I did consulting for three dealers over a two-year period (two Chevy dealers and one Ford dealer). GAP insurance is a money maker for a dealer but it only makes sense for buyers in specific circumstances.

Leasing depends on the residual value of the vehicle, which is usually set by the auto manufacturer's financing arm (the vast majority of leases go through a maker's captive finance arm). If what you're interested in is getting a new ride every few years -- and you can stay within the mileage limits and turn the car in relatively unscathed -- leasing can work well. The higher the residual value of the car, the lower your payment will be. It's usually expressed as a percentage, such as 52%. A car with a 44% residual value will cost you more in lease payment versus one with a 52% residual, generally.

Ultra-low mileage leases look attractive on paper but they almost never work out for people who do even a modicum of driving annually. Better to be realistic and look at a 12k to 15k annual mileage lease, even if it's a little bit more expensive.

All those added-cost plans -- like tire/wheel insurance, "paint & fab protection" and so forth are shiny objects meant to pull more money from your pocket.

Lastly, depending on your credit, the first monthly payment offered by the dealer is usually higher than the payment the dealer will eventually accept, if you negotiate smartly. Say the dealer quotes you a $239 monthly lease payment. You can usually count on shaving $25 off that with no sweat. Typically, many dealers will attempt to "four square" your payment quote (just Google it). Once they pull you down from the ceiling after quoting you a really high monthly payment, they'll work on you to get you to accept a somewhat -- but still very lucrative for the dealer -- lower payment. It's a psychological ploy.

And check to see if there's a lease termination fee. They usually range -- if there is one -- from $200 to $500, though if you lease from the same maker again, such as GM or Toyota, they'll usually waive the fee,especially during a "lease pull-ahead" (i.e. early lease termination) program.

---

"Politics is just show business for ugly people."

One mantra in car sales that every salesperson knows is true:

"The feel of the wheel seals the deal."


EVERY car dealer will try their damnedest to get you behind the wheel on a test drive when it comes to leasing, or buying, a new car. It's an emotional/psychological thing, believe me. But I've seen more people than I can count walk into a dealer, just "looking for some numbers," get in a car for a test drive and BLAM! Purchase the car not long after. ;-)

---

"Politics is just show business for ugly people."

Thank you Big K! Is it possible to negotiate the cost of the car itself when leasing which would affect the down payment, monthly payment, etc.? How much can really be negotiated with a lease? I don't have a trade in.

You can't negotiate the MSRP of the vehicle downward on a lease, unless you're using an employee or supplier discount, and even then the discount is what it is (i.e. it's a flat discount amount). It's better to focus on the monthly payment quoted, the residual value and the capitalized cost reduction (CCR) figures. CCR is simply the "down payment" on the lease. Sometimes, you can get the residual adjusted upward -- but that's rare these days. Oftentimes, to get the quoted lease payment you might see in the dealer's add, there'll be a CCR of $1,500 or $2,995 or some other amount.

Read the fine print on those dealer ads, too. Low lease payments often list in the fine print an employee or supplier discount, a lease loyalty payment from the manufacturer (if you're already leasing from it) and so forth. All rebates on the car will also go to the dealer.

Believe me when I say this: a sharp sales manager can "roll up" the deal a million different ways and show you any monthly payment you'd like.

One pro tip: If you want the lowest lease price from a dealer, simply call the dealer and ask to speak to the sales manager. When he (or she) comes on, ask him to give you the "stripped out deal" price. That's a deal in which every cent that can be stripped out of the deal and still allow the dealer to make at least $5 (or whatever figure it is the dealer has in mind) will be offered.

Call-ins to the sales manager will frequently get the lowest possible lease payment in order to get you in to the salesroom. From there, with that payment in your hand, they hope to recoup when they run you through the F&I ("finance and insurance") manager, who will try to make some money on the backend on financing and upsell you on various products.

Some sales managers, when you call in, will try to get you to talk with a salesperson on the phone, or with their BDC ("business development center") and avoid "stripping out" the deal in the first place. Don't let them. Stick to your guns and ask for the stripped-out deal, or the lowest-possible monthly payment, if "stripped out" doesn't sound right to you.

If he quotes you that price, make sure what the terms are and that it's the actual payment. Then, set your appointment and go in and test drive the model you want, in the color you want and with the equipment you want. If he doesn't have that on the lot tell him to do a dealer trade. Most domestic auto dealers (Ford, GM, FCA) can easily trade with another dealer for the one you want. It won't cost him any more to do that, and it shouldn't cost you any more, either.

---

"Politics is just show business for ugly people."

Sounds like you are the kind of person that would be better off buying a car.

Exactly this. If you don't get a new car every 1-5 years I don't think it's worth leasing. I drive my cars until they fall apart so I buy.

Pretty sound advice from BK. I live in a big city and have leased at least 1, more recently 2 cars for the last decade. I've gotten some super cheap leases and I haven't had a maintenance bill beyond an oil change in that entire time. I've run the math on lease vs buy in my scenario countless times, it always comes out to about the same in dollars, but in the lease scenario I always have a new car. Having said that, I am going to change it up and buy a used car in cash after this lease is up and see how long I can make it run. Mostly, I am just kind of tired of the process of shopping for a new car. With 2 cars on staggered lease maturities, it feels like I am in a dealership every year. The reality is if you can get a car to run 10+ years with minimal maintenance, you will likely come out money ahead. But even putting new tires on a car could be 3 or 4 months of lease payments.

Also, one word of caution on leasing. I agree that optional coverages are typically just moneymakers for the dealer, but I will never go without tire/wheel coverage on a lease. It costs me ~$10/month. I live in Chicago and potholes have taken out on average 2 tires a year for us. Tire/labor each time costs around $450. Basically, it pays for itself after 1 flat which for us is a virtual certainty.

Are you saying that it costs you $450 to replace one tire?

At the dealers where I spent time, it was about $1200-$1500 for a single tire and aluminum alloy wheel combination.

---

"Politics is just show business for ugly people."

Yep