Residual pricing
06-18-15, 02:23 PM
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Residual pricing
When you finally negotiate that perfect price for the perfect car, does the dealer base the residual value of the car based on your selling price or the MSRP??
i.e... If the price of an IS250 MSRP is $42k and I get them down too $36k, are they basing the residual off the $42k or the $36k?? Reason I ask, when you go to trade-in or sell the car, KBB nor Edmond's knows what you bought it for but will give you a ball park of what it should sell for...
Just curious...
i.e... If the price of an IS250 MSRP is $42k and I get them down too $36k, are they basing the residual off the $42k or the $36k?? Reason I ask, when you go to trade-in or sell the car, KBB nor Edmond's knows what you bought it for but will give you a ball park of what it should sell for...
Just curious...
06-19-15, 04:41 AM
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I think I'm over thinking/simplifying the lease process... if someone could educate me slightly.
If the residual is based on MSRP of $41k and you score a sweet deal for $35k; I guess you can think of the $6k as a "down payment" on a lease. For 36 month lease the residual is approximately 0.64, the makes the car worth $26k at the end of lease.. thus you should be paying the difference between $35k and $26k which is $9k... which should in theory give you a monthly payment of $250 plus tax... is that correct or am I over simplifying the lease process. To get to this targeted $250, how many MSD would be necessary (considering credit is pretty good to get the better initial money factor).
If the residual is based on MSRP of $41k and you score a sweet deal for $35k; I guess you can think of the $6k as a "down payment" on a lease. For 36 month lease the residual is approximately 0.64, the makes the car worth $26k at the end of lease.. thus you should be paying the difference between $35k and $26k which is $9k... which should in theory give you a monthly payment of $250 plus tax... is that correct or am I over simplifying the lease process. To get to this targeted $250, how many MSD would be necessary (considering credit is pretty good to get the better initial money factor).
Last edited by roughyear; 06-19-15 at 05:48 AM.
06-19-15, 05:13 AM
#5
I think you are forgetting that the finance charge ( money factor) needs to be included in the lease also. The$ 250 you figured out was the depreciation part of the lease. The finance charge for this lease would be around $60 with a money factor of .001, which is equal to 2..4%. With enough MSD's you could probably come close to knocking off most of the finance charge I would think. I believe each MSD is equal to a .0001 off the money factor. For example with 9 MSD's it would reduce the MF by .0009. so if you had a MF of .0015 the 9 MSD's would drop the MF to .0006 which would make the finance charge for your example here around $36 a month. I think I got it right
I think I over thinking/simplifying the lease process... if someone could educate me slightly.
If the residual is based on MSRP of $41k and you score a sweet deal for $35k; I guess you can think of the $6k as a "down payment" on a lease. For 36 month lease the residual is approximately 0.64, the makes the car worth $26k at the end of lease.. thus you should be paying the difference between $35k and $26k which is $9k... which should in theory give you a monthly payment of $250 plus tax... is that correct or am I over simplifying the lease process. To get to this targeted $250, how MSD would be necessary (considering credit is pretty good to get the better initial money factor).
If the residual is based on MSRP of $41k and you score a sweet deal for $35k; I guess you can think of the $6k as a "down payment" on a lease. For 36 month lease the residual is approximately 0.64, the makes the car worth $26k at the end of lease.. thus you should be paying the difference between $35k and $26k which is $9k... which should in theory give you a monthly payment of $250 plus tax... is that correct or am I over simplifying the lease process. To get to this targeted $250, how MSD would be necessary (considering credit is pretty good to get the better initial money factor).
Last edited by toyotatom; 06-19-15 at 05:24 AM.
06-19-15, 05:53 AM
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I think you are forgetting that the finance charge ( money factor) needs to be included in the lease also. The$ 250 you figured out was the depreciation part of the lease. The finance charge for this lease would be around $60 with a money factor of .001, which is equal to 2..4%. With enough MSD's you could probably come close to knocking off most of the finance charge I would think. I believe each MSD is equal to a .0001 off the money factor. For example with 9 MSD's it would reduce the MF by .0009. so if you had a MF of .0015 the 9 MSD's would drop the MF to .0006 which would make the finance charge for your example here around $36 a month. I think I got it right
I thought each MSD was equal to a MF of .00007, but if it's .0001 that's a whole lot better than I thought.
