What is this 1% rule I keep hearing about?

“I understand the rule to a good lease is that your monthly payment is < 1% of the MSRP. Is this true?”

In a word: sorta

It turns out that great leasing deals are easy to figure out in a glance.

We simply track down the car’s MSRP sticker price, and move the decimal point to the left two places.

For example:

A $35,000 Toyota RAV4 can be had for about $350 monthly. $0 cash down.

A $46,000 INFINTI Q50 Premium Plus is ours to drive for about $460 monthly. $0 cash down.

The popular Nissan Rogue SV – a $25,000 car is about $250 monthly. $0 cash down.

A $56,000 Audi A6 – about $560 monthly. $0 cash down.

And so on.

Remember: this is a rule of thumb

The 1% rule is merely a reference point.

It lets us know if we are getting a truly great deal – without needing a calculator.

When the monthly payment, fees, and rent charge (interest charge) add up to about 1% of the MSRP, we know we are in the right ballpark.

Outliers and exceptions to the rule

Some brands break the rules – in the wrong direction:

For example, if we get any Subaru or BMW for less than 1.3% of the MSRP, this is a HUGE win.

And the Jeep Wrangler Unlimited is notoriously overpriced. Again, getting one at 1.3% of the MSRP gives us bragging rights.

At the same time, INFINITI is super aggressive on some of their models – and I have seen leases dip below .7% of the MSRP. Same with Hyundai (especially now that a lot of their models are being recalled).

Unrealistic expectations

I have a small percentage of my leasing clients that aim for a super low monthly price.

Yes, they are looking for that deal of the century.

What is low?

About .5% of MSRP.

That would be like getting a Mercedes for the price of a Kia.

And while I admire their hustle and gusto…

And I have seen these one-in-a-billion deals cross my desk something like once a year…

Many times, looking for that obscenely-low price results in not getting into a new car at all.

Late Christmas gift

Actually, there is one day of the year where that deal of the century might exist…

It is the last day of the year…

As long as it lands on a Tuesday, Wednesday or Thursday.

I explain it all when you order my KTL USA At-Home Leasing System.