How to lease a car (and win)

I took a little break after my failed attempt to lease a Leaf and then started looking around at other options. If an electric car wasn’t going to work for me, how about a plug-in hybrid? They’re like hybrids, but cooler: you plug the car in at night and get some initial pure-electric range that costs you zero gas.

I considered the Plug-in Prius, the Ford C-Max Energi, and the Chevy Volt. Their respective pure-electric ranges are 11, 17, and 37 miles. The Volt has the largest range, but it also costs about $6k more than the Energi, which is about $6k more than the Prius. I also had an abysmal experience when I returned to the Chevy dealership to discuss Volt numbers, although that isn’t the car’s fault.

After much consideration, I settled on the Energi. And the negotiations began.

The dealer’s first offer was to write down, on a piece of paper, the MSRP ($36,155) and then immediately subtract off $6500 in incentives. He then wrote $29,655 and wrote “Wow!” next to it. This threw me. I’d come in with data from TrueCar and was ready to haggle at least down near the average price for recent sales of this vehicle… which was about $31,000. What he was offering was lower, so there was nothing for me to do.

Ever get that feeling that you must be missing something, when it’s just a little too easy?

We therefore moved on to discussing other elements of the potential lease agreement. I asked for the residual value (estimated as 52% of MSRP, which I noted was a higher fraction than the Leaf’s 49%; maybe they expect the Energi to retain its value a bit better?). I asked for the money factor, which he punted on to give me an APR instead (3%, which translates to a money factor of 0.00125). I somewhat arbitrarily decided to pay $2000 down on a 36-month lease, which put me at $420/month. I went home to think it over.

$420/mo
The next day, I googled for any other Ford incentives for which I might qualify and found two:

  • A Conquest incentive, which is where Ford will give you $1000 off if you currently are a non-Ford car owner or lessee. The name is rather distasteful (they didn’t conquer me; I made a rational decision!) but hey, it’s $1000.
  • A student incentive, which gives $500 to current students. Hey! My perpetual student status pays off!

I went back in and asked for these incentives. And got them.

$373/mo
They didn’t have the color I wanted on the lot, but they said they could trade it and have it ready by the next day. So I went home to think about it again.

At home, I suddenly realized my tactical mistake. Because the first numbers we discussed had the incentives attached, we’d never actually negotiated the price. This is a mistake.

BOTTOM LINE: If you plan to accept a manufacturer’s rebate, don’t let the dealer add that during the negotiation. A rebate is your money from the manufacturer (not the dealer) and is deducted once the price of the vehicle has been agreed upon.

So I went back to TrueCar, and this time dug in to find out how to select my option package and deselect all of the incentives, so I could do an apples-to-apples comparison. I was a little apprehensive going back intending to negotiate more. We’d practically shaken our hands on the deal already. But nothing was signed, so it was still up for grabs.

The next day, the dealer called to say the car was ready — freshly washed, freshly charged, and with a full tank of gas.

Me: “That’s fantastic! I’ll be in this evening. And by the way — everything happened so fast yesterday that I realized we skipped an important step! We never negotiated the price.”
Him: “… Oh. Okay.”

So I went in with my TrueCar data, which pointed to an average sales price for this car with these options of $34,455, or $1700 less than what we’d discussed the day before. And I said, “I want that price.”

Him: “But that’s only $20 above invoice!” [True.] “That won’t even cover the tank of gas I put in for you.”
Me: “That’s what I want.”
Him: “How about $34,743?” [This seemingly random number came from the same TrueCar printout, which included a price they claimed they could get for you at a dealership that was signed on with TrueCar, which this one wasn’t.]

A weird feeling came over me. I REALLY REALLY wanted to say yes. This guy was super nice, he’d just knocked $1412 off the price, and how much of a jerk did I want to be?

Why did I feel like I was being a jerk?

With a supreme effort of will, I forced myself to say, “No.” And we sat there in silence for what felt like 3 million years. Finally I said, “How about halfway between, at $34,600?”

Him: “Would you feel 100% satisfied by that? And would you give me an Excellent rating in the survey?”
Me: “You care about that?”
Him: “Absolutely!”
Me: “Okay. Yes, I’d be satisfied.”
Him: “Done!”
$299/mo

The rest of the process went smooth as silk. The salesperson showed me the controls on the new car until the finance person was ready, and I then signed a bunch of papers.

The Ford staff, especially the sales manager, were great. None of them pressured me at all, and the sales manager patiently went over every single number until I was satisfied. That gave me a lot of confidence in the deal. (This was not true of other salespeople I interacted with at other dealerships. The Chevy dealership was the WORST.) Likely I could have haggled harder for this car, but I came away feeling that I got a good deal, and I didn’t have to go all nasty to get it. That made me feel good about myself, too!

