A Simple new car lease formula?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
capgain22
Posts: 10
Joined: Sat Jan 14, 2017 3:07 pm

A Simple new car lease formula?

Post by capgain22 » Sat May 19, 2018 12:28 pm

Have had a lifetime of buying 2 year-old cars and driving them until theyhe are a clunker and t I just give away to family.
That has allowed me to now afford to lease and drive a new car every 2-3 years. without the hassle of selling or trading in where I never have well or get anything near "trade in value".
(Disclaimer..... I don't recommend leasing for best overall value)

Now,
When researching leasing, many sources give you formulas with gross cap cost,money factor, cap cost reduction, residual value etc. etc. which can get very complicated; (and almost impossible to calculate with the first numbers the dealers float you. )
However I've come to the conclusion that there's a simple formula that seems to work for me;
If I can get the monthly payment to 1 % of the MRSP on any given vehicle (assuming a 3 year term at 10,000 mile; AT ZERO DOWN and zero closing costs (excluding tag, tax) then it's a doable deal

It takes a lot of work to get these but they are out there. I've seen better deals on forums but I think they are rarely obtainable.
Any money they want as a down payment destroys this formula.

I used a broker last time. (Am in Florida; I get cars in the $40K range). Might have a go at it on my own soon.

Any other tips or suggestions?

kmwilson343
Posts: 34
Joined: Tue Jun 05, 2018 7:46 pm
Location: Vancouver, WA

Re: A Simple new car lease formula?

Post by kmwilson343 » Mon Jun 11, 2018 9:37 am

capgain22 wrote:
Sat May 19, 2018 12:28 pm
Have had a lifetime of buying 2 year-old cars and driving them until theyhe are a clunker and t I just give away to family.
That has allowed me to now afford to lease and drive a new car every 2-3 years. without the hassle of selling or trading in where I never have well or get anything near "trade in value".
(Disclaimer..... I don't recommend leasing for best overall value)

Now,
When researching leasing, many sources give you formulas with gross cap cost,money factor, cap cost reduction, residual value etc. etc. which can get very complicated; (and almost impossible to calculate with the first numbers the dealers float you. )
However I've come to the conclusion that there's a simple formula that seems to work for me;
If I can get the monthly payment to 1 % of the MRSP on any given vehicle (assuming a 3 year term at 10,000 mile; AT ZERO DOWN and zero closing costs (excluding tag, tax) then it's a doable deal

It takes a lot of work to get these but they are out there. I've seen better deals on forums but I think they are rarely obtainable.
Any money they want as a down payment destroys this formula.

I used a broker last time. (Am in Florida; I get cars in the $40K range). Might have a go at it on my own soon.

Any other tips or suggestions?
IMHO keep purchasing used cars with cash and don't lease, keep it simple. Good luck.

Kevin

ncbill
Posts: 304
Joined: Sun Jul 06, 2008 4:03 pm

Re: A Simple new car lease formula?

Post by ncbill » Mon Jun 11, 2018 1:54 pm

kmwilson343 wrote:
Mon Jun 11, 2018 9:37 am
capgain22 wrote:
Sat May 19, 2018 12:28 pm
Have had a lifetime of buying 2 year-old cars and driving them until theyhe are a clunker and t I just give away to family.
That has allowed me to now afford to lease and drive a new car every 2-3 years. without the hassle of selling or trading in where I never have well or get anything near "trade in value".
(Disclaimer..... I don't recommend leasing for best overall value)

Now,
When researching leasing, many sources give you formulas with gross cap cost,money factor, cap cost reduction, residual value etc. etc. which can get very complicated; (and almost impossible to calculate with the first numbers the dealers float you. )
However I've come to the conclusion that there's a simple formula that seems to work for me;
If I can get the monthly payment to 1 % of the MRSP on any given vehicle (assuming a 3 year term at 10,000 mile; AT ZERO DOWN and zero closing costs (excluding tag, tax) then it's a doable deal

It takes a lot of work to get these but they are out there. I've seen better deals on forums but I think they are rarely obtainable.
Any money they want as a down payment destroys this formula.

I used a broker last time. (Am in Florida; I get cars in the $40K range). Might have a go at it on my own soon.

Any other tips or suggestions?
IMHO keep purchasing used cars with cash and don't lease, keep it simple. Good luck.

Kevin
OP has discovered the "1% rule"

anyone interested in leasing should spend a considerable amount of time over on the leasehackr.com forums.

User avatar
deanbrew
Posts: 1256
Joined: Wed Jul 21, 2010 12:05 pm
Location: The Keystone State

Re: A Simple new car lease formula?

