How to Spot the Best Lease Deals

There are a number of sound reasons to lease a car.

Among them: You’ll always drive a newer model and your cars can always be under warranty. Further, you’ll drive a newer car for a lot less money each month with a lease than you will if you purchase the car outright. That incentive alone is enough to make most people go, “Yes, I want to do that!” But how do you know when you’re looking at a good deal?

Here’s how to spot the best lease deals.

Find the “Real” Monthly Payment

Most experts agree any lease with a monthly payment of less than $125 per $10,000 of MSRP is a good deal. This is assuming a three-year/36,000-mile term on mainstream cars and 30,000 miles for luxury cars.

To calculate this, you’ll subtract the first month’s payment from the advertised down payment, add the acquisition fee to the difference, multiply the sum by the term of the lease, and add the monthly payment to that product. You’ll then divide that sum by the manufacturer’s suggested retail price (MSRP) and multiply the quotient by 10,000 to find the true monthly lease payment.

(These numbers are less taxes, license, registration fees and etc.)

Let’s Plug in the Numbers

Here’s what this looks like in the real world.

Chrysler Capital is currently offering one of the best lease deals around on the 2019 Jeep Renegade Latitude. The vehicle’s MSRP is $27,120; the stated monthly payment is $198.00 and $4,432 will be due at signing. This latter figure includes the first month’s payment and the acquisition fee. It’s a 36-month lease at 12,000 miles per year and you’ll be charged $0.25 per mile for every mile you drive over 36,000.

Based upon those numbers, the formula looks like this:

Down payment of $4,432 – first month’s payment of $198 = $4,234.

(The acquisition fee is already included.)

Down payment – first payment: $4,234 ­ ÷ by lease term: 36 months = $117.61 per month. (This is the “hidden” portion of the monthly payment you’ll pay in advance.)

Quoted monthly payment: $198 + “hidden” monthly payment: $117.61 = the “actual” monthly payment of $315.61.

Actual monthly payment: $315.61 ÷ MSRP: $27,120 = the percentage of MSRP: .01163758.

Multiplying .01163758 by $10,000, you’ll find the cost per $10,000 of MSRP is $116.36.

This is less than $125 monthly, so it’s considered a good lease deal.

Annual Mileage More or Less Than 12,000?

In instances in which the allowed annual mileage is less than 12,000, subtract $4 for every 1000-mile difference on mainstream cars — and $8 for luxury cars. This will adjust the $125 baseline figure accordingly when you’re trying to determine the favorability of the deal you’re being offered. If it’s more, add $4 or $8 per 1000.

What About Residuals, Money Factors and Etc.?

While these elements do come into play, the formula will usually tell you if they’re in line. Now, with that said; yes, you can improve upon the deal if you can negotiate a lower money factor (interest rate) or higher residual value (amount the car will be worth at the end of the lease).

Remember, the above calculations are also based upon the car’s MSRP. In many cases, you can negotiate a better sale price, which will replace the MSRP figure used in the calculations. What’s more, you may qualify for a loyalty deal if you’re sticking with the same manufacturer. Recent college graduates often get discounts too, as do members of the military. These too, will lower the purchase price of the vehicle.

Either way though, this formula will help you spot the best lease deals right away when you’re scanning ads looking for potential bargains.