"Am I getting a good deal?" is perhaps the most frequently asked question on Leasehackr Forum. Here are some tips for evaluating whether a lease deal is any good.
1. The One Percent Test
Generally, a good deal is when your monthly payment is equal to one percent of the retail price of the car, with only drive-off fees due upfront (first month’s payment, document fees, and vehicle registration). An example of a one percent deal would be $300 per month on a $30,000 car with no more than $1,000 due at lease signing.
That said, there are a few caveats to consider. The one percent rule doesn't account for variables like annual mileage. A 15,000 mile per year lease that passes the one percent test is more impressive than a 10,000 mile per year lease of the same car that also passes the test.
There’s also a difference of opinion on whether the monthly payment used for the test should include sales tax or not. A "good" deal in Texas might fail the one percent test, as sales tax is levied on the entire price of the car there, while the same deal might pass had it taken place in a state that taxes leases more favorably.
If the quote you received includes a large down payment, be sure to account for that as well. On a 36-month lease, every $1,000 down is equivalent to adding approximately $30 to your monthly payment.
In sum, use the one percent test as a general rule of thumb. It’s a great starting point to see if you’re being ripped off: if the deal is closer to two percent, best to go elsewhere. But it’s not the end-all for evaluating a deal.
2. Leasehackr Score
The Leasehackr Score, which is automatically generated by Leasehackr Calculator, represents the number of years it would take before the sum of monthly payments exceeds the retail price of the car. The higher the score the better.
For example, a $30,000 car with a monthly payment of $300 will have a Leasehackr Score of 8.3 years. You can pay $300 per month for 8.3 years before you reach $30,000. We've seen scores ranging anywhere from just 5 years to as high as 20 years.
Like the one percent test, the Leasehackr Score is based on the monthly payment relative to the retail price of the car, and it's subject to the same caveats. But it's expressed in a way that makes sense for a lot of people.
If the Leasehackr Score is low on a car even after your best efforts negotiating, you might be better off buying instead of leasing, or choosing a different vehicle altogether.
3. Research What Others Are Paying
The one percent test and Leasehackr Score are good starting points, but there can be nuances to each particular make and model. Some cars have inflated retail prices that few people actually pay—so getting a one percent deal on one might be nothing special. Conversely, some manufacturers like Porsche have notoriously difficult lease programs, so a deal with a low Leasehackr Score might still be good relative to what others are paying for the same car.
You can search the Share Deals & Tips category on Leasehackr Forum for recent transactions. Compare your quote with deals you’ve seen posted by others. Just be sure to note differences like annual mileage, optional equipment, vehicle condition (new vs. demo), location, and applicability of targeted incentives. Try compiling as many data points as possible.
4. Calculate Your Own Ideal Lease
Finally, try calculating the perfect lease deal that you would like to see. Research lease program details like the residual value and money factor. Research incentives that apply to you. Identify an ambitious but realistic selling price. Then plug these numbers into Leasehackr Calculator to see what your ideal lease should be.
While the other methods are helpful, only by calculating your own lease can you account for factors specific to your deal, like annual mileage, vehicle MSRP, tax rate, targeted incentives, and so on.