ELI5 (or maybe ELI10) for leasing a car

[newbie003]

First; yes, I know, I should buy used as it makes the most financial sense (and that's what we did with our last car), but I think I want to lease our next car nonetheless. Please don't turn this into an argument about buy used vs. new/lease, I'm just looking for assistance with leasing.

In any case, having never leased before, can someone let me know the top 5 or whatever things that I ask ask/confirm?

If I was buying, and I know the MSRP is, for example, $60k, but searching around I see that people are getting it for $55k, then I know what I should/would want to pay. Nice and simple...

For leasing though, I know that dealers can play games with the monthly payment vs # months, etc... to make the car look cheaper. So do I still start off asking for their best otd price, and then ask what it would cost to lease (i.e. hide the fact that I might lease vs. buy outright)? And how do I know that those lease payments then correspond to the otd price they gave me? In other words, for that $60k car with $55k otd, how do I know if $750/month is good, or $800, or $850...?

I know that I want low mileage (7,500 if I can, or even less) and 36 months. Would also probably want to put zero down. I would of course make sure I'm doing an apples to apples comparison if talking to multiple dealers.

I'm also not sure what if anything I'm supposed to ask about the residual value and how that plays into anything, nor do I know if that's even negotiable, or if the RV is just a set item that the manufacturer decides.

In short, can you please either point me to a very good, simple tutorial, or share with me your insights? I did some googling so I'm getting an idea, but am still not fully understanding how to make sure I'm getting a proper deal.

Thanks!

[lunch_money]

I’m not an expert, but have looked into it for myself and family members.

When you lease, you are effectively agreeing to buy the car and then sell the car back after the lease period ends. So you are negotiating three basic things:
1) Purchase price (aka capitalized cost)
2) Sell-back price (aka residual value)
3) Interest rate (aka money factor)

You also want to pay attention to the mileage overage charges, wear and tear charges, and what happens if there is an accident and the car is totaled (for this last - most commonly the leasing company is paid off and you get nothing one way or the other - which is why most recommendations are not to put money down on a lease - you’d lose more that way than spreading it out over payments)

Each thing can be understood/negotiated separately - you’ll have to ask for the details - but at a high level, just compare the total out of pocket costs of the lease across the term, as long as the other points (mileage etc) are reasonable. Make sure car equipment is comparable though.

More miles per year costs more, as you are effectively selling back a more used car

[bombcar]

Another note is that the residual value is where the dealers often play games against the manufacturer - not just you.

So sometimes you get a case where the residual value they're using is insanely high, which makes it a good deal to lease - because they want the darn things off their lots.

[VCC]

Leasehackr

[soobaerodude]

Leasehackr

Yup, go here

[toddthebod]

I’m not an expert, but have looked into it for myself and family members.

When you lease, you are effectively agreeing to buy the car and then sell the car back after the lease period ends. So you are negotiating three basic things:
1) Purchase price (aka capitalized cost)
2) Sell-back price (aka residual value)
3) Interest rate (aka money factor)

You also want to pay attention to the mileage overage charges, wear and tear charges, and what happens if there is an accident and the car is totaled (for this last - most commonly the leasing company is paid off and you get nothing one way or the other - which is why most recommendations are not to put money down on a lease - you’d lose more that way than spreading it out over payments)

Each thing can be understood/negotiated separately - you’ll have to ask for the details - but at a high level, just compare the total out of pocket costs of the lease across the term, as long as the other points (mileage etc) are reasonable. Make sure car equipment is comparable though.

More miles per year costs more, as you are effectively selling back a more used car

Another note is that the residual value is where the dealers often play games against the manufacturer - not just you.

So sometimes you get a case where the residual value they're using is insanely high, which makes it a good deal to lease - because they want the darn things off their lots.

My understanding is that the residual value is not negotiable.

For OP, what I will tell you based on experience (this has happened to me twice) is that it is not worth fixing the car up before turning it in at the end of the lease. I have leased two cars that have been involved in minor fender benders where I have pocketed the insurance check and returned without repair. and the amount that the manufacturer charged was maybe half what the insurance had paid out. Same thing applies to tires. They may ding you at the end for worn out tires, but they will charge you less than you will pay for new tires anywhere.

[sketchy9]

Agree with the recommendation for leasehackr. If nothing else it will give you an idea of what deals are available for your car of interest in your area.
I'd also potentially recommend a lease broker. I think the leasing process is extremely opaque, more so than purchasing, and a broker can navigate that better than you. Interestingly, a friend of mine used Costco to lease his car. Not sure if that's an option for you.

[bombcar]

My understanding is that the residual value is not negotiable.

It's usually not negotiable by you, but the dealers and manufacturers sometimes do - residual value will be a different percentage of different makes/models - and sometimes it's stupidly high (and other times silly low).