mikeg250

Would appreciate feedback on the following quote:
MSRP= $81,005
Negotiated Price=75,900
Money Rate= 0.00185
3 year, 12,000 mile
Acq Fee=1,095
Taxes-3,462
Doc Fee=799
3 year prepaid maintenance-1,280
Residual .54 or $44,433
$1,269/month

Willing to do a 1 pay-quoted 46,342

Thanks for your help

JTK44

Maybe I am missing something:

1. As a general and absolute rule when you are leasing, you want to put everything possible into the lease payment: That includes taxes, acquisition and of course the prepaid maintenance which is residualized. The reason for this is that in the event your car is stolen or in an accident and totaled, everything you have put down to reduce the monthly lease payment is GONE - PUFF into the ether. The reason for this is that the insurance company is only responsible for paying off the balance of lease payments.

For example If everything is put into the lease and the monthly payment is $1500, and your car is stolen after one year, having made 12 payments, your obligation under the lease is 24 payments @$1500 each, total of $36,000. This is what your insurance company will have to pay.

Now instead you paid at lease inception, the taxes and acquisition fee, $4,557, which will reduce your monthly payment by about $150, to $1350, if after 1 year your car is stolen or
totaled, the insurance company is liable for 24 payment @ $1,350 each, total $32,400. The lease company saves $3600 and you are out $4,557.

2. With this concept in mind, if you prepare the entire amount, $46,342, if after 12 months the car is stolen or totaled, you owe nothing under the lease and your insurance company
has no obligation. You are out the entire $46,342. Unless you can get your insurance company to make you whole, I would never do this.

This is why in a lease put everything possible into the lease.

Documentation fee: this seems extremely high: On my 2019 E450 lease and every other car I have leased over the past 35 years, if I transfer plates the documentation fee has been $175 or less. If I need new plates $175 plus the motor vehicle charges for new plates.

Negotiated price: On an both the E350 or E450 sedans, especially as we are entering the end of the model year, I would expect a minimum of 10% to 12% off of MSRP. The wagon is different. But a discount of $5100 is only 6%. I think you can do better.

Residual: percentage is set by the factory.

MF: .00185 equals 4.4%. There is "set" MF from Mercedes Benz Financial. To this set MF, the dealer can increase it to increase his profit. I think that has been done here: In other words I think 4.4% is too high. I would check with another dealer. Of course MF depends on one's credit, but as you are looking at an $80,000 car, I assume you have a top credit rating.

PrePaid maintenance: This without a question should and must be put into the lease: When it is in the lease it is residualized, which means you are only paying for 44% of the $1,280 plus interest.

Mileage: I normally take 10,000 miles per year. But because of Covid - 19 I find I am driving substantially less. In the future, I will probably drive less. Only you can determine is 7,500, 10,000 or 12,000 miles per year is right for you.

One Final point: certain states allow you to make as a "deposit" up to 10 lease payments. At the end of the lease the deposit is returned to you. By making the deposit, it dramatically reduces the MF and hence the monthly lease payments. To see if this makes sense for you, take the savings in the monthly lease payments, multiple by the number of months in the lease and then divide that number by amount of the deposit. Then divide that number by number of years of the lease and that will give you the annual return on the deposit.

For example: Assume MSRP of $80,000, agreed to selling price of $75,000, residual 54% and MF of .001666 (4%), 36 months, will give you a monthly payment of $1,008.

Now assume you put down as a deposit 10 monthly payments which reduces the MF to .0004167 (1%). Your new monthly payment will be $932 or a savings of $76 per month, total 36 months $2736.

You deposit is 10 months times $1,008, $10,080. $2736, your savings, divided by $10,080 equals 27%. As the lease term is three years, you must divide the 27% by 3. So your annual rate of return is 9%. If you feel that 9% is sufficient return go for the deposit of 10 months. If not, just pay the $1080 per month.

To calculate lease payments go to: https://goodcalculators.com/auto-lease-calculator/


Hope this helps!

mikeg250

Thanks for all the helpful info and advice.

ccww

Very informative response, @JTK44.

I’m not familiar with leasing and am a little confused when you say the insurance company is only responsible for the remainder of the lease payments. In a total loss aren’t they responsible to MB Financial for the entire value of the car?

I do see how your strategy reduces your overall outlay in the case of a total loss however. Good information!

JTK44

Yes. Payments plus residual.

I am talking about what happens to your responsibility under the lease.

If the car is stolen or totaled, you are no longer responsible for the lease payments. That becomes the insurance companies responsibility.

teksurv

I agree on 10k miles per year. Especially if you are going to lease a new model afterwards from MB. They are forgiving and want to keep your money rolling in. Don't forget the "pull ahead" they offer as well. I also agree you should be able to negotiate 12% off MSRP at this time. And your money factor is high.

jhpmbusa

one thing that might not be in your favor is that there is less inventory in general due to covid and dealers aren't being as aggressive, at least this was the case for june - while april and may they were desperate to sell.