I have been happily leasing cars for the past 15 years. I don't buy cars because they do only one thing: depreciate. If the car retains value better than expected, then I buy it at lease-end. If it is a POS, the manufacturer gets its car back with a thank-you at lease-end. It is a great arrangement, as long as one is clear on a few things.

1. Always negotiate a lease on the purchase price. Never do it on payments.

2. Know the numbers on the car: MSRP, Invoice, dealer holdback, incentives, factory money, options pricing, and equipment groups.

3. Never agree to a lease term that extends beyond the manufacturer warranty.

4. Know your annual mileage requirements.

5. Be familiar with the very easy mechanics of leasing. If the dealer gives me a purchase price, residual value, and implicit interest rate, I can run a lease payment in 10 seconds on any financial calculator that is accurate to +/- $5/month. If it differs from the payment the guy is quoting, I know he's screwing me, and I tell him so. We review the numbers until he understands there is no room to hide.

6. Assume the salesman will screw you if he/she can - that's how they make "bonus" money. You'll be right 90% of the time, even if you took the guy out for beers the week prior. Don't take offense to that...just be smarter than they are. Know the car and know your numbers.

7. It's your money and his POS inventory until you sign on the dotted line. One you sign, it's your POS. If the deal sucks, tell the salesman he's a jerk and walk. Be sure to stop by with your new car when you get it from the competitor.

Here are the leasing components and inputs on a financial calculator (my favorite is the HP 10B, available from any Staples for $35):

Present Value (PV): Purchase Price - enter as a negative number.

Future Value (FV): Residual Value at the end of the lease term...also the purchase option price of the vehicle. Expressed as a percentage of the MSRP. For Corvettes, this is currently about 55-59% after 3 years. BMW and Mercedes have higher residuals, as they *tend* to hold their value better.

Interest Rate (I/YR): Equivalent APR on the lease or, the cost of your money. If they throw the term "money factor" at you, such as "your money factor is .00257", just multiply that value by 24 to get .0617 (6.17%) and plug it into the calculator as "6.17", NOT ".0617".

Term: that's easy.

Solve for Payment (PMT). You're done.

SEE HOW EASY THAT IS?

One caveat: remember to set the financial function for 12 payments/year.

You can also use these function keys to calculate an auto loan, mortgage, annuity (income stream from an investment) etc. etc.

The above cautionary comments, as Steve and others have pointed out, apply to any purchase, regardless of the financing method. Get to know the product and the process until you can discuss it in your sleep. Knowledge is power. Use it.

 

Thanks, all - hopefully, as FatherLarry said, some folks will get educated: not only about leasing, but how to avoid being ripped off at the dealer in a "shell game" of purchase price, trade in, and financing options.

But - I would be remiss if I didn't point out that the primary way I avoid getting ripped off by a dealer is to always buy my cars from Karl Johanson. Like some of the other Forum dealers who EARN the testimony of their customers, he is a no-BS, up-front guy! :cheers: