what's up guys so if you're trying to figure out how to get the lowest lease payment on a car that you or a loved one is thinking about getting this is the only video you'll ever have to watch i promise you that in today's video i'm going to show you exactly step by step what to do to negotiate the lowest lease payment and it's actually really straightforward once you understand the numbers you need to research in order to have the highest negotiating leverage when you visit these car dealerships now i do want to preface that you will need to put your detective hat on so make sure to put that on because getting the lowest lease payment will actually require a little bit of legwork from you in terms of research but trust me guys just an hour of research plus referencing this video will equip you with so much knowledge that oftentimes you'll walk into a car dealership and you'll know more than the car salesman himself using today's method i was able to save over 2 200 on a lease for my mom's latest vw sedan and we actually ended up lowering her monthly payment around 55 dollars per month from the original quote that they gave us now speaking of today's method it's essentially a video format of a popular reddit post on the personal finance subreddit so all credit goes to the writer of this post toma tuvem i think i said his name right but it is because of this method i learned exactly what i'm going to share with you today so i'll be sure to link to the reddit post in the description below if you'd like to read it after this video alright guys so let's get right into it number one your first step is to assess the exact model make and the terms that you want as well as how many miles a year you intend on driving it and how many years you want to lease the car for once you have these details make sure you write them down and you remember them somewhere now personally i'm an suv kind of guy i love driving a car that's really high up and i definitely value luxury over performance but for today's video i know some of the most popular cars out there are actually sedans so today we'll go through an example using a 2022 honda civic sedan sport all right so after you've completed step one step two is one of the biggest steps it's to figure out the residual value of that car the residual value is the value of the car that the manufacturer thinks the car will be worth at the end of the lease term now all cars depreciate and you may have heard that really popular saying which is like after you drive the car off the lot the car is immediately worth a lot less due to depreciation and that's definitely true because most cars have a depreciation curve that looks like this after about three years the typical lease term cars are generally worth 55 to 65 percent of their original value if we're able to figure out the residual value of the car we're trying to negotiate for it serves as the basis for the rest of these steps now in the case of a lease a higher residual value is always going to be better one important note is that the residual value is not something that is to be negotiated rather it's usually set by the dealer and your job is to figure out what it is because it will help you negotiate the sale price of the car so how do you get the residual value well there are a few methods that you can do to get the residual value of any make and model number one you could go the dealership and ask they won't tell you easily technically the information should be transparent if you're nice enough but sometimes car dealers are a little bit guarded with their information my favorite method is to actually go to edmunds.com or cargurus.com and both of these websites are super helpful in figuring out the exact residual value of your make and model now typically these forums are contributed to by auto industry insiders and the information is generally crowdsourced and reliable so let's say you want this 2022 civic sport sedan right here it's nice and blue and you want it for 36 months or 10 000 miles a year the msrp on this guy 24115. what i would then go do is actually google 2022 honda civic sedan sport residual value as you can see it's the top result in my google search bar because i was doing this a little bit earlier but after you actually type that in you want to find a thread that looks like this 2022 2022 honda civic lease deals and prices by forums.admins.com it's basically a discussion on that specific year's make and model almost every single make and model has a thread of their own on the edmunds.com forums and the moderators there try to dispense the most accurate information so in our case if we do a little bit of scrolling on this thread specifically we'll actually be able to find a post which i have pulled up right here where a user named mm7 is asking for the 36 month numbers on a 2022 civic sport a 2022 civic ex and a 2022 touring for his zip code the moderator on july 3rd replies that for a 3610 which is 36 months or 10 000 miles a year the money factor is .0015 mf so the money factor which is something we'll get into that's what we actually need in step three just ignore that for now but as you can see in the second line he says the residual is 69 67 or 65 for these models respectively so that's awesome we figured out the residual value is 69 after three years and this is 69 of the capitalization cost which i'll also get into shortly step three is to figure out what the money factor is but in our case it was actually found by doing step two the money factor is the interest rate it's always represented as the actual interest rate divided by 2400 so in our case if the money factor is .0015 if we multiply that by 2400 we get 3.6 percent and that's the interest rate of the finance charge of lease payment if you can't get it at edmunds.com or cargurus.com sometimes the car dealerships will actually tell you what the money factor is but don't expect it now it's also important to note that this isn't really negotiable either it's just the interest charge on your payment and we're gonna plug in those numbers right now into our calculator so step four is to plug in these numbers into a car lease payment calculator lucky for you guys i have one on the screen right here as well as i'm gonna share this spreadsheet with you guys in the description below so that you can do it on your own so once you have those three variables the residual value the money factor and the msrp you can start ballparking what a lease payment for this exact car will look like using the car lease payment calculator so right now i'm just going to go ahead and fill in this information the residual here is 0.69 because it's 69 and the money factor was 0.0015 now you'll see that the actual monthly lease payment is not calculated yet because there is one variable we're missing which is the capitalization cost this is the cost that you're going to negotiate with the dealer and it's basically the cost of the car to you and it's what the lease payment is based off of generally you want to focus on this number in negotiations and the lower the capitalization costs the lower your lease payment is going to be now if you were a sucker and you didn't watch this video and you went into a car dealer without knowing all of this stuff they might just base your lease payment off of the msrp of the car and that means you would end up paying way more with our method today since you're negotiating the capitalization cost it should always be less than the msrp the reason is is that the msrp is just a made-up number the dealer is buying the car from the manufacturer for a price called invoice the invoice price is basically what the dealer pays for it because the dealer needs to make money too for us unsuspecting car shoppers out there they'll just lease cars at the