Post by deanbrew » Mon Jun 11, 2018 2:40 pm

capgain22 wrote:
Sat May 19, 2018 12:28 pm
Now,
When researching leasing, many sources give you formulas with gross cap cost,money factor, cap cost reduction, residual value etc. etc. which can get very complicated; (and almost impossible to calculate with the first numbers the dealers float you. )
However I've come to the conclusion that there's a simple formula that seems to work for me;
If I can get the monthly payment to 1 % of the MRSP on any given vehicle (assuming a 3 year term at 10,000 mile; AT ZERO DOWN and zero closing costs (excluding tag, tax) then it's a doable deal

It takes a lot of work to get these but they are out there. I've seen better deals on forums but I think they are rarely obtainable.
Any money they want as a down payment destroys this formula.
Sounds like a good deal if you can get it. Am I correct in thinking that it severely limits the brand, model and trim levels that you can find at 1%? I just looked at a couple of cars that I might be interested in, and I doubt I could get anywhere near 1% per month with no down payment. Whenever I see an advertisement for a lease deal, the down payment is always in fine print and adds more than $100 a month to the bottom line.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

User avatar
tennisplyr
Posts: 1617
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: A Simple new car lease formula?

Post by tennisplyr » Mon Jun 11, 2018 6:42 pm

Been leasing since '95.....sometimes life isn't about money.
Those who move forward with a happy spirit will find that things always work out.

User avatar
TheGreyingDuke
Posts: 1460
Joined: Fri Sep 02, 2011 10:34 am

Re: A Simple new car lease formula?

Post by TheGreyingDuke » Mon Jun 11, 2018 8:39 pm

ncbill wrote:
Mon Jun 11, 2018 1:54 pm

OP has discovered the "1% rule"

anyone interested in leasing should spend a considerable amount of time over on the leasehackr.com forums.
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells

pennylane
Posts: 41
Joined: Thu Apr 12, 2018 10:22 am

Re: A Simple new car lease formula?

Post by pennylane » Mon Jun 11, 2018 9:30 pm

capgain22 wrote:
Sat May 19, 2018 12:28 pm
Have had a lifetime of buying 2 year-old cars and driving them until theyhe are a clunker and t I just give away to family.
That has allowed me to now afford to lease and drive a new car every 2-3 years. without the hassle of selling or trading in where I never have well or get anything near "trade in value".
(Disclaimer..... I don't recommend leasing for best overall value)

Now,
When researching leasing, many sources give you formulas with gross cap cost,money factor, cap cost reduction, residual value etc. etc. which can get very complicated; (and almost impossible to calculate with the first numbers the dealers float you. )
However I've come to the conclusion that there's a simple formula that seems to work for me;
If I can get the monthly payment to 1 % of the MRSP on any given vehicle (assuming a 3 year term at 10,000 mile; AT ZERO DOWN and zero closing costs (excluding tag, tax) then it's a doable deal

It takes a lot of work to get these but they are out there. I've seen better deals on forums but I think they are rarely obtainable.
Any money they want as a down payment destroys this formula.

I used a broker last time. (Am in Florida; I get cars in the $40K range). Might have a go at it on my own soon.

Any other tips or suggestions?
Yes, you are correct. If you can get a car for 1% of the MSRP, it usually is a steal. Tough to find but they are out there. Everyone in my immediate family usually ends up paying less than 1% of the MSRP when they lease because I was in the business.

Wife paying .8%
Father .65%
Mother .95%
Sister 1.3% (she rushed and didn’t wait for me to help)

I don’t lease I only buy 5-6 year old cars because it’s the best bang for the buck

User avatar
Alexa9
Posts: 1329
Joined: Tue Aug 30, 2016 9:41 am

Re: A Simple new car lease formula?

Post by Alexa9 » Mon Jun 11, 2018 9:38 pm

The best lease deals are probably the vehicles with the highest residual value. I would guess Lexus for this reason. Also, everyone seems to want an SUV nowadays so those tend to have higher residual values. I still think leasing rarely makes sense unless you can write it off.

pennylane
Posts: 41
Joined: Thu Apr 12, 2018 10:22 am

Re: A Simple new car lease formula?

Post by pennylane » Mon Jun 11, 2018 10:41 pm

Alexa9 wrote:
Mon Jun 11, 2018 9:38 pm
The best lease deals are probably the vehicles with the highest residual value. I would guess Lexus for this reason. Also, everyone seems to want an SUV nowadays so those tend to have higher residual values. I still think leasing rarely makes sense unless you can write it off.
Not necessarily. High residual usually goes accompanied by a high money factor (interest on lease)

Low residual usually is accompanied by a low money factor and lender/manufacturer rebates

pennylane
Posts: 41
Joined: Thu Apr 12, 2018 10:22 am

Re: A Simple new car lease formula?

Post by pennylane » Mon Jun 11, 2018 10:42 pm

Alexa9 wrote:
Mon Jun 11, 2018 9:38 pm
The best lease deals are probably the vehicles with the highest residual value. I would guess Lexus for this reason. Also, everyone seems to want an SUV nowadays so those tend to have higher residual values. I still think leasing rarely makes sense unless you can write it off.
Not necessarily. High residual usually goes accompanied by a high money factor (interest on lease)

Low residual usually is accompanied by a low money factor and lender/manufacturer rebates

CorradoJr
Posts: 83
Joined: Thu Apr 26, 2012 10:03 am

Re: A Simple new car lease formula?

