Question 1

What is a good money factor for a car lease?

Accepted Answer

A good money factor is generally below 0.0020 (equivalent to about 4.8% APR). Excellent credit scores (720+) can qualify for money factors as low as 0.0005-0.0010 (1.2%-2.4% APR). Manufacturers sometimes offer subsidized money factors below market rates as incentives, especially on slow-selling models. Always negotiate the money factor just like you would an interest rate on a car loan.

Question 2

How is residual value determined?

Accepted Answer

The leasing company (not the dealer) sets the residual value based on the vehicle's projected depreciation. Vehicles that hold their value well (like Toyota, Honda, and some luxury brands) have higher residuals, which means lower monthly payments. Residual values typically range from 45% to 65% of MSRP for a 36-month lease. You cannot negotiate the residual value.

Question 3

Should I put money down on a lease?

Accepted Answer

Financial advisors often recommend against large down payments on leases. If the vehicle is totaled or stolen, gap insurance covers the lease balance but you lose your down payment. A better strategy is to negotiate a lower vehicle price (cap cost reduction happens at the dealer level) rather than putting cash down. If you want a lower monthly payment, consider a shorter term or a vehicle with a higher residual value.

Question 4

Is leasing cheaper than buying?

Accepted Answer

Leasing has lower monthly payments because you only pay for depreciation, not the full price. But if you always lease, you always have a payment. Buying and keeping a car for 8-10 years is almost always cheaper long-term. Leasing makes sense if you want a new car every 2-3 years, drive within mileage limits, and prefer lower monthly costs over building equity.

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