Leasing a new car - what I learned and how it went
To those of you who have met me and Dori in person, you’ve no doubt seen Dori’s red ‘97 Jetta. Its a fun car, and at 10-years old in March, has had a pretty good car. In the past few months we sunk in the 2-3k range in repairs to pass MA inspection and just general maintenance. It was beginning to show signs of its age, like sometimes when it was very cold out, the passenger side door would freeze (not the lock, but the actual opening mechanism), so Dori or I would have to ride taxi-style or climb over the brake to get in. The last straw was when the heater core died. We couldn’t turn the heater on because it would blow antifreeze fumes into the cabin (highly toxic), so some days getting into the car was like stepping into a meat locker. Where the windshield would fog up and require the air conditioner to defog it.
So, after getting sick from a 3 hour ride back from NY, and getting a ~$k quote for repairs to the heater core (almost all labor) we decided to look for a new car. Naturally neither Dori nor I have any idea what to look for in a car, nevermind a lease contract, so my brother-in-law Alan came to the rescue. He leases 2 Hondas now - an Accord EX and a Pilot, and is very happy with both. He gave me a crash course in leases, and here’s a rough outline of what he told me to look for and ask about:
Residual Value - this is the value of the car after you’ve leased it. Typically its expressed as a percentage of the original value. On a 36-month lease, a 60% residual is high, 55% or lower is low. A higher residual usually means a lower lease price, since the car holds its value less, hence, you have to pay a smaller share of the cost of it.
Money Factor - the interest rate on the depreciation, divided by 2400 (essentially). Lower is better here. Full details on formulas can be found here.
Damage Waiver - certain car companies offer damage waivers for when you turn in the car. Honda, for instance, offers you a “3 spot, $500-each” damage waiver - so they’ll cover damages in 3 different spots on the car, each to a maximum of $500. Hyundai offered no damage waiver on the Sonata, but it could be added on top (for $5k in coverage, too much).
Termination Fees - Another fun place where you get screwed. We wanted all costs rolled into the lease payment, but apparently most car salesman are hard of hearing and intelligence. Yes, “all” includes termination fees, registration, the tank of gas when you pick it up, doc fee, taxes, and whatever other bullshit you guys make up. There are no exclusions in “all”. Sigh…
So, we went and test drove about 6 cars - the Honda Accord, the Hyundai Sonata, the Mazda 3 and the 6, the Ford Fusion, and an ‘06 Toyota Carola we rented for the weekend while in VT. The Carola was kinda boring, nothing really special going on, the Fusion didn’t come with ABS standard (according to the salesman, down South they don’t like that. Yeah, right.) We liked the Mazda 6 a lot, but it had a fairly poor Consumer Reports rating (safety was good, customer satisfaction was poor!). So it quickly came down to the Accord or the Sonata - the Accord as I mentioned had a damage waiver, the Sonata didn’t (standard, paying extra doesn’t count). The Accord was rated #1 family sedan by Consumer Reports, and by our account was essentially the same car as the Sonata - yes one might drive a tiny bit better (the Accord), one has a powered driver’s seat (the Sonata), one had traction control (the Sonata), but one seemed to need it based on CR’s review (the Sonata).
With the decision to get the Accord, we did what any good shopper would do - called up several dealerships and got lease quotes on an Accord LX, no money down, 36-months, all fees and prices rolled into the monthly payment. It was kinda fun, we’d have a dealer on the phone, and tell him what the other dealer just gave us, and he’d go “Wow, that’s some deal. Let me talk to my manager and call you back.” For about 45 minutes we did this, and the price dropped from our original $265/mo quote down to $238/month. Not bad for 45 minutes of work!
We knew that getting a good lease price meant we were likely going to get screwed on the trade-in, since the dealer wants to recoup some money on that deal. This, and the general atmosphere at the dealership, made the closing of the deal quite tense. Also when we sat down it came to light that the $238/mo quote didn’t include registration, inspection, or doc fee, so naturally I bitched out the woman who gave me the quote. We were able to recoup some of this surprise cost by negotiating the trade-in, but not much, in the end it was ~$200 that we didn’t expect to pay that we did. Which isn’t bad really. We had them cut a check for the trade-in, fitting with our “nothing up front” philosophy.
My overall impressions of leasing are car are pretty straightforward:
- Car salesman really do lie, and a lot. Its like they can’t stop. I wonder if they do recruiting in psych wards.
- Ignoring the salesman until you pick the car is a good thing. Then you don’t waste time haggling when you’re not even going to buy the car. This is of course a difficult thing to do.
- Asking questions about termination fees, the residual, the money factor, and other fees really changes the attitude of the sales people. They tend to switch from “selling” to “pleading” mode, especially when its near the end of the month and they want to make their sales quotas.
- It takes eons to do anything with these people. Minimum time spent in a dealership, including test drive, was around 1.5 hours.
- Comparison shopping works. Calling multiple dealers was a bit of a power trip, and it gives you some confidence when you get down to the point where people can’t drop their offers any lower. When the numbers are changing by $1-3/month on the payment, its a good sign.
Just in - last night we signed the paperwork and everything, but today I got a call from another dealer claiming to be $8/mo cheaper, with no stunts at the last minute. Assuming we get about the same price on the trade-in, this looks like the better deal. He claims since we haven’t received the vehicle yet, he can simply call Honda and tell them we’ll be picking it up from him…