How Do You Calculate Lease Price?

[MrElussive]

Hey,

So I've visited some dealerships and I've gotten some lease prices, but I wanted to know how you accurately calculate the lease price. Here is my understanding of it:

Car's MSRP: $45,000
Residual value after 3 years: 59%
Money factor: 3%
NJ tax: 6%

All these numbers are for a BMW X3 3.0i under 36 month, 36,000 mile lease, $0 money down (aside from initial fees), and all taxes included. Here is what I did:

$45,000 x 0.41 = $18,450 (calculation for value of car used based on 3 years/36K mileage)

$18,450 x 1.03 = $19,003.50 (calculation for 3% money factor)

$19,003.50 x 1.06 = $20,143.71 (calculation for 6% NJ tax)

So we have a final price of $20,143.71 which I split it up into 36 months:

$20,143.71 / 36 = $559.55 (calculation of monthly payment)

So based on this, I am looking at a monthly payment of $559.55. Can anybody tell me why my local BMW dealership gave me a lease price of $623 per month for these same numbers? Did I miscalculate somewhere? Perhaps the way I calculated money factor was wrong? I mean this $559.55 price is based off of MSRP, after you knock off $2K-$3K it should make things even lower!

Thanks,
MrElussive

 

[MrElussive]

Whoa, I just found this: http://www.edmunds.com/advice/leasing/articles/48365/article.html

Based on that, I come up with a lease price of $638/month (again using NJ sales tax), which is worse than what the dealership gave me. But there are people walking out of BMW dealerships paying far less.

Another person on this forum just got a 530i. MSRP came to $50K and he did the same lease terms as I am, and he walked out the door paying only $573 a month (36 months, 36K miles, $0 down, taxes included).

I'm straight up confused right now. [???1]

 

[epj3]

Can anybody tell me why my local BMW dealership gave me a lease price of $623 per month for these same numbers? Did I miscalculate somewhere? Perhaps the way I calculated money factor was wrong? I mean this $559.55 price is based off of MSRP, after you knock off $2K-$3K it should make things even lower!

Thanks,
MrElussive

Your credit rating/age among other things. The lowest lease terms they advertise are for those very well qualified for it with a perfect credit rating.

 

[Bryan330i]

If you were told the money factor is 3, the actual interest rate equivalent would be just slightly over 7%.

I think I may have some information (spreadsheet) at work that may help you. When I get there tomorrow I will see if I can find a leasing spreadsheet.

 

[MrElussive]

Thanks for the help, Bryan. The guy specifically did say "3 percent", and wouldn't a 7% money factor be pretty high for BMW? I checked some online lease calculators, one being "Lease Kit". It told me that for a $42,000 BMW X3, a "HIGH" lease price would be $770 a month. A "GOOD" lease price would be $627 a month. An "EXCELLENT" lease price would be $516 a month.

Since BMW has a strong residual and a low money factor (and assuming I can get the car discounted a couple thousand off MSRP), I should able to come pretty darn close to the $516 a month. I mean the whole point of going for the X3 was because it is so economically worthwhile. If this dealership is not willing to give me a good deal, I'll go to the next one who will!

 

[Bmw 325i 7803]

Just wondering, which BMW dealer(s) did you visit? I think the 530i BMW guy got such a great deal because it was dealer inventory and the 5 series probably has a higher residual value along with his (highly likely) excellent credentials. Also the additional $60 per month could account for the dealers secret-profit formula that got factored in.

Did you give JMK a try? They might not be the best in sales pricing but they are one of the very best when it comes to service...great service in the BMW department is worth a premium considering what a rare find it is.

 

[MrElussive]

Actually, I checked out DiFeo BMW in Tenafly, NJ since the dealership is literally a 7 minute drive away. They have superb service, and the guy I am working with knows his cars and is a really nice guy. I am just not at a price that I want. I figured that the guy who got the great deal on the 5 took one off the lot, and my salesman even said that he "can't be as flexible" when it comes to a car that has to be built (I want navigation and most options available, so it has to be ordered). If I can't get the price that I want then I just have to go with the Grand Cherokee, although I'd rather not. Granted the 5.7L V8 is fast, the brakes of the vehicle are pretty bad (60-0 in 139 feet, whereas the X3 does it in 118 feet), some of the interior is REALLY cheap (the shift knob and some of the buttons around it), and there is no free maintenance and the GC needs at least an oil change every 3K miles.

