marty123 wrote:Could be because it's a lemon, or because the original lessee didn't like the colour.
Too many variables and too much research. I haven't checked the link, but here is a starting point:
- (24 x 614)/1.13 + 21000 = $34,040. Substracting the $1120 = Obligation of $32,920 + taxes - interest
- Is the $32,000 from auto-trader realistic? Is it for a new one, or a used one slightly used? Wouldn't you expect a 3% to 10% additional discount?
- How's the market for resale these days?
I'd negotiate a higher discount. The same car new would sell for $34,500 plus $2,000 of freight/AC taxes plus GST and PST. On the road price would be about $41K.
A used car at $32K would cost $32K + 8% PST (if purchased via private sale) meaning a total on the road price of $34,500. So you're looking at ~$6,500 in savings vs. buying new. Roughly a 15% discount for a car that has ~20,000 KMs on it. You're right, probably not enough.
That said, I've been tracking used TSX prices for a while now, and their resale values seem to be very very strong.
- How is the mileage on the one you are getting? How does that compare with the allowance over the full lease?
Mileage allowance on the lease is not an issue. Under the terms of the lease I'd be able to drive ~25,000 KMs per year -- I usually average around 16-18,000 so this is plenty.
- How's the interest lease rates these days? Off the top of my head, a 0% interest rate = $32,920, while a 5% rate = obligation of $30,200.
What are you suggesting the appropriate discount rate on an NPV calculation should be? I feel that for me, the best discount rate to use would be the fixed rate I pay on my mortgage -- call it 4%. So for all of my NPV calculations I try to use 4% as the appropriate discount rate.
- How much would a new lease cost fromt he dealer?
I've never really considered leasing from a dealer directly -- it's always felt as though the pricing was always too high relative to what could be negotiated on a cash purchase.
- How good a deal did the lessee negotiate from the dealer? If he left money on the table and the $1120 is not covering it, you're paying for his bad negotiation skills.
- How much of a bind is he in? $1120 seems low to me for a favour considering that the car got used, unless he had an awesome deal to start with
Negotiating is also the one area where I can see the advantage going to buying the car outright. It's probably much easier to negotiate a discount on a cash sale -- say knocking down the $32K to $30K, vs. negotiating a higher up front kick back on the lease. Taking $2K off a $32K sale price would be a ~6% discount whereas increasing the up front kick back would be asking the seller to triple the amount their willing to give away up front.