How I Managed To Lease A $60K Mercedes for $289/Month
Note: This deal occurred in 2012 and cannot be replicated. However, the same basic concepts apply to leasing any car.
Returning Eichhörnchen, our lovely 2013 E350 BlueTEC, at lease-end.
Here are the three things you need to know.
1. Find A Car With A High Residual Value
When you lease a car, you’re essentially paying for the depreciation that occurs from your use of the vehicle. Therefore, cars that hold their value well are generally cheaper to lease than those that don’t.
Back in December 2012, I found out that the Mercedes-Benz E350 BlueTEC sedan had the highest residual value of any car. Mercedes-Benz Financial Services (MBFS) estimated that the car would still be worth 74% of its manufacturer’s suggested retail price (MSRP) after two years of use at 10,000 miles per year!
Most cars have two-year residual value percentages in the sixties rather than the seventies — so this was great news. With this in mind, I went to the local Mercedes dealer and picked out a 2013 E350 BlueTEC with an MSRP of $59,495.
2. Get A Big Discount On The Sales Price of the Car
This one sounds obvious. But many people don’t know that, just as if you were buying a car, the sales price of a car can be negotiated on a lease, too. Every dollar you save off the MSRP is a reduction in the depreciation expense you pay over the term of the lease.
From browsing car forums and car buying sites, I found that most dealers in Southern California were offering 15-18% off MSRP on E-Class sedans. Mercedes-Benz at the time was offering huge incentives to dealers in order to meet aggressive year-end sales targets.
I obtained quotes from a handful of dealers and asked the nearest dealer to match the lowest quote. They obliged and offered a $10,300 discount off MSRP for a price of $49,195.
3. Use Multiple Security Deposits (MSD) and Auto-Pay To Lower the Money Factor
In addition to paying for depreciation, a lease also involves finance charges. You are essentially borrowing an amount equal to the price of the car, and you will pay some interest on that.
There are a few ways to minimize finance charges. With Mercedes-Benz and several others, you can lower the money factor (the finance rate for a car lease) by putting down multiple security deposits. Unlike with a down payment, security deposits are fully refundable at lease end.
I put down ten security deposits (the maximum allowed by MBFS) totaling $3,500, which saved $65 per month by nearly halving the money factor rate. Finally, MBFS offered a money factor discount if you utilized automatic bill payments. This shed $10 further off the monthly payment. Sadly, MBFS canceled the auto-pay discount circa 2017.
The E350 BlueTEC had the winning trifecta of a high residual, a large discount, and a low money factor.