Automotive

I wanted to lease a CX5 2021, but I'm not sure about the money "trick" they used

  • Last Updated:
  • Sep 20th, 2020 1:42 pm
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes

I wanted to lease a CX5 2021, but I'm not sure about the money "trick" they used

I went to look at the CX5 GX AWD.

I was planning on getting a lease with the idea of probably buying back the car after 4 years IF I really liked it. I was told they had no 2020 and leasing a 2021 would be cheaper anyway because of the higher residual value (if I buy it back it has no incidence for me). I'm not sure if that was a sale tactic. Two different Mazda sites give two different prices on a lease of a 2020 CX5, so I'm not sure. (I'll call another dealership tomorrow just to be sure I'm not getting lied to.)

The monthly payments on the site are 424$ for 16 000km with a 1000$ incentive. I know they don't make a lot of profit on this car (around 1300$ according to unhaggle), so I didn't expect to get a big rebate, maybe a few hundreds. So I negotiated with the guy and we ended up at 399$ per month, which is a lot more than I expected (25$ * 48 months = 1200$) . It looked like a really good price for the location of a SUV.

But then when he gave me the paper, I saw that the car only went down from 32 081 MSRP to 31 711. I didn't quite understand where the money went and if I was getting a good deal anymore.

Then I noticed that the 1000$ incentive that I thought was supposed to be for the whole value of the car seemed to only be applied to the location part. The residual value was calculated on the full MSRP (52% of it, so 16 666$). The problem is that the Mazda site doesn't give the residual value of the car and the interest portion, so it's really tough to calculate what was the original deal before negotiation.

What's your thoughts? Does it mean that I'm getting a good price for the lease, but with this deal it's probably not worth it to buy it at the end of the lease? Should I tried to get that 1000$ applied to the whole car and still get the rebate that I thought I was getting? I don't even think they have that much wiggle room anyway, but I feel like the guy wasn't totally upfront with me as I wasn't really getting 1200$ on top of the 1000$ on the whole value of the car, but I was actually getting 370$ on top of the 1000$ only applied to the lease portion. So even if the deal can be considered good from a leasing perspective, I don't feel that good about it. But I must admit, maybe there's something I don't understand about what happened.

I signed something to hold the car and I'm supposed to take a final decision by the start of next week. I'll for sure look around for the price on a 2020. Probably talk to the guy again. Any advice for me? You think it's as good as I'll get?
Last edited by leolozon on Sep 16th, 2020 10:49 pm, edited 2 times in total.
27 replies
Deal Expert
Mar 25, 2005
21999 posts
2814 upvotes
leolozon wrote: I went to look at the CX5 GX AWD.

I was planning on getting a lease with the idea of probably buying back the car after 4 years IF I really liked it. It was a good option for me for a couple of reasons. The option of buying it was important though, because I understand that it's cheaper to ultimately own the car for many years. I was told they had no 2020 and leasing a 2021 would be cheaper anyway because of the higher residual value (if I buy it back it has no incidence for me). I'm not sure if that was a sale tactic. Two different Mazda sites give two different prices on a lease of a 2020 CX5, so I'm not sure. (I'll call another dealership tomorrow just to be sure I'm not getting lied to.)

The monthly payments on the site are 424$ for 16 000km with a 1000$ incentive. I know they don't make a lot of profit on this car (around 1300$ according to unhaggle), so I didn't expect to get a big rebate, maybe a few hundreds. So I negotiated with the guy and we ended up at 399$ per month, which is a lot more than I expected (25$ * 48 months = 1200$) . It looked like a really good price for the location of a SUV.

But then when he gave me the paper, I saw that the car only went down from 32 081 MSRP to 31 711. I didn't quite understand where the money went and if I was getting a good deal anymore.

Then I noticed that the 1000$ incentive that I thought was supposed to be for the whole value of the car seemed to only be applied to the location part. The residual value was calculated on the full MSRP (52% of it, so 16 666$). The problem is that the Mazda site doesn't give the residual value of the car and the interest portion, so it's really tough to calculate what was the original deal before negotiation.