My dad really wants the Grand Cherokee and that's cool, he's the one who makes the payments. But I feel like, if I can get the lease price that I want for the X3 ($530-$550/month, which is the same as the Grand Cherokee), the BMW will make much more sense. Free maintenance, better bulid quality, more luxury and features, etc. etc.
I am biased towards the X3, but can you blame me? After I test-drove it yesterday I just can't get over it. It rides comfortably like a luxury vehicle and it takes turns like a sports car. I found myself taking turns at the same speeds I would in my G35C and the X3 was a non-sport package vehicle!

 

[aNoodle]

The problem with your calculation is that you apply the "money factor" or interest as an simple rate over the 3 years--a one time .03 calculation. They calculate the interest rate as an annual rate which compounds monthly. So Bryan is right to say the 'effective' rate over the years is going to be something higher. You need to do a 'time value of money' calculation, which calculates what monthly payment would be necessary to bring down $18,450 + plus tax over three years when the annual interest rate of 3% is calculated and added to each new monthly balance. That is how their calculation is different than yours.

 

[Bryan330i]

I can’t seem to find the spreadsheet for calculating loans. I’m thinking I must have it on disk somewhere. If I can find it I will let you know but it sounds like you may have already found something that works.

Sometimes you do need to be careful when rates are quoted because dealers like to throw around the lower and better sounding money factor but this is not a true picture of the annual rate so it’s a good idea to get both numbers quoted when comparing deals between dealers.

“This interest is expressed as a money factor, sometimes called lease factor, and is specified as a small decimal number such as .00297. (Note: dealers will sometimes confuse you by quoting money factor as a larger decimal, such as 2.97, which means .00297, because it sounds like an attractively low annual interest rate.)
Money factors can be converted to annual interest rate (APR) by multiplying by 2400 (yes, it is always 2400 and is not related to the length of the loan in months). For example, a money factor of .00297 multiplied by 2400 = 7.13%.” (http://www.leaseguide.com/lease07.htm)

 

[WSUBeember]

Not that it helps, but if you go to www.bmwusa.com and build the X3 on the web and price it out the lease payments come to $567 (I don't know how the one you are looking at is configured, I justed added stuff on to equal about $45K).

I know it isn't an exact pricing, but I used it when compairing lease values when I bought our car and it came out pretty close. Using other websites that you have lised and others have listed help out too..

Leasing is not as complicated as some people make it out to be. I have found that dealing with higher end car manufactures don't mess with the leasing numbers that much and don't offer much flexibility. As opposed to the US car makers... Just my observation.

 

[Average Jae]

Jeremy: most luxury brands actually make money off of their cars, whereas most american brands, save for SUVs usually lose money per sale. lately the big three have been making the money on the financing end, thus they offer attractive lease offers. that's why they can offer early lease terminations and such, only to get you into a new lease, thus making money for the financial arm. weird how you try to make money by losing money, but i guess it works out for them. (it also helps them slow down the losing market share i suppose.)

Emile, remember that the 40k grand cheese will out accel both the audi TT and the 325xi, and have the legendary off road capability! did something happen ot your car again? or am i just missing something? going from a g35 to an x3 might drive you a bit nuts, even in the 3.0 form imo.

 

[MrElussive]

Yeah, I've seen those commercials where they show the Grand Cherokee out-accelerating those two vehicles. Then they show the Grand Cherokee stopping shorter than those two vehicles and I call BS. The Grand Cherokee stops from 60-0 in 139 feet, which I think is awful (and is definitely worse than the 325xi and Audi TT).

The X3 is not to replace the G35C. The ML500's lease ends on April 9th and we are looking for a replacement for it, and the X3 seems to be the best bet. Although I am having the worst luck ever with the G35C, just two weeks ago this bitch merged into me in traffic (she changed lanes without checking her blind spot, my car goes in today to get repaired).

 

[MyHarley]

. Although I am having the worst luck ever with the G35C, just two weeks ago this bitch merged into me in traffic (she changed lanes without checking her blind spot, my car goes in today to get repaired).

