10 Sep Good Deal Gone Bad
A lot of clients have inquired about the sweet leasing offers that immediately catch your eye- 2013 Mercedes C-Class Sedan Sport for only $349/month! and many others alike. Because RevYourMind was founded around helping people like you, let’s take a closer look at this type of deal before you go running out the door to your local dealership.
You see, dealerships know that by advertising low monthly payments on an attractive vehicle, they’ll be increasing their foot traffic which potentially leads to higher sales. Ever hear the saying “If it sounds too good to be true, it most likely is?” Let’s take a closer look at this deal by expanding the ad, reading the small print, and quickly dissecting the principal terms of the deal.
1st The first sentence reveals a major factor playing part in this deal. “Available only to qualified customers through Mercedes-Benz Financial Services…”
Translation: Unless you have excellent credit you will not qualify for this rate. It even states not everyone will qualify. These type of deals are usually reserved for individuals with Tier 0 or Tier 1 credit rating who typically hold a 750 credit score or higher.
2nd The dealership discloses the MSRP of the vehicle this offer is based around. In this case the ad states “…payment based on MSRP of $38,755 less the suggested dealer contribution resulting in a total gross capitalized cost of $37,400. Dealer contribution may vary and could affect your actual lease payment.”
Translation: Typically models offered in this type of deal are base models, models with very few options, or a specific vehicle in the dealership’s inventory. Pay attention to the MSRP the deal is based on and compare it to the MSRP of the same vehicle equipped with the options you’d like to have. For every additional $1,000 your payment will typically go up by approximately $20/month- This quickly adds up! The second part states that in order for this offer to stand, the dealership must contribute $1,355 out of their pocket to bring the gross sales price down to $37,400. Typically this money comes from manufacturer-to-dealer incentives provided to help move inventory. Your payment will be affected should the dealer choose to offer less of a contribution.
3rd The sentence that follows is financially dangerous and will place a HUGE dent on your bank account. “Excludes title, taxes, registration, license fees, insurance, dealer prep, and additional options.” If we keep reading we also find that “Cash due at signing includes $2,899 capitalized cost reduction, $795 acquisition fee, and first month’s lease payment of $349.”
Translation: THOUSANDS of dollars out of pocket. In addition to the thousands you’ll be paying for title, taxes, registration, options, etc. you’ll also have to provide around $4,000 in cash due at signing of which: $2,899 will serve as down payment, $795 will cover the acquisition fee, and $349 will be applied toward your first month’s payment. Putting thousands of dollars down on a lease has never been and will never be a financially sound decision. Remember, you will not own the vehicle at the end of the lease term. You’ll never see those thousands of dollars you put down again- Adios! Bye! Ciao! That sweet deal should start to look a bit sour at this point.
Finally, the 4th most important detail to take into consideration for this lease offer is the mileage restriction and other lease-end costs. If we rewind a little and scroll back to the top, we can see the offer discloses the lease-term in this deal as 27 months. Skip back toward the bottom and you’ll find that “At lease end, lessee (that’s you) pays for any amounts due under the lease, any official fees and taxes related to scheduled termination, excess wear and use PLUS $.25/mile over 22,500 miles, and $595 vehicle turn-in fee.”
Translation: WOW talk about a good deal gone bad. First let’s take a look at the mileage allowance. If you’re allowed 22,500 miles for 27 months this means that in average you should not be driving more than 833 miles per month or 10,000 miles per year. If you drive more than 10k miles per year this lease is not for you, unless you’re willing to pay $.25 per every mile you go over at lease-end. In addition to the mileage fees you’ll also be responsible for a $595 vehicle turn-in fee, plus excessive wear & tear (dings, scratches, etc.). Remember all those thousands you put down when signing the deal? As if it wasn’t enough, you’ll now have to add $595 plus any other applicable fees. If this isn’t a bad financial decision then I don’t know what is.
Buying or leasing a vehicle is the 2nd largest investment you’ll ever make in your life aside from buying a home. In an article written by financial guru Dave Ramsey titled “Buying a Used Car? 5 Tips You Need To Know” he states the importance of going with someone who is knowledgeable about cars and will keep you from making dumb mistakes like paying too much. Buying a new car is no different, except for the fact you’re spending a lot more of your hard earned money. Unless you have a solid understanding of auto finance and dealership profit centers, it is wise to have a professional by your side.
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