You have more leverage in changing your residual price if you work directly with a leasing company versus through a dealer. Companies like ALG (Automotive Lease Guide) provide these values to dealers and banks that use them as a reference point for designing leases. These are often set by banks that derive these numbers from statistics and reports on the values of vehicles when they are returned from leases. The difference is the Residual Price.ĭealers do not necessarily set residual prices. Notice that the Monthly Payment for Vehicle A is over 26% higher than the payment for Vehicle B. Monthly Payment (before interest & taxes) Here's an example of the same car with two different car payments based on nothing other than the residual price difference: The purpose for this price is to determine how much the vehicle will depreciate during the term of the lease so that you can determine how much you owe while you are making payments. The Residual Price is the amount the car is expected to be worth at the end of the lease. Next to your Capitalized Cost ("cap cost") the biggest leverage item in your lease is your Residual Price. ( For more information about finding the best lease, see the section entitled "Shopping for your Lease".īack to the top Residual Price or Lease End Buyout If you would like to get a sense for actual money factors in real time, we suggest you visit, which provides real-time quotes for leases including money factors, residuals and associated costs of a lease. Your focus for your money factor should be either getting the best rate you can find among lenders or to find the best rate among lenders and require the dealer only receive a small markup after that. The dealer offers convenience above all else, but beyond that you can easily secure your own financing. It is important for you to know that if you are going to use the dealer, you are paying more than you have to. The dealer is in business to make money like any other business, and this is a revenue center for him. If you are shopping through a dealer for your financing, you are probably going to pay a premium above the money factor your bank is actually charging. The dealership environment is a difficult place to make a sound business decision.īack to the top Negotiating on Money Factor If you are uncomfortable with this math on the spot with the dealer, you should consider waiting until you get home to make your final purchase decision. OR you can work backward to determine your target Money Factor:Ħ% (or just the number 6) divided by 2400 =. If you multiply this Money Factor by 2400 you will get the equivalent interest rate: (For more information about how money factors work, see “Leasing Basics”) Typically a Money Factor will look something like this. While this is a good approximation of what you will be paying in interest, you need to remember that a money factor works slightly differently because of the structure of a lease. This will equate to a similar Interest Rate like you would see on a loan. The easiest way to determine your Money Factor is to take the Money Factor number and multiply it by 2400.
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