Post by CorradoJr » Mon Jun 11, 2018 10:57 pm

BMW’s lease great. Currently leasing a 3-series and opted for European Delivery (7% off MSRP), picked up from the BMW Welt (factory) in Munich.


For comparison on my car -
MSRP $49.7k
36 month,15k residual value was 59%
Money factor was 0.00081 – money factor (includes multiple security deposits)

$499.99 – monthly payment includes 9% PA sales tax

User avatar
deanbrew
Posts: 1256
Joined: Wed Jul 21, 2010 12:05 pm
Location: The Keystone State

Re: A Simple new car lease formula?

Post by deanbrew » Tue Jun 12, 2018 8:28 am

pennylane wrote:
Mon Jun 11, 2018 9:30 pm
Yes, you are correct. If you can get a car for 1% of the MSRP, it usually is a steal. Tough to find but they are out there. Everyone in my immediate family usually ends up paying less than 1% of the MSRP when they lease because I was in the business.

Wife paying .8%
Father .65%
Mother .95%
Sister 1.3% (she rushed and didn’t wait for me to help)
Do you mind mentioning what brand and model vehicles those are? And you are calculating the monthly percent based on MSRP, correct? A lot of vehicles typically sell quite a bit below MSRP, especially if there are rebates and incentives available. So, the actual monthly percent would be higher if you compare it to a "good" purchase price (not the absolute lowest, perhaps, but what a decent shopper could get).
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

User avatar
TheGreyingDuke
Posts: 1460
Joined: Fri Sep 02, 2011 10:34 am

Re: A Simple new car lease formula?

Post by TheGreyingDuke » Tue Jun 12, 2018 8:37 am

deanbrew wrote:
Tue Jun 12, 2018 8:28 am


Do you mind mentioning what brand and model vehicles those are? And you are calculating the monthly percent based on MSRP, correct? A lot of vehicles typically sell quite a bit below MSRP, especially if there are rebates and incentives available. So, the actual monthly percent would be higher if you compare it to a "good" purchase price (not the absolute lowest, perhaps, but what a decent shopper could get).
The "rule" takes that into account
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells

pennylane
Posts: 41
Joined: Thu Apr 12, 2018 10:22 am

Re: A Simple new car lease formula?

Post by pennylane » Tue Jun 12, 2018 2:11 pm

deanbrew wrote:
Tue Jun 12, 2018 8:28 am
pennylane wrote:
Mon Jun 11, 2018 9:30 pm
Yes, you are correct. If you can get a car for 1% of the MSRP, it usually is a steal. Tough to find but they are out there. Everyone in my immediate family usually ends up paying less than 1% of the MSRP when they lease because I was in the business.

Wife paying .8%
Father .65%
Mother .95%
Sister 1.3% (she rushed and didn’t wait for me to help)
Do you mind mentioning what brand and model vehicles those are? And you are calculating the monthly percent based on MSRP, correct? A lot of vehicles typically sell quite a bit below MSRP, especially if there are rebates and incentives available. So, the actual monthly percent would be higher if you compare it to a "good" purchase price (not the absolute lowest, perhaps, but what a decent shopper could get).
wife: Honda
Father: Mercedes
Mother: BMW
Sister: Honda

Honestly, forget calculating anything. It is completely irrelevant, you're going to not only frustrate the dealer but you're going to get caught up in numbers that you don't have to. There is no need for you to know what the residual is unless you're planning on buying that car at the end of the lease. You also don't need to know what the money factor is either because its not negotiable (unless you put down security deposits which may or may not be available, this is depending on the bank)

You want a good deal? Pick a car, trim and MSRP... get quotes from your local dealers asking them to give you a quote with X miles and NO MONEY OUT OF POCKET, EVEN INCEPTIONS ROLLED IN.

only money you will be paying is your first month.

you knowing the MF or residual will not affect your monthly payment because this is not something you can change or challenge them on. Also, sometimes it doesn't pay to go to the cheapest dealer because if you're going to be servicing with a dealer, you want to most likely buy from them because they will be able to offer you pick up and drop off services when you need maintenance and maybe better servicing deals.

njdealguy
Posts: 33
Joined: Wed Jul 26, 2017 8:15 am

Re: A Simple new car lease formula?

Post by njdealguy » Tue Jun 12, 2018 2:40 pm

I consider a really great deal to be not just 1%, but sticker price divided by 120 as the monthly payment plus taxes for any car with no down payment but multiple security deposits allowed to bring down the money factor. That translates to what I call .83% rule rather than 1%. This is for a general lease for 36 months with 12k miles per year.

Derived this figure based on the Leasehackr website that considers any lease to be a great deal based on a so called "10 year rule" which is where 10 years or more worth of payments would equal the sticker price of a car. So 10 years is 120 months basically so (1/120) that comes to this. Have seen some great deals there posted such as a Infiniti QX60 SUV worth over $60k for somewhere in the low 400s per month.

I think the key to getting such deals is to email multiple dealers and work everything out ahead of time rather than walking randomly into dealers.

Post Reply