Is there a MAXIMUM number of MSD that may be applied on an IS250/350??
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06-19-15, 06:50 AM
#8
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You're probably not over simplifying, but I think you are overthinking this whole process.
Your first main goal should be negotiating the lowest possible selling price. That, combined with a high residual and low money factor will get you a reasonable or better lease payment, especially on a car like a Lexus which has great resale if cared for properly.
06-19-15, 07:45 AM
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The money factor on a Lexus lease is reduced by .00008 for each MSD up to a maximum of 9 MSDs or a total reduction of .00072. A negative money factor is not allowed, therefore you only need enough MSDs to get it to the least positive money factor possible.
You're probably not over simplifying, but I think you are overthinking this whole process.
Your first main goal should be negotiating the lowest possible selling price. That, combined with a high residual and low money factor will get you a reasonable or better lease payment, especially on a car like a Lexus which has great resale if cared for properly.
You're probably not over simplifying, but I think you are overthinking this whole process.
Your first main goal should be negotiating the lowest possible selling price. That, combined with a high residual and low money factor will get you a reasonable or better lease payment, especially on a car like a Lexus which has great resale if cared for properly.
Once you tell him a "number" then you are almost trapped. this is how dealers get the best deals for themselves and the dealership. no matter how crazy of a low ball number you tell them, they will somehow get you to that number. and almost always not to your benefit. and you know what i have no problem with dealers and salespeople doing this just as long as it's clear and in print and if they explained everything to the buyer before they sign. it's their job to make as much for themselves and the dealership. if i owned a dealership i would want the same thing and i'm sure most of you would also. again, it's not their fault if the buyer is not informed.
before you speak to any dealers always do your homework. always know what YOUR numbers are first. i can't stress this enough. you're buying a car worth tens of thousands of dollars so always go in prepared.
if the first words out of the sales person's mouth are "what do you want your monthly payment to be or how much can you spend a month" stop them right there and say" Let's talk about sales price first". lock down a final sales price first...ALWAYS.
06-19-15, 09:30 AM
#10
Lexus Test Driver
The ABSOLUTE most important aspect of leasing or buying any car. What is the sales price. I just got off the phone with a dealer and after some some chit chat his first words were "what do you want your monthly payment to be". I told him i was at work and i would call him back later.
Once you tell him a "number" then you are almost trapped. this is how dealers get the best deals for themselves and the dealership. no matter how crazy of a low ball number you tell them, they will somehow get you to that number. and almost always not to your benefit. and you know what i have no problem with dealers and salespeople doing this just as long as it's clear and in print and if they explained everything to the buyer before they sign. it's their job to make as much for themselves and the dealership. if i owned a dealership i would want the same thing and i'm sure most of you would also. again, it's not their fault if the buyer is not informed.
before you speak to any dealers always do your homework. always know what YOUR numbers are first. i can't stress this enough. you're buying a car worth tens of thousands of dollars so always go in prepared.
if the first words out of the sales person's mouth are "what do you want your monthly payment to be or how much can you spend a month" stop them right there and say" Let's talk about sales price first". lock down a final sales price first...ALWAYS.
Once you tell him a "number" then you are almost trapped. this is how dealers get the best deals for themselves and the dealership. no matter how crazy of a low ball number you tell them, they will somehow get you to that number. and almost always not to your benefit. and you know what i have no problem with dealers and salespeople doing this just as long as it's clear and in print and if they explained everything to the buyer before they sign. it's their job to make as much for themselves and the dealership. if i owned a dealership i would want the same thing and i'm sure most of you would also. again, it's not their fault if the buyer is not informed.
before you speak to any dealers always do your homework. always know what YOUR numbers are first. i can't stress this enough. you're buying a car worth tens of thousands of dollars so always go in prepared.
if the first words out of the sales person's mouth are "what do you want your monthly payment to be or how much can you spend a month" stop them right there and say" Let's talk about sales price first". lock down a final sales price first...ALWAYS.
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