What's your thoughts? Does it mean that I'm getting a good price for the lease, but with this deal it's probably not worth it to buy it at the end of the lease? Should I tried to get that 1000$ applied to the whole car and still get the rebate that I thought I was getting? I don't even think they have that much wiggle room anyway, but I feel like the guy wasn't totally upfront with me as I wasn't really getting 1200$ on top of the 1000$ on the whole value of the car, but I'm actually getting 370$ on top of the 1000$ only applied to the lease portion. So even if the deal can be considered good from a leasing perspective, I don't feel that good about it. But I must admit, maybe there's something I don't understand about what happened.

I signed something to hold the car and I'm supposed to take a final decision by the beginning of next week. I'll for sure look around for the price on a 2020. Probably talk to the guy again. Any advice for me? You think it's as good as I'll get?
Never negotiate a monthly payment. Start with the value, then apply lease or financing.
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes
Kasakato wrote: Never negotiate a monthly payment. Start with the value, then apply lease or financing.
I heard that many times, but you sometime get suckered in without noticing. I thought I was negotiating the price of the vehicule, but then noticed the residual value wasn't moving. I didn't mind, because I thought 1200$-1350$ on the lease part or on the whole car... I'm still getting that money. Turns out it wasn't quite true as he probably(?) just moved that 1000$ incentive to pay for part of the rebate he was giving me.

I think I'm maybe getting as good of a deal as I'm going to get on a lease, but not on the car. If I negotiate the value of the whole car and manage to get 1000$ off (I doubt he goes that high considering the margin), my monthly payments will probably end up over 399$, but with a lower residual value. Right?
Deal Addict
Mar 3, 2018
2274 posts
2333 upvotes
GTA
I negotiate only one amount. The out the door cost or the amount I write a cheque for. Everything else is just moving parts. Ask for a fee to be removed and it will be added back indirectly somewhere else like less discount. In your case you negotiated a $399 a month lease. Was it the best you could have gotten you wouldn't know unless you went to other dealers to see if they could beat that $399 X 48M or $19,152.
Newbie
Aug 18, 2014
94 posts
85 upvotes
Calgary, AB
Newer vehicles will have a higher residual value, and residual values do not change as it is based on MSRP
Deal Addict
User avatar
Sep 27, 2011
3799 posts
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Toronto
Don't lease to buy, you will almost always pay more. Especially if it has a strong residual (vital to getting a good lease rate in the first place...)

If you think you'll like the car, just buy it. I think you will as the new CX5 is a really nice car for its bracket.
FreezingCanada wrote: We voted him in as God of RFD last month. Where were you during elections...?
Newbie
Mar 26, 2010
61 posts
10 upvotes
leolozon wrote: I heard that many times, but you sometime get suckered in without noticing. I thought I was negotiating the price of the vehicule, but then noticed the residual value wasn't moving. I didn't mind, because I thought 1200$-1350$ on the lease part or on the whole car... I'm still getting that money. Turns out it wasn't quite true as he probably(?) just moved that 1000$ incentive to pay for part of the rebate he was giving me.

I think I'm maybe getting as good of a deal as I'm going to get on a lease, but not on the car. If I negotiate the value of the whole car and manage to get 1000$ off (I doubt he goes that high considering the margin), my monthly payments will probably end up over 399$, but with a lower residual value. Right?
The residual is set by the company and is not negotiable, so any discount you’d get would all be reflected in your lease payment, not the residual.
Jr. Member
Oct 11, 2018
148 posts
124 upvotes
I negotiated for $480 a month for the 2021 cx5 GT Turbo with 20,000km mileage allowance for 48 month term with free oil changes. Also ending my 2017 lease early as well.

Also no idea when I’m expecting the car as the last I heard it hadn’t landed yet.
Deal Expert
Mar 25, 2005
21999 posts
2814 upvotes
leolozon wrote: I heard that many times, but you sometime get suckered in without noticing. I thought I was negotiating the price of the vehicule, but then noticed the residual value wasn't moving. I didn't mind, because I thought 1200$-1350$ on the lease part or on the whole car... I'm still getting that money. Turns out it wasn't quite true as he probably(?) just moved that 1000$ incentive to pay for part of the rebate he was giving me.

