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Rules of Thumb
As with most areas of commerce there are certains thing to look
for, or lookout for that should tip you off to the value of a product
or service. If you ordered a pizza to be delivered, and the person
taking the order tells you that they are REALLY BUSY and
short of delivery drivers, would you be surprised if your pizza
was delivered late or not at all? No you wouldn't and the wise diner
would find another pizza shop or choose a different meal. Call that
a RoT (Rule of Thumb) for ordering pizza.
If you wander into a car dealership and are not greeted or approached
by anyone within 30 minutes, this is not a good place to do business.
Another RoT. Get it now?
The same holds true for leasing so I've included some tips to tip
you off.
RoT No. 1
Never lease a vehicle for more than 36 months. Let me repeat that.
NEVER LEASE A VEHICLE FOR MORE THAN 36 MONTHS.
RoT No. 2
The total of your lease payment time the term plus the residual
should not exceed the selling price plus interest if you had purchased
the car and financed it. Okay, I'll explain. If you purchased a
$20,000 car at 6% interest for five years, the payment would be
roughly $386 per month, with the total of payment being $21,360.
When calculating your lease, the total of your LEASE payments, (for
no more than 36 months), plus the RESIDUAL VALUE should not exceed
$21,360. For example, this $20,000 car with a 55% residual ($9000)
for 36 months with no cap reduction and no discount considered,
with a .0025 (6%) money factor would be $327 per month, or $327
X 36 + $9000 = $20,772. This is good for two reasons. If you were
for some reason to decide to buy this car, you are no worse off
than when you started if you had financed the purchase. Second,
it is hard for a dealer or leasing company to manipulate number
within these guidelines to give you a BAD deal.
RoT No. 3
Manufacturers Leasing Programs are always worth pursuing. They
are at least worth looking into even if it is not the car of your
dream. If you are dead set on leasing a BMW X5 and Mercedes Benz
advertises a Special Lease Program on their ML Class, you must check
it out. Sometime, admittedly, it will be all fluff and smoke and
you'll happily be driving your first choice, the BMW. But there
are times when manufacturers REALLY offer great lease packages and
they should not be missed.
RoT No. 4
When you see a lease ad in print or on television showing an amount
to start, which may or may not be a Special Lease Program, disregard
the amount to start and start your negotiations with NO MONEY DOWN.
This means, in lease parlance, no cap reduction. When the program
initially indicates a cap reduction this means the lease payment
wasn't that good from the start. Remember, the cap reduction is
to enhance your lease, not improve the dealers profit. The profit
will be established from level ground, which is the selling price.
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