We must be related somehow or have the worst luck..........when I thought I only scratched two wheels a couple of weeks ago on a curb in construction, it also cut two of the tired (the wheel guard area). Michelin is replacing those two tires for me free, this will make Tire #15 and Tire #16 I think.............so laughing.......

 

[Bmw 325i 7803]

Yeah, I've seen those commercials where they show the Grand Cherokee out-accelerating those two vehicles. Then they show the Grand Cherokee stopping shorter than those two vehicles and I call BS. The Grand Cherokee stops from 60-0 in 139 feet, which I think is awful (and is definitely worse than the 325xi and Audi TT).

The X3 is not to replace the G35C. The ML500's lease ends on April 9th and we are looking for a replacement for it, and the X3 seems to be the best bet. Although I am having the worst luck ever with the G35C, just two weeks ago this bitch merged into me in traffic (she changed lanes without checking her blind spot, my car goes in today to get repaired).

That downright sucks, I wonder what the residual value on that car is going to be at lease end... You don't take any hit to my understanding because of the repairs right? It seems that regardless as to how well you drive, the more you are on the road the more chances the road-psychos have to get you. Anybody can point out that a lot of people drive crazy today especially with their beatup cars. I recently was in a taxicab where the driver explained to me how he knows he can make the upcoming left as soon as it turns green because the first car stopped at the light was a new BMW and was sure to yield. (happened to be a shinny red X3) From my personal experience he's right...

 

[Average Jae]

gees Emile, looks like the lease was a right choice for ya... your parents are cool w/ going from the ml500 to an x3? they'll miss the pull down low, but at least they'll be happier at the gas station.

one thing is for sure, it usually takes two for an accident to happen, but only one idiot to cause it. that's why i'm especially wary when taking my car out in the snow. i know i'll have pretty good traction w/ the snows, but what of the other drivers and their cars? after a certain point, some just don't care about their cars, nor conditions, i'm def not there yet!

 

[jrt67ss350]

one thing is for sure, it usually takes two for an accident to happen, but only one idiot to cause it.

Or one vehicle, three idiots, and a tree like in one of my past accidents.

 

[MrElussive]

MyHarley, you certainly know where I am coming from. I have a bit of curb rash on all four wheels now. I'm just glad I have a can of Einszett Wheel Primer, Einszett Wheel Paint, and Einszett Wheel Clearcoat on standby to patch things up as soon as it happens!

BMW325i, this accident was small, nothing more than a fender-bender. I am under a lease contract and any accidents the car gets into that reduces the value of the car when the lease is over is not my problem. I just have to return the car in its original condition. This accident actually happened on the West Side Highway at 2AM with a lady from the Bronx. She was the definition of a shitty driver. I also agree in that the more time you spend on the road, the more likely you are to get into an accident. I drive a lot and I am in NYC every week-end and I always seem to deal with so many awful drivers....there are only so many accidents you can avoid from shitty drivers until you finally get into one with them, I guess. Also very interesting about what the taxicab was telling you. I do believe in it and I follow this system all the time to be defensive, but never offensive. For example, if I feel like a shitty driver is going to change lanes, I back off and they usually do change lanes (and I'm not going to assume they'll check their blind spots before they do it!). What pisses me off the most about Manhattan are the bikers, scooters, and the stupid schmucks who jaywalk when there is active traffic. I don't mind jaywalkers, I do it myself, but you're just one dumb bastard to cross the street when there are on-coming cars (unless the on-coming car has instructed/permitted you to cross).

Average Jae, I feel like leasing is usually the right choice for me. The monthly payments are easy, I benefit if the car has a high residual value (lower lease payments), you can drive it like you stole it for the duration of the lease, there is minimal maintenance required for a car in its first 36K miles and it will NEVER give you problems (not "BMW/Mercedes problems" but you'll never have to call a friend to say "yo man, I need a ride, my starter motor died" or something like that), and you get a brand new car every 3 years. Woohoo !!!
As for the ML500, my parents have their own cars. I have my own car. My brother has his own car. The ML500 is what we call a "car of the house" where whoever wants to or needs to use it, is free to do so. Last time my mom drove the ML500 was NEVER (for real, she has never driven the ML a single time for its entire lease), and the last time my dad used it was months ago. I often end up using it on week-ends for going into NYC where I know I'll have multiple people getting in/out of the car.