I think I'm maybe getting as good of a deal as I'm going to get on a lease, but not on the car. If I negotiate the value of the whole car and manage to get 1000$ off (I doubt he goes that high considering the margin), my monthly payments will probably end up over 399$, but with a lower residual value. Right?
Residuals do not move. This is why you never discuss monthly payments.
Jr. Member
Feb 8, 2009
151 posts
100 upvotes
The best thing you can do is watch some YouTube videos on how dealers make their money and the tactics they use. Working on a monthly payment number is right up there. I call it the art of confusion — throwing out numbers making it seem like you are getting a good monthly deal, whereas you likely are paying close to full retail. There’s a sales trainer on YouTube called Steve Richards ... what his videos to see how dealers play the game. Always negotiate on total price, never on payments, because, they can always get you within your budget by tacking on 12 more months of payments and of course tons more interest.
Deal Addict
Jan 15, 2017
4377 posts
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Ottawa
Here's a link to a leasing payment calculator that may help. As you know the interest rate, the residual and the payment, you can work backwards to see what the capitalization cost was to determine what your discount is. http://www.apa.ca/LeaseCalculator.asp

FYI - as others have stated, when leasing the residual is not negotiable and does not decrease with a better deal. Discounts simply reduce the capitalization cost which reduces your overall lease obligation (and your monthly payment) but do not reduce your residual value.
Deal Addict
Mar 17, 2016
1606 posts
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lovingthosedeals wrote: I negotiated for $480 a month for the 2021 cx5 GT Turbo with 20,000km mileage allowance for 48 month term with free oil changes. Also ending my 2017 lease early as well.

Also no idea when I’m expecting the car as the last I heard it hadn’t landed yet.
Wow that's a very good deal for a turbo if that includes tax. Did you put a downpayment or anything like that? Looks like you knocked off quite a bit off of MSRP.
Jr. Member
Oct 11, 2018
148 posts
124 upvotes
Hindenburg1 wrote: Wow that's a very good deal for a turbo if that includes tax. Did you put a downpayment or anything like that? Looks like you knocked off quite a bit off of MSRP.
Yes including tax. No down payment. also I’m a current Mazda owner so it knocked 1% off the leasing rate. I believe the incentives are better on the 2021, plus residuals are higher
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes
skeet50 wrote: Here's a link to a leasing payment calculator that may help. As you know the interest rate, the residual and the payment, you can work backwards to see what the capitalization cost was to determine what your discount is. http://www.apa.ca/LeaseCalculator.asp

FYI - as others have stated, when leasing the residual is not negotiable and does not decrease with a better deal. Discounts simply reduce the capitalization cost which reduces your overall lease obligation (and your monthly payment) but do not reduce your residual value.
If residual doesn't move, wouldn't it mean that monthly payments is pretty much all you can affect, therefore negotiating total price doesn't matter as much when it comes to leasing?

Though I must admit I saw something weird. They took out 291 + tax from the capitalized cost and then put it back at the end as something I have to pay cash when I get the car. I guess it's a way for them to lower the monthly payments but still get you to pay that amount?

Is it normal to pay a fee on top of your monthly payment when you get a leased car? The guy told me it was a normal thing and told me how it was called, but I find it weird that they first deduce it to then put it back at the end and they call it "cash" in the location offer. As in, we'll take that amount for your to pay it cash instead.
Last edited by leolozon on Sep 17th, 2020 7:10 pm, edited 1 time in total.
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes
skeet50 wrote: Here's a link to a leasing payment calculator that may help. As you know the interest rate, the residual and the payment, you can work backwards to see what the capitalization cost was to determine what your discount is. http://www.apa.ca/LeaseCalculator.asp

FYI - as others have stated, when leasing the residual is not negotiable and does not decrease with a better deal. Discounts simply reduce the capitalization cost which reduces your overall lease obligation (and your monthly payment) but do not reduce your residual value.
Thanks!

Can you explain to me why the monthly payments aren't the same when I put 31 506$ in the selling price and 16 666$ in the buy back price, compared to when I simply put 14 840$ in the selling price? Aren't you only paying interests on the difference between the selling price and the buy back price?
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Sep 9, 2012
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Oakville, ON
leolozon wrote: If residual doesn't move, wouldn't it mean that monthly payments is pretty much all you can affect, therefore negotiating total price doesn't matter as much when it comes to leasing?

Though I must admit I saw something weird. They took out 291 + tax from the capitalized cost and then put it back at the end as something I have to pay cash when I get the car. I guess it's a way for them to lower the monthly payments but still get you to pay that amount?

