Buying A New Car This Holiday Season?
My Audi A4 3.0 car lease expires in a few months. I’m looking around for what I want to get spring 2006. So many people have had terrible car buying experiences, but in reality it’s very easy! My tips below should help new car purchases—I’ve tried my best to keep it very simple.
1. #1 Myth: Don’t ever lease a car. When you’re leasing a car, you’re only paying for what you use which is reflected in the residual value. There is a sweet spot for residual value and it usually falls within the 36 – 48 month lease terms. Obviously some cars have much better residual value than others (BMW’s historically have the best)—there are some cars that have terrible residual value and therefore you would not want to lease. Another benefit is that you’re covered under the manufacturer’s warranty for anything that breaks. Also, you’re only paying sales tax on your monthly payment and not the whole amount of the car.
2. The ONLY variable you’re negotiating for in a lease is the selling price, nothing more! Before you go to the dealership, find out the invoice price for the car and if there are any dealership holdback or incentives. $500 over invoice for a $50k car and $1000 over invoice for a $80k car is what I would be willing pay.
Three factors determine your monthly payment: selling price, money factor and residual value. Money factor and residual value are already set by the lease program for all North American sales. Salesmen will fudge these numbers, but ask to see the lease programs for that month and demand you get those exact numbers. You can also get these from Carman who’s the forum moderator at Edmunds.com. Auto manufacturers will often subsidize lease programs with very low money factor rates for a few months during the year. The money factor for my current lease is .00115 which is around 3%.
3. Don’t put any money down on your lease! This is dumb, save that money to make payments. You see deals advertised for $299 36/mo lease that require $3000 down. This effectively makes your monthly lease $383—not so cheap anymore. If you’re involved in an accident and your car is declared totaled, you don’t get any of that money back.
That’s it. Pretty easy eh? Swapalease.com is also a good place to get short term leases or unload your current lease. What’s ironic about this post is that I’m actually going to be buying my next car since it’s one that I plan to keep for a long time–not saying what it is to avoid the hate mails :)
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