Other lessons learned:

  • When leasing (at least in California), you only pay tax (use tax, not sales tax) on the amount of your lease payments, plus your down payment, plus any incentives for which the dealer is being reimbursed (e.g., by the manufacturer). The exception is for incentives paid by the federal government (like federal tax rebate for PHEVs) (not taxed) or cash rebates that the dealer is not reimbursed for (not taxed). I had to finally call the CA Board of Equalization to get a clear interpretation of this, because I couldn’t find an authoritative discussion of it online, and (to my chagrin) I found regulation 1660 extremely difficult to interpret myself.
  • You can look up the DMV registration fee yourself to confirm that you’re being charged the correct amount.
  • Plug-in electric hybrid vehicles qualify for a California rebate of $1500. Not the $2500 that pure electric vehicles get, but not bad!
  • They also qualify for California carpool lane access stickers. Still waiting for mine!

4 Comments
3 of 4 people learned something from this entry.

  1. Umaa said,

    September 29, 2013 at 12:47 pm

    (Knew it already.)

    So, I’ve already heard the story, but it’s good to see it in print. I have to say, I wouldn’t have had the balls to go that far down and sit through the awkward silence. Kudos!

  2. Susan said,

    September 30, 2013 at 10:28 am

    (Learned something new!)

    Wow. I am awed at your ability to negotiate. Research I can do, and I do obsessively, so in that way we are similar. But I am just an amazingly bad negotiator. I respond to all the emotional cues that make me feel like a jerk, and I even lean on Terran to grant a more generous deal in response to that pressure.

    I’ve become aware in the last few years of just how manipulable I am in haggling situations and am at least working harder not to shoot myself down. Often Terran and I tag-team where I do a bunch of research behind the scenes and arm him to do the talking. He’s far more resistant to letting strangers make him feel like an asshole. Being self-aware is also improving my performance. If I’d made it to the point where you were aware of feeling like a jerk, I’m certain I’d’ve gone the other way. Impressive fortitude!

    I am very curious to read reports of what you think of your pluggable hybrid. The move to Somerville has thrown the gas mileage of our Prius through the floor, seriously from 48mpg to 36. It turns out that our driving style here, as well as the landscape, is just a perfect storm for a traditional hybrid. We have no plans to replace soon, but a pluggable that would get me to David Square or the grocery store and back on battery would save us real money.

  3. Dave said,

    October 3, 2013 at 2:42 pm

    (Learned something new!)

    Kiri,

    So I have been following this whole endeavor for a while now and am a little confused by the whole process so wanted to ask a few questions.
    1. After learning about the limitations of the Leaf you decided to pursue other options.
    a. I am assuming you wanted the leaf initially because of it’s minimal carbon footprint and fact it does not use gas, but found the 75 mile range to much of a risk (I totally get that one)

    2. Once you moved beyond the Leaf you looked at two other options
    a. Vehicles with a gas motor that has electric assist
    i. Toyota & Ford
    b. Vehicle with electric motor that has gas assist
    i. Volt
    1. It has a generator that makes power for the electric motor so it does not directly drive the vehicle like the other two do
    So here is my question. If you were mainly interested in the Leaf for it’s off the gas grid nature, then I assume (and this is based on the number of other outstanding articles you have written which I have and continue to enjoy immensely) you also considered the engineering behind each of the vehicles. So would not a vehicle that uses a gas engine as a generator instead of a motor have a number of inherent advantages over one which uses a gas engine as a motor directly? I don’t know the answer to this question but from what I have read it seems like more of the decision was based on economics (and crappy dealer experience – which once again makes total sense) over the engineering benefits and/or pitfalls of one vehicle vs. another.
    Regardless I have to admire your pluck and tenacity when dealing with the sales persons and love how you do not settle for anything less than what you want. Hope the car you got is everything you’re looking for an can’t wait for the next installment of “As the Wheels Turn “
    The most interesting thing for me was the money factor calculation on the lease etc, I knew of it but never understood it.
    Thanks for taking the time to share this with us.

  4. Blair said,

    June 26, 2014 at 3:16 pm

    (Learned something new!)

    Great information! We are about to enter the negotiation process for a 2014 Leaf. This is a great example of how to approach this process and I will be sharing it with my husband since it’s “his” car and he is the one financing. Interestingly I asked about Nissan dealerships in my area on Facebook and one of my friends, who is leasing a Leaf, said “We just went to the closest dealer. I don’t think there’s any negotiating you can really do when leasing a Leaf…”

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