Is it normal to pay a fee on top of your monthly payment when you get a leased car? The guy told me it was a normal thing and told me how it was called, but I find it weird that they first deduce it to then put it back at the end and they call it "cash" in the location offer. As in, we'll take that amount for your to pay it cash instead.
To clarify on residuals, they do change from time to time throughout the year. Residuals start off higher when a model yr first hits the floor or preset book, then residuals will be adjusted down as the model year wears on. But this only happens from the manufacturer lender side and the dealership can never change the residual. Therefore, sitting at the dealership to do a deal the only factor that can change the residual is if you elect to take a higher or lower kilometre allowance and this is only done via a manufacturer lender approved residual sheet that sets all permutations/combinations in stone for the dealer.

So since the residual is basically a set figure and the interest rate is basically set then the only remaining aspect that you can control to reduce costs and save money is the total price. This is what becomes the capitalized cost. The higher the capitalized cost then the higher your payment, and the lower you can get the price/cost down then the lower your payment.

If you go the other way and try to negotiate on the payment first then you have less control over what the total price/cost of the vehicle is going to be. Here’s an example of hypothetical numbers....

Let’s say they run a pricing sheet that comes out to $510 per month and you counter that it has to be less than $500 or there’s no deal. They agree and you have a deal at $500 / month. Now over 48 months you just negotiated down the price by $480 dollars over the term and they essentially have you a $480 discount.....HOWEVER.....if you looked at the top line and negotiated from there you might have been able to get them to drop the total cost by let’s say $750, which would have resulted in a $495 payment instead of the $500 the other way.

So obviously don’t ignore what the monthly payment comes out to, but instead really focus more on what discount is at the top of the deal and what fees are they adding and what other charges/costs are they adding.

It’s far easier for them to put a $1,000 in fees/charges at the top of the deal when it only comes out to $20/month on the payment - people are more likely not to quibble of $20/month but would walk away from $1,000 being added to a cash deal. !
Deal Addict
Jan 15, 2017
4377 posts
3972 upvotes
Ottawa
leolozon wrote: Thanks!

Can you explain to me why the monthly payments aren't the same when I put 31 506$ in the selling price and 16 666$ in the buy back price, compared to when I simply put 14 840$ in the selling price? Aren't you only paying interests on the difference between the selling price and the buy back price?
No, interest on a lease is not calculated on the difference between the selling price and residual. Interest on a lease is calculated as (capitalized cost + residual value) x money factor.
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes
skeet50 wrote: No, interest on a lease is not calculated on the difference between the selling price and residual. Interest on a lease is calculated as (capitalized cost + residual value) x money factor.
I went to look at some sites, but none of them really explained it.

In my case, would that be : (30 573 + 16 666) * (2.95/2400) = 58$ would be the interest per month? Is that it?

What's the logic behind the money factor? And adding the capitalized cost to the residual value. Are you essentially paying interest on the whole car?
[OP]
Member
Mar 12, 2017
236 posts
155 upvotes
lovingthosedeals wrote: I negotiated for $480 a month for the 2021 cx5 GT Turbo with 20,000km mileage allowance for 48 month term with free oil changes. Also ending my 2017 lease early as well.

Also no idea when I’m expecting the car as the last I heard it hadn’t landed yet.
That deal seems pretty incredible. They do have more room to make deals on higher end models though.

It's weird. I asked for free oil changes and he told me they don't do it anymore because it was complicated with people changing dealerships (Brossard, Qc). So I didn't know what I could ask for other than tires and free oil change.

Did you have a fee to pay when you took the car other than your first payment? He told me he had to put a fee, but I can't remember what it's called. In my case, it's 291 + taxes.
Last edited by leolozon on Sep 19th, 2020 12:12 pm, edited 1 time in total.
Jr. Member
Oct 11, 2018
148 posts
124 upvotes
leolozon wrote: That deal seems pretty incredible. They do have more room to make deals on higher end models though.

It's weird. I asked for free oil changes and he told me they don't do it anymore because it was complicated with people changing dealerships when they leave (Brossard, Qc). So I didn't know what I could ask for other than tires and free oil change.

Did you have a fee to pay when you took the car other than your first payment? He told me he had to put a fee, but I can't remember what it's called. In my case, it's 291 + taxes.

Just looked at the bill of sale. I’m in Ontario and other than first month payment, it’s $32 for the plates transfer and lien registration fee $75. That’s about it

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