Automotive

How do you negotiate a car lease?

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  • May 8th, 2015 12:04 pm
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[OP]
Newbie
Dec 1, 2014
6 posts
Toronto, ON

How do you negotiate a car lease?

It seems like financing a car seems much easier. I have never leased a car before and now looking to lease a 2015 BMW X5, we are looking at $500 a month lease payment including tax.

We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.

Let say if you know you can get about $4000 off that particular car, how do you negotiate the price? Do you negotiate the down payment? If so how much to start?

Or is It better to have a higher payment with less down payment but it seems that way you pay more taxes on the lease payment but it's not that much anyways.

What's the optimal plan to negotiate this BMW X5. I've read other places saying that you negotiate on the total purchase price of the car first and then work out the lease details?

Any help would be appreciated.
15 replies
Member
Feb 10, 2014
355 posts
225 upvotes
Mississauga
sgtoronto wrote: It seems like financing a car seems much easier. I have never leased a car before and now looking to lease a 2015 BMW X5, we are looking at $500 a month lease payment including tax.

We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.

Let say if you know you can get about $4000 off that particular car, how do you negotiate the price? Do you negotiate the down payment? If so how much to start?

Or is It better to have a higher payment with less down payment but it seems that way you pay more taxes on the lease payment but it's not that much anyways.

What's the optimal plan to negotiate this BMW X5. I've read other places saying that you negotiate on the total purchase price of the car first and then work out the lease details?

Any help would be appreciated.
If you know how much you are willing to pay monthly why not start straight from there? Unless you are increditably good in maths, it would be easier for you to know how much you are paying monthly every time you submit an offer.
Deal Expert
User avatar
Jul 30, 2007
31252 posts
17820 upvotes
Toronto
1st question is why would you put down $25 - $30K down to begin with ? Reason for leasing is to put down as low as possible. If you are going to have that kind of downpayment, you should just finance the car instead.

for negotiation, you can aim at around 7-7.5% off configured price and there will also be about $2300 in freight/pdi + $400 admin fee + $100 A/C tax + $5 OMVIC fee + $50 PPSA (if financing or leasing) + $24 Ont tire levy. These items you can negotiate as well to certain extent. As for bogus fees, dealers are charging up to $300 for nitrogen air + up to $300 for VIN etching admin fee. These are optional and if you don't want to pay, then you can opt out even though the dealer will insist they are mandatory (which is a big lie). Dealer will also charge $90 wheel locks, up to $110 for full tank of gas and $300 for rubber mats. For leasing, there is also the Excess Wear & tear protection plan for $1200 which most may opt for if you don't want to get a huge bill at the end of the lease due to dents, cracked windshield, bumper scratches/crack, interior damage, etc. Residual value and interest rate are set by BMW Canada and dealer are basically bound by those variables in calculating your payment.

For May, I don't believe there are any factory incentive going on now. 36 months for a x5 35 is 56% residual and 5.9% interest (crazy high for SUV).
Deal Fanatic
Jan 15, 2004
7088 posts
1575 upvotes
Never negotiate with monthly payment. Negotiate like you're buying the car. The discount should apply to the overall lease payment. For example, if you get $3k off, it'll come off your lease payment, not the overall price of the car, as you will only pay for a certain percentage (total car price - residual value).
Deal Fanatic
May 4, 2014
5083 posts
6663 upvotes
Toronto, ON
golden wrote: Never negotiate with monthly payment. Negotiate like you're buying the car. The discount should apply to the overall lease payment. For example, if you get $3k off, it'll come off your lease payment, not the overall price of the car, as you will only pay for a certain percentage (total car price - residual value).
Exactly.. Telling a car salesman how much you will pay monthly and down is simply asking to be milked.
Deal Expert
Aug 22, 2011
37031 posts
22996 upvotes
Center of Universe
Aim to have the residual as high as possible at the end of the term.
Deal Addict
May 10, 2011
1475 posts
523 upvotes
Ottawa
sgtoronto wrote: We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.
What the reason for putting that much down payment? Are you aware that you will lose all those money if you get into an accident and your car is a write-off? Also most people renew the lease early to advantage of pull-ahead promotion. If you put down any down payment you are wasting a good chuck of money if you take renew your lease early.

As for negotiation I will suggest to keep it simple. Forget about the residual, APR, interest rate, etc. Simply look at what your total cost for the whole lease period (i.e. down payment plus monthly payments times the number of payments). Get a couple of quotes from different dealers.
Member
Jun 3, 2013
381 posts
93 upvotes
I always recommend two ways. 1. Get a car broker and tell them to get you the best price. They usually will do better than anything you can ever do with hard negotiating. Easy Car Discount, discount Auto broker etc. plus saves you from even entering a dealership.

2. - do the math yourself. Go on the BMW website and price out the car yourself on Whatever lease terms you want. - this is your price with no discount.

Next add the expected discount you want in the downpayment section. Recalculate the monthly payment. This is what you should pay per month with a solid discount.

After this is done. THEN add your personal downpayment to the price. Obviously with 5.9% interest downpayment or paying down rate with multiple security deposits would be useful.

Can I ask why the X5 of all the cars you can buy with that budget?


sgtoronto wrote: It seems like financing a car seems much easier. I have never leased a car before and now looking to lease a 2015 BMW X5, we are looking at $500 a month lease payment including tax.

We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.

Let say if you know you can get about $4000 off that particular car, how do you negotiate the price? Do you negotiate the down payment? If so how much to start?

Or is It better to have a higher payment with less down payment but it seems that way you pay more taxes on the lease payment but it's not that much anyways.

What's the optimal plan to negotiate this BMW X5. I've read other places saying that you negotiate on the total purchase price of the car first and then work out the lease details?

