Understanding Online Lease Ads

**This post contains affiliate links and the publisher may be compensated if you make a purchase after clicking on these links.**

Do you have any idea what the easiest part of leasing is?  The answer, to the detriment of the unprepared consumer, is advertising the lease deal!  Think about the lease deals you’ve seen advertised before –  on TV, in newspapers or other print, or even on billboards: all of them focus on just three numbers (in this order):

1. The monthly payment
2. The number of months
3. The amount due at signing / down payment amount

The advertisers then breeze through the other legally required details as quickly, or in as small of font, as their lawyers will let them.  Comparatively, advertising a vehicle for purchase either needs to focus on the full purchase price, which is tens of thousands of dollars, or try futilely to advertise a single monthly payment for consumers with thousands of unique credit and down payment situations.  So manufacturers, dealers, and lessors love being able to advertise leases – which have the same 3 numbers for everyone – until you get into the details.

However, it is in those details that the difference between a good deal and a bad deal become apparent.  That, along with really understanding the other key items about getting a great lease deal that Lease Wizard explains, will help you understand the lease ads to pay attention to, and those that aren’t worth your time.  We’re going to focus on examining an online banner ad recently presented to the author (with the time spent on research and administration related to Lease Wizard – I’m presented with a lot of these).

Elements of the Online Lease Ad

First things first – the items the advertiser will want to present initially will be the monthly payment and the amount due at signing, so we’ve highlighted those in green.  The monthly payment will usually be in the biggest type-size in the ad, and this ad is no exception.  However, these numbers should be taken with a grain of salt: they will always be excluding any government fees and taxes.  At the bottom of the page is the “Offer Disclosure”, highlighted in yellow.  If you’re seeing an online ad on a specific vehicle type from a dealer or manufacturer there will always be disclosures – check them out!  When you hover over the “Offer Disclosure” phrase the disclosures appear, and we captured them and placed next to the main ad.

Here’s where the interesting stuff is!  First, we highlighted the “payments may vary…” phrase, because while it’s there for purely legal reasons it’s a good reminder: the ad is the starting point, not the end point.  Negotiate your lease deal by negotiating the selling price and everything else you can too.  

The other item highlighted is the included miles – this is also required to be presented in either the main ad or the disclosures.  You’ll notice here that it is below the 12,000 miles/year average.  That is becoming more common in advertising – not because there aren’t higher mileage programs, but because advertising those programs also means advertising a higher monthly price.  So always check the included mileage and be ready to negotiate for the mileage level that fits your needs.  Also, you’ll want to know the price per additional mile; the advertiser needs to present that along with the included mileage level.  In this case it is $0.20 per additional mile, which is a common figure, but be sure to locate this when reviewing the advertised deal.
<

Things Not Shown in the Online Ad

As mentioned above, all the effort is to present a low monthly price, a (relatively) low down payment amount, and tell everyone the term of the lease.  The other items that are often placed in the legal/disclosures view include the included miles, price per additional mile, the security deposit amount (if any), a reminder that all taxes and fees are excluded from quoted figures, and other legalese.  But here’s some of the things you don’t see:

• Gross (or Net) Capitalized CostThis is the total amount amount financed by the lease. It includes the selling price of the car, plus any taxes or fees. In most states, sales tax is not included in the capitalized cost. (Cap Cost)
• Residual ValueThe expected value of the vehicle at the end of the lease. It is either a percentage of the selling price of the car, or a fixed value.
• Money FactorThis is the rate of interest for the lease. To translate this number into a more relatable term, multiply the money factor by 2400 and add a percentage sign. This will represent the annual percentage rate.
• Acquisition FeeA fee charged by the lessor for setting up the lease which usually ranges from $300 to $1000, depending on the lessor and the vehicle being leased. (since this is charged by the lessor, this is presumably included in the Cash Due at Signing – but you need to ask to confirm)
• Purchase Option Exercise Fee or Disposition FeeThe fee you will owe to the lessor if you return the vehicle at the end of your lease rather than exercising your purchase option.
• Dealer Documentation Fee (since this is a manufacturer’s ad, they don’t know what each dealer charges)

Without these key items – the money factor, the cap cost, and the residual value, you really have no idea how they are getting to the monthly payment advertised.  Rest assured that the math will work out – but that doesn’t mean that the deal is a good one.  Besides the simplicity of advertising a lease, manufacturers and dealers also like it because they are able to hide the most important items.


 The simple way to overcome that is to ask the right questions:

• What is the cash selling price of the vehicle?
• What is the residual value?
• What is the money factor, and what are the requirements to qualify for this money factor?
• What is the acquisition fee and dealer documentation fee?

Once you have the important figures covered, you can plug them into the leasing calculator and determine the real monthly payment and down payment, as well as knowing the information you need to negotiate the best possible lease!

Next Article: “Road Trip – II”

Article Archives

Previous Article: “At the Dealership”