msrp but just like anything there's a margin to work with there and our job is to figure out what the lowest capitalization cost the car dealer will work with to get the deal done so essentially in this calculator what i basically do is i play around with the cap cost i make it 15 less than msrp so i just kind of go right here i press equals msrp and then i multiply it times 85 percent or 0.85 and that gets me 20498 for my cap costs which is 15 less than msrp after i do this you can see that the rest of the calculator takes care of everything i get what my depreciation payment is every single month and my finance charge payment is every single month and that's the total monthly lease payment that i can expect from this car now if you really are curious the lease payment is actually calculated with this really long formula right here but i'm not going to bore you with that as long as you use this lease calculator or any other lease calculator online it'll basically do the same thing so this capitalization cost is 15 percent less but sometimes i also like to go a little bit lower and see what my monthly payment will be if it's 20 less so let's say you know we're taking c2 cell c2 which is msrp over car multiplied by 0.8 which is 20 off the cap cost would be 19.292 k and as you can see our monthly lease payment is going to be 215 dollars a month now if it's only 10 off let's do the same thing here multiply it by 0.9 then our lease payment is 242 a month so i'm going to continue to do this i might even try 20 000 and see what the monthly lease payment looks like i might try 18 000 which is a hell of a lot lower and i'll get a 201 monthly payment and i'll basically play around with all these numbers and i know all my numbers intimately before i go on to step five step five is to actually call dealers and this is where you're going to put your research into action the goal of calling a dealer is to find a baseline that you can work off of so you're going to call multiple dealers or even go online to say the leasehacker.com forums and try to find comparable deals to what you're looking for now when you're calling dealers don't just call your closest dealer call some that are further away and you want to say this exact phrase now you can write this down or pause the video and by the way i just took this from reddit so full transparency there but basically the phrase is hello dealer i see that there's a 2022 honda civic on your lot with xyz options based on my research the residual is 69 and the money factor is .0015 for a 36 month 10 000 mile a year lease if you'd be willing to base a lease off of a 19 500 capitalization cost i'm willing to come in and sign the papers today this phrase will basically just show to the dealer that you mean business and you're knowledgeable about the capitalization costs and that you know your numbers intimately immediately you're going to be taken a lot more seriously so whenever i'm doing this my first call is usually to a dealer that's not in my area because it's not a very convenient dealership to get to but my first call is always going to be around 15 or 20 less than msrp to see how low that i can actually go i generally don't expect to get the first dealer to agree to my number but what i'm looking for here is their response how serious are they taking my offer are they immediately offended if my cap cost is actually way too low they might actually reply with something like there's no way we can do that goodbye and that's good to know because now we can call the next dealer and raise the cap cost slightly engage their response and kind of narrow in on a baseline you're operating in a game of imperfect information but by setting a really low baseline and then gauging their reaction you can kind of start to understand what a reasonable number for the car is going to be now that's my personal negotiation method and it's worked for me in the past now some people might take offense that i do lowball at least in the beginning but you have to be okay with this or if you really really want you can offer a little higher than 20 less than msrp right off the bat now a good resource that i mentioned earlier was that you can go to other forums like on leasehacker.com and click on share a deal and see what other people are getting for their deals and guys seriously it's just rinse and repeat this method eventually you'll start to figure out what capitalization costs the dealers are starting to get interested in and that's when you can hone in on a successful deal now real quick let's talk about down payments and rebates now when it comes to down payments in 99 of cases you want to put zero money down not only is it gonna help you figure out your baseline of deals a lot easier since most of the shared information online that you see is basically a zero money down deal but putting money down is actually a risk car dealers will always ask you to put money down because it's one method that they can get your monthly payment to look a lot lower they try to get you to focus on your monthly payment and you can get the monthly payment down to whatever you really want if you put more money down instead like i said today focus on the sale price or the capitalization cost of the car another reason why i don't like putting any money down is is that if you get your car stolen or you total your car the money that you put into the down payment will be completely lost if there's anything you remember from today's video it's zero money down and focus on the capitalization cost of the car not the monthly payment now when it comes to rebates you'll want to find a car that the manufacturer is discounting or offering a rebate on if you want the lowest lease payment possible you can monitor online for cheap deals or call around to different dealers to see if they have any incentives for the models that you're looking for in my experience discounting of certain models is a month to month kind of thing so if there aren't any lease deals for your model right now consider checking them out again next month manufacturers are always running those sort of deals on different types of models in order to move inventory all right so what should you actually pay for at the dealership you can get away with only paying the first month's payment and you usually have to pay this upfront there are also going to be miscellaneous fees such as lease acquisition fees bank fees gap insurance registration and title and document fees if you choose to pay these upfront that's totally up to you but if the interest rate is low enough you might be able to bundle these into your lease deal now i do have some final thoughts number one be nice and respectful to the sales floor people they may not be very financially literate when it comes to these numbers but the sales person's job is to organize the customer's details for the sales manager and it may not be their job to know the numbers intimately number two it's really a good idea to lease if you want a new vehicle every few years now some people will hate on leasing but it's especially good if you have a business you can write off police payments as well lastly finance a car if you do drive a lot or if the vehicle that you want holds its value really well alright guys that's it i hope this video gets you the lowest possible payment on your lease now if after you watch this video and you do the steps today let me know in the comments i'd love to hear from you if you were able to get a great deal and if these tips helped you make sure to subscribe to my channel and like this video if you enjoyed today's content lastly thanks to all my patreon supporters for being here i appreciate you guys watching i'll see you guys in the next video which will be in a few days here all right peace you