Any help would be appreciated.
Deal Fanatic
Jan 15, 2004
7088 posts
1575 upvotes
vkizzle wrote: Aim to have the residual as high as possible at the end of the term.
Residual is not negotiable AFAIK. They varies between models, so maybe you're suggesting OP to look for a car with high residual instead of negotiation for a better price?
Deal Expert
Aug 22, 2011
37031 posts
22996 upvotes
Center of Universe
golden wrote: Residual is not negotiable AFAIK. They varies between models, so maybe you're suggesting OP to look for a car with high residual instead of negotiation for a better price?
I've never leased before, but have always heard (for those leasing to return), is to pay as less as possible over the term; thus ending with a high residual.
Deal Fanatic
Mar 15, 2005
5675 posts
1221 upvotes
sgtoronto wrote: It seems like financing a car seems much easier. I have never leased a car before and now looking to lease a 2015 BMW X5, we are looking at $500 a month lease payment including tax.

We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.

Let say if you know you can get about $4000 off that particular car, how do you negotiate the price? Do you negotiate the down payment? If so how much to start?

Or is It better to have a higher payment with less down payment but it seems that way you pay more taxes on the lease payment but it's not that much anyways.

What's the optimal plan to negotiate this BMW X5. I've read other places saying that you negotiate on the total purchase price of the car first and then work out the lease details?

Any help would be appreciated.
If you are going to put down 25-30k on a lease why not just finance it?
Deal Addict
Jan 6, 2015
2860 posts
783 upvotes
Toronto, ON
sgtoronto wrote: It seems like financing a car seems much easier. I have never leased a car before and now looking to lease a 2015 BMW X5, we are looking at $500 a month lease payment including tax.

We sort of know the range of down payment required for that amount, it's going to be about $25000 to $30000 depending on the packages.

Let say if you know you can get about $4000 off that particular car, how do you negotiate the price? Do you negotiate the down payment? If so how much to start?

Or is It better to have a higher payment with less down payment but it seems that way you pay more taxes on the lease payment but it's not that much anyways.

What's the optimal plan to negotiate this BMW X5. I've read other places saying that you negotiate on the total purchase price of the car first and then work out the lease details?

Any help would be appreciated.
What??? Why would you put money down on a LEASE. Best to have the residual rate HIGH, so your monthly payments low. Man if you're putting $20,000 down you may as well finance it. Are you planning on buying the car back AFTER the lease? If you're gonna be using it for a business expense, just lease it with no money down.

Never put money down on a lease. I think you gotta look what your plan is 4 years down the road.
Deal Addict
Oct 30, 2006
2368 posts
1031 upvotes
GTA
booblehead wrote: 1st question is why would you put down $25 - $30K down to begin with ? Reason for leasing is to put down as low as possible. If you are going to have that kind of downpayment, you should just finance the car instead.
I see this posted regularily, the downpayment reduces your interest cost as your are paying interest on the residual value for the term of the lease, now if the lease rate is low like 0%-1.9% then a downpayment does not make a lot of sense, but if it's 4.9% putting a large amount down makes sense. I recomend people look at how a lease really works and what you pay interest on.

Therefore a downpayment on a lease works the same as a finance, it saves you interest cost and lowers your monthly payment.
Deal Expert
User avatar
Jul 30, 2007
31252 posts
17820 upvotes
Toronto
wackojacko wrote: I see this posted regularily, the downpayment reduces your interest cost as your are paying interest on the residual value for the term of the lease, now if the lease rate is low like 0%-1.9% then a downpayment does not make a lot of sense, but if it's 4.9% putting a large amount down makes sense. I recomend people look at how a lease really works and what you pay interest on.

Therefore a downpayment on a lease works the same as a finance, it saves you interest cost and lowers your monthly payment.
But the point here is if such a large downpayment, OP is better off in financing it. That's what the general consensus is suggesting. Of course I know and pretty well everyone knows if interest rate is high, you may want to put some down payment towards the lease thus lowering the finance component of the lease payment.
Deal Addict
Oct 30, 2006
2368 posts
1031 upvotes
GTA
booblehead wrote: But the point here is if such a large downpayment, OP is better off in financing it. That's what the general consensus is suggesting. Of course I know and pretty well everyone knows if interest rate is high, you may want to put some down payment towards the lease thus lowering the finance component of the lease payment.
I'll use myself as an example, a number of years ago, probably 10, I was looking to buy a new car, planned to finance but the finance rate were higher than lease rates. What I looked at doing was putting a downpayment equal to the lease obligation, thus not paying any interest on the lease portion, basically 1 lease payment at the begining of the 4 year period. Then I would be paying the low (I think 0.9%) on the risidual value. Finance rate was like 4.9%. I fulling intended to buy out the lease at the end of the 4 years but was going to take advantage of the deferred payment of the risidual of 0.9%. Ended up borrowing from parents for 0% so it did not happen but I fully discussed the option with the sales guy and finance manager and both agreed it was smart and no one had proposed the option before.

I imagine there are many reason, such as mentioned of a write-off and maybe losing some/most of the downpayment because the insurance will just pay of the remaing balance, but it would still factor the value of the car and you might get some money back. hard to plan for the worse scenario all the time though.
Deal Expert
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Mar 1, 2008
16335 posts
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Toronto, Ontario
booblehead wrote: 1st question is why would you put down $25 - $30K down to begin with ? Reason for leasing is to put down as low as possible. If you are going to have that kind of downpayment, you should just finance the car instead.
Lots of Chinese immigrants and those on visas are forced to put down a significant down payment because too many of them lease vehicles and then run off back to China while they still have a lease. In the end, the manufacturer suffers because no one is paying for that vehicle. It's pretty much an unwritten rule now if you're young, Chinese, are an immigrant or have a visa, and want to lease a vehicle.
RFD is love. RFD is life.

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