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Excel DCF Models | Vehicle Finance and Lease
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Free Vehicle Finance and Lease Comparison
New vehicle shoppers may be overwhelmed by the number of choices involved. Some choices are non-financial (whether to buy a truck, car, SUV or van; whether to deal with Ford, Nissan, Honda, Toyota, or Mitsubishi; vehicle options; and paint color). However, an Excel spreadsheet can help with choosing whether to obtain a car loan or lease instead.
I recently compared four vehicle models (2006 Toyota Sienna CE, 2006 Honda Odyssey LX, 2006 Honda Odyssey EX, and 2006 Kia Sedona), and two payment options (48-month vehicle lease versus 60-month finance loan). Vehicle dealer cost and taxes applied in British Columbia, Canada.
My spreadsheet assumes a vehicle price of Dealer Cost + $1,000 (roughly $2,500 below MSRP). Car dealer cost information can be obtained from most vehicle insurance agents.
My Excel spreadsheet shows that while the 2006 Kia Sedona is the cheapest vehicle, the monthly lease payment was second-highest (after the Honda Odyssey EX). Whyu? Kia dealerships offered the lowest lease buy-out on the Sedona (compared to the Toyota dealerships and Honda dealerships). Hence, monthly lease costs on the Kia Sedona were comparable to the payments on the car finance loan).
Vehicle prices vary across dealerships. For example, Honda may be more
willing to negotiate on a car loan or lease than (say) Honda.
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TIP - NEVER BUY A CAR WITHOUT FIRST KNOWING DEALER COST. To understand the importance of knowing dealer cost, let us first consider the "traditional" bargaining process preferred by car dealers. Under this traditional framework, the Sticker Price (or MSRP) serves as the starting point for price negotiations. A discount is usually negotiated into the final agreed price, giving the customer an impression that he or she has received a good deal.
Under the traditional bargaining process described above, the dealer holds a significant bargaining advantage over the customer. Although both parties (dealer and customer) know the maximum price on the bargaining table (this being the Sticker Price), only the dealer is privy to the minimum price (this being the Dealer Cost).
Thankfully, there is an alternative negotiating approach that favours the customer. If the customer can learn what the dealer's actual cost is for the vehicle, then the Dealer Cost (as opposed to Sticker Price) can serve as the starting point for negotiations. With both parties (customer and dealer) aware of the Dealer Cost, the only remaining detail to negotiate is the amount of profit to incorporate into the final price.
To successfully implement the Dealer Cost Approach, a car buyer first needs access to dealer costs. In Canada, dealer costs can be obtained from Car Costs Canada.