy to take you up on the offer. Pretty sure I'm going to spend part of the weekend trolling various dealerships around the country to see who's willing to play ball on the numbers, focusing primarily on the MSRP. Am I a horrid person for wanting to start in markets with the highest unemployment, knowing those dealers are probably more eager to move inventory our of their hands?

If so, I apologize for any offense. Just seems like a logical way to go at this, if I'm swinging for the most negotiating strength.

DigMyM35x

One thing to consider, since your original post mentions your current Lexus lease - if you call them up you should be able to get a 6 month extension for no additional cost. I actually did it twice. Your payment stays the same and the same portion of your payment reduces your principal owed on your current car. We actually had some trade value on our lease because it was so low miles. I think we netted $1200 or something simple like that. They just paid off the lease and gave us the credit (NOT rolled into the new vehicle - a true positive equity situation).

We used the first 6 months because my wife's lease ended in February and we wanted to give the brand new 2010's a shot and to see if the prices came down a bit after the initial few months. Then we extended again because I wanted to wait for the Enform equipped vehicles to hit the lot. We did the extension but ended up not needing it and used the car for a trade before the initial 6 months was up.

Just a thought to take off a bit of the pressure on timing. A lease extension is not the best thing for anyone but you can use it to your advantage if you need to - just nice to have the option.

Good luck and please keep us posted!

Jay

DetailsGrl

So far, so good.

The (new) sales guy was a bit surprised when I responded to his initial offer, based on full MSRP. After the conversation got rolling, he began talking about adjusting the MSRP...but not the initial cap cost. Pretty sure he didn't expect me to know the difference.

Imagine his shock when I pulled out the Edmunds numbers, said "Let's start by dialing down the initial cap costs," then began crunching digits on my calculator. Definitely changed the conversation.

In the end, looks like I'm going to get a deal that's in my comfort zone. Only question is this: In the models they currently have on the lot, all include the tow prep package. Well, in the 30+ years I've been driving, I have yet to tow anything...or expect a need to. He tells me that's critically important in a frigid northern climate, even if you don't tow, because of the difference in "under the hood" equipment.

Does that make sense? Or is this his way of saying "Here's what we have, let's stick to those vehicles?"

kitlz

DetailsGrl, tow package is pretty standard up north. I haven't towed anything in 11 years or even used the roof rack but I have had both in my 1st and 2nd gen and will be getting it in my 3rd gen. Maybe they can throw in all weather floor mats or something else to make up for the cost which fortunately is minimal.

DetailsGrl

Thought we were at a point of agreement (me and the sales guy, that is) until I looked at what he's showing for the drive off....

Correct me if I'm wrong, but shouldn't drive off equal:

1. Whatever down payment has been agreed to
2. Required licence/documentation free
3. Acquisition fee
4. First month's lease payment

Is there something else in there I'm missing...

...or did the dealer just find a place to "hide" another $1,500 in profit (the difference between those four amounts and what he's showing as my "due at signing")?

jeffmust

DetailsGirl -

It would be most helpful if you could post all the numbers - MSRP, residual, gross cap price, net cap price, sales tax % in your area, registration fees and misc fees, bottom line payment/month without tax, etc.

Then it's easy to evaluate. Saying there's $1500 tossed in somewhere...too vague.

Jeff

DetailsGrl

Well, I found part of the problem.

Upon asking to see a new printout of the worksheet he's quoting from, a couple of anomalies appeared: a higher initial cap cost and higher sales tax figure. Apparently, the sales guy charged the wrong sales tax the first two times, so that part's now correct.

As for the higher initial cap cost, though...hmm...pretty sure he didn't expect me to ask to see a copy of the worksheet.

We've been corresponding by email the past two days since neither of us can get on the phone at the same time (my schedule is as big a problem as his). Each email has been pressuring me to hurry up and send the signed lease app, which doesn't help. Feels a lot like he's wanting to race this along (so I don't find something?).

jeffmust

Details -

Don't forget the money factor...sometimes that item gets mysteriously "buried" in a dealer's worksheet calculations so it isn't visible in the hardcopy printout.

What you wind-up with is the adjusted cap price after drive-off cash - which can match your figures. But the actual monthly payment might be based on a "higher-than-we-discussed" MF - and you'd never know it unless you entered the adjusted (or net) cap, residual, and correct money factor in your lease calculator.

The dealer explanation can take the form of..."Well...yes, Lexus Financial is offering a MF this month of .0022 (5.28%) for people that qualify with tier 1+ credit - but that's our buy factor, not the factor we use to write deals." Don't accept that nonsense.

