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Could someone break down vehicle leasing factors - money factor, residual value, incentives, etc

3,683 141 October 28, 2020 at 10:41 PM
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I'm planning to lease a vehicle again and want to negotiate better with knowledge of money factor, residual value, etc. There's an edmunds forum where people will go to the model car they're seeking and provide their zip code and then ask about money factor, residual value, and incentives.

So a sample post would be like:


Quote :
Hi! May I please have the Residual and MF for :
Zip is 98106


Any discounts or incentives?
2021 XC90 T6 AWD MOM 6 passenger 10K
2021 XC90 T6 AWD MOM 6 passenger 12K
And the reply will be like:


Quote :
36/12 T6 MOM 6 - .00163 and 60%
$2000 lease bonus
So my question is what would be the next step done with this information?


The above request is the car I'm seeking right now. When I went today, the breakdown they gave me was .00163 and L.E.V. (which I assume is Residual) of 58%). So if I were in that zip code and seeking that mileage, would that mean I wouldn't negotiate further on .00163 and rather try to get that L.E.V. to 60%?

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Joined Jan 2007
Free hugs!
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#2
Rather than reinvent the wheel, I suggest reading at https://leasehackr.com/
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Joined Jul 2004
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#3
Quote from uniquename
:
Rather than reinvent the wheel, I suggest reading at https://leasehackr.com/
yup. a whole website dedicated to leasing.
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Joined Mar 2007
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#4
Leasehackr is great...but here is some info at a very high level:

The banks set the MF and Residual. They generally cannot be negotiated, unless they are different than what the banks set (sometimes the dealers will increase them to make more profit). However, as always, the sales price can be negotiated. And as always, never negotiate on a monthly payment, always negotiate the final sales price of the car.

There is a lease calculator on Leasehackr that you can enter all of this information into to see what your monthly payment should be. Again, at a high level, in a lease you will be financing the difference between the negotiated sales price and the residual value (which is calculated on MSRP, not the sales price). The money factor represents the interest rate (it is NOT the interest rate, though. There is a formula that you can use to convert it to an interest rate). However, the calculator can be a bit confusing since there are so many variables. Read up on it on the website.

There are also several very reputable dealers on Leasehackr forums that will give you honest quotes before you buy. There are also car-leasing services that "advertise" there as well. Use those to get an idea of what your final payment could be. Then see if you can do better.

Good Luck!
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Joined Mar 2006
L8: Grand Teacher
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Original Poster
#5
Thanks to the earlier people who suggested Leasehackr. I'm actually familiar with LeaseHackr - I first used it back in '17 for my first lease that just finished. I still didn't understand everything but did a post and got feedback and then did my lease. I just had totally forgotten I did that.


That said when I did visit Leasehackr again, I found some good info but it all came off complex. So I just skipped over trying to understand it and just read the discussions. Also had a chance to talk to some brokers which came in handy.


Thanks for this breakdown Arrosen:


Quote from arrosen
:
Leasehackr is great...but here is some info at a very high level:

The banks set the MF and Residual. They generally cannot be negotiated, unless they are different than what the banks set (sometimes the dealers will increase them to make more profit). However, as always, the sales price can be negotiated. And as always, never negotiate on a monthly payment, always negotiate the final sales price of the car.

There is a lease calculator on Leasehackr that you can enter all of this information into to see what your monthly payment should be. Again, at a high level, in a lease you will be financing the difference between the negotiated sales price and the residual value (which is calculated on MSRP, not the sales price). The money factor represents the interest rate (it is NOT the interest rate, though. There is a formula that you can use to convert it to an interest rate). However, the calculator can be a bit confusing since there are so many variables. Read up on it on the website.

There are also several very reputable dealers on Leasehackr forums that will give you honest quotes before you buy. There are also car-leasing services that "advertise" there as well. Use those to get an idea of what your final payment could be. Then see if you can do better.

Good Luck!

I get the gist of everything, just struggle a bit with Money Factor. But the big answer I got was what you said which is that the MF and RV are set by the bank. So what I learned I'm supposed to do with that information given in the edmunds forum is just do a confirmation that it's the right MF and RV that should be used.


Luckily that's ultimately what happened. If anyone's curious about my lease breakdown, I have it over here: https://forum.leasehackr.com/t/de...d/309109/8


Something I did which you suggested not to was focus on the monthly price. IT just felt more natural to be negotiating by saying I have a monthly amount I need to be in and working with that. Ultimately it worked out and I seem to have gotten a great deal.
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