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1. Saab ad leases don't leave any room......
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Posted by Mike Lynch [Email] (#81) [Profile/Gallery] (more from Mike Lynch) on Fri, 10 Jan 2003 20:39:15 Share Post by Email
In Reply to: lease virgin, stu, Fri, 10 Jan 2003 09:39:36
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Saab wants to advertise the lowest possible payment, the lower the payment the more effective the ad. The ad lease cars for Saab as specified in the Limited Time Offers on the http://www.saabusa.com site all reflect an MSRP of the most inexpensive model in the range, stick shift with no premium package or metallic paint and so on. The vast majority of the cars in inventory have somewhat higher MSRPs or list prices than specified.

It takes quite a bit of doing to make the payment point on a car with the advertised MSRP. As a dealer you have to give up all the incentives, all the rate and roughly 2/3rds or more of a dealers normal profit. excluding incentives. That is you have to cut it to the bone to make the ad payment.

The most amazing Saab lease ad is on a 9-3 SE Convertible, MSRP $41,095 with a payment of $399 plus local tax. That deal requires three elements. First a $3,000 Saab rebate to the dealer. Then the dealer must whack his profit from a little over $2k down to only about $700ish, not much on a $40k unit! Woe to the dealers in a market area that charges an extra $250 to the invoice for advertising, then you make only $500 or so. This translates to a "cap cost" or a selling price on the lease of only $36ish so it's a heavly discounted offer. Then Saab Financial gives you an incredibly low .00066 lease rate, the equivalent of only 1.58%, which you must pass on to the consumer at the buy rate for no profit. And then you have to explain to the customer that the $3,500 cash down quoted doesn't include local tax and license which swells the cusomer cash to almost $4,000.

More than likely the car you've selected has more equipment, say metallic paint at $475 and automatic for $1,200 and you only wanted to put $3,000 down so it's a constant struggle to get anywhere near the ad terms. In So Cal the ad car at the ad terms is actually $399 plus tax for total of $429.92 and the $3,500 swells to $3,958.57 when you ad the tax on the cap reduction and DMV fees.

So start with the ad terms and work up. That is the metallic paint and automatic totals $1,675, divided by 48 months is another $35 a month. The dealer would make just slightly more using this simple method as things that ad to the MSRP are residualized, but it would still be a great deal for the consumer.

Also 36 months is more payment, although Saab's low lease rates are even lower for 36 months than 48 as with the convertible the 36 month rate is only .00032 or the equivalent of 77/100ths % (0.77%). 15,000 miles per year instead of 12,000 as advertised is cheap. It's only a 1% residual shift, so that's 1% times $41,095 + $410.95 divided by 48 = about $9 a month.

But people have the false perception that the ad payments can be worked down. If you find a dealer that's willing to sell for a zero profit then you'd only save $10 or $15 a month and the payment would still be plus tax and the $3,500 will still have tax and license added to it. Do you want to shop that aggressively? At normal rates and margins a $40k car is more like $600 amonth.

That's why I get calls from sharp financial guys who do the arithmetic in their head and wonder why 48 months of $399 and $3,500 and the residual or $16,438 all added up still leaves you a couple thousand short of the MSRP after 4 years including finance charges! Saab has the most amazing lease deals in the industry and they do it with consumer friendly low residuals too.

posted by 207.158.49...
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