General Lease Question

waddy3

I've been researching leases for a 2015 A4 (Premium Quattro automatic with the heated seats option). I think I generally understand how a lease works (i.e. try to squeeze the depreciation by decreasing your capital cost and increasing the residual value, get the lowest money factor, $0 down payment, etc).

However, with the 2016 model around the corner, I wonder if it's in my financial interest to wait for that. I've heard that the "best time to lease a car" is after the new model comes out because its residual value will be substantially higher than at the end of its year. I'm also wondering if the 2016 body style will be different enough to further increase its residual value compared to the current 2015 style.

Also, how do you know you're getting a good lease deal? In other words, how do you know that the dealer and financial lessor are barely making money (from the standpoint of the actual price as well as what is actually in the lease payment)? Of course, I don't want to rip anyone off...but I DO NOT want to be ripped off myself—and I know there are dozens of ways that can happen when leasing a car.

I've been shopping all the local dealers as well as an online dealership out of state. My whole goal has been to lease this car for $0 down and $400/mo, so I've been negotiating like crazy. I currently have an offer from the online dealership to lease the car I mentioned above at the following terms:
- MSRP of $39k
- $1k rebate
- 10k miles for 36 mos
- Purchase option (RV?) of $21.1k (54%)
- Monthly payment of $436 (includes taxes, trucking cost, GAP)
- $0 down

Total payments and fees over the term equate to about $16.5k. If I add this to the RV, it is still below what I think capital cost is ($38k). How is anyone making money on this offer? Is it a good offer or am I missing something? If I feel like it's a GREAT deal, I am willing to push my original $400/mo limit to reach it.

To summarize, here are my questions:
- Is the best time to lease a car right after it is released (e.g. lease a 2016 after it is released later this year)? If not, when is the best time?
- I haven't been able to confirm but will the 2016 A4 bring a major body style change (enough to perhaps increase its RV relative to the 2015)?
- Is it possible to lease an A4 for $0 down and $400/mo over 36?
- What kind of gut checks can I make to be sure I'm getting the best deal available (e.g. is it a good deal if the sum of total lease payments is less than the "depreciation" of the car value based on price and RV or are there better rules of thumb)?

Thank you SO much for your help!

Michaell

waddy3 said:

I've been researching leases for a 2015 A4 (Premium Quattro automatic with the heated seats option). I think I generally understand how a lease works (i.e. try to squeeze the depreciation by decreasing your capital cost and increasing the residual value, get the lowest money factor, $0 down payment, etc).

However, with the 2016 model around the corner, I wonder if it's in my financial interest to wait for that. I've heard that the "best time to lease a car" is after the new model comes out because its residual value will be substantially higher than at the end of its year. I'm also wondering if the 2016 body style will be different enough to further increase its residual value compared to the current 2015 style.

Also, how do you know you're getting a good lease deal? In other words, how do you know that the dealer and financial lessor are barely making money (from the standpoint of the actual price as well as what is actually in the lease payment)? Of course, I don't want to rip anyone off...but I DO NOT want to be ripped off myself—and I know there are dozens of ways that can happen when leasing a car.

I've been shopping all the local dealers as well as an online dealership out of state. My whole goal has been to lease this car for $0 down and $400/mo, so I've been negotiating like crazy. I currently have an offer from the online dealership to lease the car I mentioned above at the following terms:
- MSRP of $39k
- $1k rebate
- 10k miles for 36 mos
- Purchase option (RV?) of $21.1k (54%)
- Monthly payment of $436 (includes taxes, trucking cost, GAP)
- $0 down

Total payments and fees over the term equate to about $16.5k. If I add this to the RV, it is still below what I think capital cost is ($38k). How is anyone making money on this offer? Is it a good offer or am I missing something? If I feel like it's a GREAT deal, I am willing to push my original $400/mo limit to reach it.

To summarize, here are my questions:
- Is the best time to lease a car right after it is released (e.g. lease a 2016 after it is released later this year)? If not, when is the best time?
- I haven't been able to confirm but will the 2016 A4 bring a major body style change (enough to perhaps increase its RV relative to the 2015)?
- Is it possible to lease an A4 for $0 down and $400/mo over 36?
- What kind of gut checks can I make to be sure I'm getting the best deal available (e.g. is it a good deal if the sum of total lease payments is less than the "depreciation" of the car value based on price and RV or are there better rules of thumb)?

Thank you SO much for your help!

To answer your questions:

1. While the residual value on a just released model may be higher, the bank may also set a high money factor to offset it. It's possible that the previous year, while having a lower residual and MF, may be the better deal as you can negotiate more off the sticker price.
2. Don't know what differences, if any, there will be for the 2016 A4
3. Without knowing the MSRP and negotiated price, we can't estimate a payment for you
4. For Audi, 4-6% off sticker is a good selling price. The only other variable in a lease is the MF; if you ask in the A4 lease questions forum, we can provide that information to you and you can work with the dealer to make sure they don't mark it up.

Trust me - a dealer won't make a deal where they aren't making money on it. It's your job (with our help) to make sure you get the best possible deal for the car you want.

waddy3

Thanks, Michaell. Here are some follow-up questions:

1 - So it sounds like it's not worth "waiting it out" in hopes of a better deal when the 2016 comes out—however, wouldn't it be easier to negotiate a better price on a 2015 at that point? I'd think the dealers would be more motivated to get those models off the lot.
3 - Let me ask this a different way: if the MF is 1.5% APR and the RV is $21.1k, how low would the price have to be in order to achieve a $400/mo payment? (Does Edmunds have a lease calculator?)
4 - So, in order to feel confident that I'm getting a good deal, I just need to make sure the price is ~ 5% below MSRP and that the MF is fair? The way I've been thinking about it is to add up the total cost to me as a lessee over the term with the RV and see how much lower the sum of those numbers is compared to MSRP.

Really appreciate your help.

Michaell

waddy3 said:

Thanks, Michaell. Here are some follow-up questions:

1 - So it sounds like it's not worth "waiting it out" in hopes of a better deal when the 2016 comes out—however, wouldn't it be easier to negotiate a better price on a 2015 at that point? I'd think the dealers would be more motivated to get those models off the lot.
3 - Let me ask this a different way: if the MF is 1.5% APR and the RV is $21.1k, how low would the price have to be in order to achieve a $400/mo payment? (Does Edmunds have a lease calculator?)
4 - So, in order to feel confident that I'm getting a good deal, I just need to make sure the price is ~ 5% below MSRP and that the MF is fair? The way I've been thinking about it is to add up the total cost to me as a lessee over the term with the RV and see how much lower the sum of those numbers is compared to MSRP.

Really appreciate your help.

1. Correct - better deals (in terms of discounts from MSRP) on the 2015's, but the selection will be limited. You may not find your preferred color or equipment levels if you wait
2. Lots of lease calculators available on the web - here's an article on how to calculate your own lease payment:

http://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html

There are only two variables in a lease - the selling price and the MF. Get the best selling price you can and the base MF and you should be good to go.