Leasing represents one of the most difficult concepts for most consumers to understand. So it’s no surprise that car dealerships love to use lease prices in their ads to confusion people and make their prices appear incredibly low. Don’t feel bad if you have trouble understanding the leasing process, I’ve spoken to people with MBA’s who could not decipher a lease payment in a car dealer’s newspaper. So, as the auto insider let me show you how to easily estimate what the real monthly lease payment would be for a car advertised in a car dealer’s newspaper ad.
First allow me to bust your bubble, if you are reading your local paper and you see an ad for a car you like, with a monthly lease price you can afford odds are you can not bring that ad to the dealership, sign a couple of papers and drive away with the car you want with the payment you saw in the newspaper. Sadly it does not work that way. I can not say with 100% certainly that there is not a dealer anywhere that advertises accurate lease prices, but I feel comfortable telling you virtually every advertised car lease payment is significantly lower than what you would be quoted when you are sitting in that dealership.
To prove this point I’ve randomly selected an ad from my newspaper, picked a car and I’ll show you how to get a car’s REAL lease price. The car I have selected is a 2008 Mazda CX-9 All Wheel Drive Sport Edition. This car recently won the 2008 Motor Trend SUV of the year and it’s a beautiful car. From the description in the newspaper ad it is nicely equipped and the lease price is $229 per month for 24 months! WOW, according to this ad I could be driving home this afternoon in one of the best cars available ANYWHERE and only have to pay $229 per month. Heck, at first look I can drive this CX-9 for 2 years and it will cost me less than $5,500 ($229 X 24 months)!! For a deal like this I should run, not walk to that dealership.
Let’s take a minute to see if this $229 lease price is… accurate. Now I’ve ripped the ad out of the paper and I am sitting in front of my computer. Looking at the ad the lease price is a big, bold number that I can see from across the room. But, there should be other numbers in the ad that are printed in near microscopic type that we need to help us check what it will really cost me to lease this car. These numbers are usually located in one of two places, the smaller type directly under or on the side of the picture of the car; these numbers are included with the vehicle’s description. Information like the number of cylinders and doors the car has, does it have air conditioning (A/C) etc are called the car’s description and in this area you may find some important figures. The second place you need to look for key figures is in the disclaimer. The disclaimer is usually at the very bottom of the advertisement. To find it hold the ad away from you at arm’s length and look for two or more lines of very small type running the entire width of the ad (if the disclaimer is not at the very bottom, it is usually contained in the bottom 1/3 of the ad). From the vehicle’s description and the ad’s disclaimer you should be able to find the following:
Vehicle’s sale price – very seldom do they list this in ads, but they will list the MSRP and we can use this number.
Cash down and/or trade-in amount – these numbers are often referred to as money down, trade or down payment. If the only figure they give you is the total due at signing or amount due at inception, this figure includes any down payment or trade-in amount plus any bank fee or security deposit.
Bank fee & security deposit – you’ll want to gather these figures if they are not rolled into the total due at signing.
Residual or purchase option – this is the calculated worth at lease end.Lease term – this is the number of months your lease will cover, in the CX-9 ad it’s a 24 month lease.
Miles per year – this is the number of miles per year your lease allows before you must pay an overage penalty. Sometimes this number is broken out by year, in my ad it’s 10,500 miles per year. Other times dealers list it as the total mileage allowed, if they did that in my ad it would read 21,000 miles (10,500 miles x 2 – remember, it’s a 24 month lease).
OK, now that you’ve identified all the numbers we need we can figure out what my REAL monthly payment would be for this CX-9. To get the real lease price I an going to use Edmunds.com, they have a great lease calculator. Go to Edmunds and select ‘New Car’, then click on ‘latest incentives’ and put in the car you are interested in (I am shopping a 2008 Mazda CX-9 AWD Sport) if there are any incentives record that number. Now click the back button on your browser and go to the ‘Financing’ page then select ‘Basic Lease’. When you are on the basic lease page you will need to re-enter the type of car you are interested in leasing.
Once you select a vehicle they will automatically calculate a price for you. But, to get an accurate calculation you need to enter the proper numbers we found in the dealer’s newspaper ad. So you need to make the appropriate adjustments based on the information found in the newspaper ad to get the most accurate calculation:
Vehicle Sales Price – if it is not listed in the ad put the MSRP in here
Sales tax – when I inputted by zip code (Edmunds asks for this it automatically calculated this for me – a very nice feature)
Title registration and other costs – they input a figure for you – not sure how accurate this number is, but it works fine for our purposes
Customer rebate – if you found a rebate insert it here
Trade-in – insert this figure here if there was a number in the newspaper ad. If you use this field be sure to put $0 down for a pay off
Lease term – the number of months the lease is advertised for
Lease residual value – if the ad does not have a figure Edmunds puts in a default number. I had the residual, but it was nice to see that Edmunds figure would have been close enough to use had the dealer not disclosed it in the ad.
Money factor – Edmund’s provides this
Miles per year – as mentioned, in my ad it is 10,500 miles.
Acquisition fee – use the number in the ad or Edmund’s default
Security Deposit – use the number in the ad or Edmund’s default
Now that you have inputted these numbers press calculate. Remember, my monthly payment in the newspaper ad is $229 per month. After plugging in all the numbers Edmunds calculates my monthly payment for a 2008 Mazda CX-9 AWD Sport to be $529.36. A $300 per month difference! If you’re wondering why there is a HUGE discrepancy between the advertised price and the Edmunds price, let’s look deeper into the newspaper ad to shed some light, although I think anyone (who’s not a car dealer) would agree that this is disgrace to advertise cars with such deceptive pricing! To begin with, virtually every car ad excludes the tax along with any and all fees. The Edmunds price includes these costs. As I mentioned, the selling price I used is not 100% accurate because I had to use the car’s MSRP in my calculation because the actual selling price is not disclosed in the ad. So let’s say I’m a great negotiator and I’m able to get this dealer to lease me a 2008 Mazda CX-9 AWD Sport at invoice (in another section on Edmunds.com you can find this information). If I get this car at invoice price I would be paying only $29,020 so my monthly payments would drop to $490.73. A savings yes, but still a far cry from $229 per month advertised price. The other number that could fluctuate is the money factor. This number will not be available in a newspaper ad. But, it’s not important to detail what this figure is, or what it does but I can tell you that it is highly doubtful that Edmunds would use a money factor number that was incorrect to such an extreme to significantly affect the monthly payment calculation.
So, it is safe to say that if I want to lease a 2008 Mazda CX-9 AWD Sport for 24 months with $3,995 down (what I saw in that dealer’s newspaper ad) I need to expect to pay approximately $500 per month, a price NOT anywhere close to the advertised $229 payment. In closing, I find it just as absurd that a car dealership advertises a $229 payment for a car that will really cost people approximately $500 a month. Dealers do this because they want their newspaper ad to get you in their doors, and then they’ll try and fit you into a car you can afford. Now, with the information in this article you can take any car dealer’s newspaper ad and quickly determine the REAL lease price for any car (it took me less than 5 minutes to get on Edmunds site and calculate the real monthly payment)!