DigMyM35x

It would be easier for us to help you if you could cut and paste the numbers from the email and post them here. I'm sure you'll get all kinds of opinions then

Unfortunately, for the average consumer, there are lots of places to 'hide' numbers in a lease. It doesn't help if there is a 'mistake' from the beginning because you are suddenly comparing what YOUR original benchmark/goal was to comparing what the SALESPERSON wants you to see from the last discussion/email. It's an old trick. If they get you comparing numbers to previous options instead of your original goal and education that you originally armed yourself with - then they can often confuse a buyer and things 'look better' because the natural instinct is to compare to recent and feel relief it it is better. That's a bunch of bull - always compare to YOUR original math not the dealer's math compared to a number of confusing iterations.

In other words, you should have your numbers figured out in advance based on the negotiated sale price of the car, the MSRP(which is used to calculate the residual), the money factor, term, residual, taxes and then your own calcuation of any money paid upfront. If you don't have a strong handle on those numbers from your own calculations you can end up getting confused with the shell game that some salespeople play.

I'm not saying this guy is doing anything unethical but based on the pressure that you will 'regret' not getting the tow package from your other post, coupled with the mistake in tax calculations, I would definitely tell this person that you want to start over.

YOU should email the numbers to HIM based on your previous conversations and the known items: you should know the MSRP, moneyfactor and residual based on the Lexus standard and readily available information. So, really, the only variable is the agreed upon sale price.

It sounds to me like you may be confusing this with the cap cost. The selling price is the price that the dealer is willing to part with the vehicle. It may be MSRP or a few thousand under (hopefully). Your cap cost would be that selling price minus any upfront money you put into the transaction toward reducing the cap cost. So if the selling price is $43,000 and you decide to put $2,000 into cap cost reduction your cap cost would be $41,000 but the selling price would still be $43,000. You aren't getting the car for $41k - you are getting it for $43k and YOU are paying the $2k to get a lower lease payment based off of the $41k.

That $2,000 comes from you NOT the dealer.

You should also know what 'typical' costs are included upfront like taxes, tags, etc.

My advice is always to start with only paying those costs and not paying ANY money to reduce the cap cost. Then you only need to negotiate the selling price with the dealer. The lease payment will be reduced by approximately $30 for every $1,000 cap cost reduction so you can easily do that math yourself.

Make it easy - don't focus on ANYTHING except the SELLING PRICE of the vehicle. Then you can use the Lexus standards for the lease terms and the known items for taxes. After that, then you can determine if you want to lower the cap cost by putting additional money into the transaction. (Again, most people will tell you not to do this but it's your call).

I hope that helps. Stand firm on the negotiation of the selling price first and foremost. Then you only need to 'confirm' the other items because they are relatively fixed. I would email and ask for a list of just those items mentioned a few paragraphs above and then do the math with the calculator you've been using.

And post those numbers for us to help!

Jay

DetailsGrl

Jay, thanks for the wonderful detailed explanation. I think maybe I'm a bit blurry on the difference between MSRP and initial cap cost, thinking the first was full price (correct) and the second was what they were willing to actually sell the vehicle for (blurry?).

Since this got rolling, and after we had agreed to everything (via emails, not a signed contract), the dealer suddenly told me he couldn't get either of the two colors I'd requested from the beginning: Obsidian (black) or Smoky Granite Mica (metallic gray). I either had to take a color they had on the lot (the light colored Pearl or the mossy green, neither of which I care for) or take what they had in black or charcoal...

...which added the cargo package and the remote starter package, neither of which I need or want.

And both of which cost more.

Of course, now that I see what's on the worksheet, I understand what's going on. He's simply increasing my downpayment to keep the drive off high while maxing out the top limit of what I'm willing to pay per month ($500).

Here are the latest numbers:

MSRP: 44,090.00
Initial cap cost: 41,216.00
Down Payment: 1,767.06
Adjusted cap cost: 39,448.94

L.E.V. (residual): 63% / $27,776.70

Here's (another place) where it gets weird. The tax rate went up when he realized he's charged the wrong rate--used his local tax instead of the tax rate where the vehicle will be titled--but the Total Tax amount went down on this first line. How is that possible?

Total tax: 1,435.44
Money factor: .00260
Term: 36 months
Base monthly payment: 499.00
Tax rate: 7.2750% / 1,435.44 (correct now...I confirmed with state)
Payment amount: 499.00

Lic/Docs: 574.00
Acquisition: 724.50
Customer cash at drive off: 5,000.00 (?!?)

According to the dealer, all taxes are paid up front as part of drive off in Minnesota, which means the complete drive off list includes:

My downpayment
Total tax (based on sale price)
First month's payment
Lic/Docs (non-negotiable)
Acquisition (non-negotiable)

Okay, folks. Tear into this and let me know what you think. Am I off base by not understanding things, or is this actually a decent deal? That down payment seems awfully high.... If his goal was to make my head swim by continually changing the numbers on each iteration of the worksheet, well, mission accomplished.

As always, THANK YOU for your wisdom and guidance!