My new car in Hello from Open Diary

The lease on my Mercedes C300 came to an end in June, so I had to get a new car. I was planning to get something different, because that’s part of the fun of getting a new car. I had an Audi A4 before the Mercedes, so I figured this time I might go with a BMW just to round out the big three German manufacturers.

I looked at the BMW 328i, Audi A4, and Infiniti Q50. My dad recommended that I consider the Infiniti, and it’s a great car, but it’s just not as prestigious as Mercedes, BMW, or Audi, so I wasn’t really considering it very seriously. I did some preliminary shopping in April, at which point I wasn’t ready to buy, so I just went for test drives and got some preliminary quotes, but I didn’t make any effort to negotiate.

Negotiating for a lease is a bit different than negotiating to buy a car because in a lease, you’re only paying for the depreciation (or, you can think of it as selling the car back to the dealership in advance). If you’re buying a car, you mainly just negotiate the price of the car, but if you’re leasing, you’re really focusing on the payments, which aren’t necessarily proportional to the price of the car. There are more variables in leasing than in buying, including the residual, the money factor (interest rate), the down payment, and the length of the lease (usually 36 months, but sometimes 27 or 39 or 48 months).

In order to normalize the lease prices between different cars and different terms, I used a formula of the ratio of MSRP to total monthly payment (monthly payment + down payment/months) – the higher, the better. For example, for a car with an MSRP of $40,000 with a monthly payment of $300 for 36 months and $3600 down, the total monthly payment would be $400, so the ratio would be 100. I got what I think was a good deal on my last car, and the ratio on that was 98. The quotes I got from my initial test drives were 63 for the Audi A4, 66 for the BMW 328i, and 98 for Infiniti Q50. I also looked at advertised lease specials, which are usually great deals, but very specific and not always equipped the way I’d want. The advertised deals were much better with ratios of 85, 85, and 101, respectively.

I called the nearest Mercedes dealership about turning in my old car, and of course they wanted to sell me another Mercedes. I told them I was planning to get something different this time, and they said, “Well, the C300 is all new and completely redesigned since your last one, so you should come in and take a look!” I went there first, before I went back to look at the other cars again. They gave me a quote, which was ridiculously high, with a ratio of 69. I told them that didn’t stack up well against the other deals I’ve seen, and after two more rounds, they came back with a deal with a ratio of 90, which they said was the best they could do. I told them I was going to look at the other cars I was considering before I made a decision.

The best deal I could get from Audi was a ratio of 84, and they weren’t willing to negotiate much. Then I moved on to BMW. I had e-mailed the dealership for a quote before I went in, and the best deal they had was a ratio of 87. I told them this wasn’t as good as the deal on the Mercedes, and they came back with a ratio of 93. The salesman told me this was a great deal because it had a really low money factor of 0.00128, which was practically unheard of and I would never see better than that. I said, “Actually, Audi was offering a money factor of 0.00080.” The salesman talked to the manager again, and then came back saying that they could match Audi’s money factor if I put down a security deposit (which would be fully refunded at the end of the lease). With that deal, the ratio came out to 101, which was the best deal I had seen, and on the car I wanted, so I was just about ready to take it. But the thing is, I really liked that Mercedes. I really liked the BMW, too, but not quite as much as I liked the Mercedes.

I called Mercedes and told them that I liked their car a little better than the BMW, but BMW was offering a deal that was too good to pass up. They said if I came back, they would see if they could match it. But when I got there and told them the numbers on the BMW deal, they said there was no way they could get there. They initially didn’t believe me about the security deposit, and they said the BMW salesman was probably lying to me about refunding it at the end of the lease. They said they had never heard of a refundable security deposit, but then they asked the finance manager, who informed them that Mercedes had a similar scheme. The way it works is that the security deposit is essentially an interest-free loan to the finance company, and the finance company invests the money during the course of the lease. In exchange, they offer a lower interest rate, which translates to a lower payment. With the security deposit, the deal came out with a ratio of 101, so I took it. It has dark blue metallic paint, and some nifty features my last car didn’t have, like a navigation system and backup camera.

TL;DR – I negotiated the total payments down by 32% from their original offer. Not bad! I could take a crappy picture with my phone, but I’m going to use much less effort and provide a much nicer picture from the internet.