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Old 02-20-2023, 07:22 PM   #194 (permalink)
JSH
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Quote:
Originally Posted by Isaac Zachary View Post
How does "passing the full credit" to the buyer apply when prices are negotiable? From what I understand, car dealerships don't have to sell new cars at MSRP prices. They can sell them for less or sell them for more. It would seem to me that in theory a dealership could sell a car for $7,500 more than MSRP and still apply the "full credit" towards the price.

I don't know how that would work with leases, but I would imagine it's the same. ??? Or is a lease a fixed price from the manufacturer? Do people negotiate to get cheaper leases? Can dealerships gouge customers when there's a shortage of leaseable vehicles?
You have to look at the math. Yes, a dealer could mark up a car $7500 and then subtract $7500 for the credit. Then the buyer should walk away because the dealer is trying to rip him off. As with all car purchases - buyer beware - check the documents before you sign. Leases can be fixed from the manufacturer if they are doing the financing and advertising a special or they can be completely negotiated just like a purchase. I've done 2 leases in my life:

In the case of my 2016 Spark EV it was a hard deal advertised by GM - no negotiation. The advertised lease price was good for only specific VINs. I saw no reason to argue with a lease payment of $100 a month.

The math worked out like this: $26,000 MSRP - $7500 tax credit - $7500 GM cash = $11,000. The agreed upon value of the car at the end of the lease = $7,100. So $11,000 - $7100 = $3900. That $3900 was split into 39 monthly payments. That is the math that got me to a $100 a month lease with zero down. (It wasn't quite zero down as I had to pay $115 for a title fee and $173 for registration)

With my 2003 VW Jetta Wagon it was a normal negotiation. We negotiated the purchase price of the vehicle and the value of my trade. Then I compared their finance options to what I had from my credit union. Then they said - we can lower your payment if you lease. I checked the math and found they weren't trying to screw me and the monthly payment was about $100 less for the lease vs a 5 year loan so I took the lease even though a knew I would have to buy the car because I would be way over the miles. 2 years into the lease we used a subsidized Stafford student loan* to buy out the lease contract and Uncle Sam paid the interest on the loan until my wife graduated from university.

* I paid my wife's tuition out of pocket and used the student loans that were available to her to refinance my student loans, then the car, then my motorcycle (which was my primary transportation. We took every subsidized loan she qualified for until all of our "consumer" debt was consolidated and subsidized. When she graduated we paid of the loan in about 3 years.
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