Me: “I wonder how this guy feels when he looks at himself in the mirror.”

Friend: “Like a goddamn BMW salesman.”

The stereotype of a sleazy car salesman has no worries that it might lose its relevance in the lexicon any time soon. There are still plenty of these people around, if you’re not careful, you could get in for a bad time next time you enter a car dealership.

The lease end is rapidly approaching on my car. Since I would soon be required to return this leased car, I figured it would be a good time to start looking for some deals now, before the clock runs out. I have some thoughts on leasing cars, and why, having leased once, I would probably never lease again. More on that later.

So a few weeks ago, after a few calls and voicemail from a certain BMW dealership in regards to lease-end, I decided to email them back about getting a pre-lease-end inspection on the car. The inspection serves to give you an idea on how much “excessive” wear and tear on the car you have put on the car, and give you an opportunity to have the excessive wear and tear fixed before the turn-in date.

Here is what I wrote.

Yes I am aware of the lease end coming up and I am definitely interested in going over some lease end options.

The salesman, let’s call him George, responded promptly to the email. In his email, George asked if I had some time the very day to go over some deals he has been putting together for me. Presuming a phone conversation, I answered that I can probably have a phone call at 1:30.

A few minutes after the email was sent, George emailed back “see you at 1:30.” It turns out he wanted me to go into the dealership and take a look at the options he has available for me.

No, I called George at 1:30, I can’t actually be at the dealership at 1:30 because I am at work. But I do have time the very next day, since it’s my day off. Perhaps 8:30 in the morning will work.

“No,” George flatly replied, “we don’t usually do business that early in the morning.”

Shouldn’t somebody that want your business jump at an offer for an appointment, or at least offer a counter proposal if the timing is truly inconvenient? Also, I checked online later, and the dealership is open for business each day at 8AM.

Feeling a bit slighted, I asked George to email me some of the special offers he told me that he has been working on, I will review them and call him back to schedule at a more convenient time.

A vapid scan of a previously letter containing the offer was emailed to me as follows. The missing half of an inch on the right margin was a nice touch.

The offer was for a 2019 model year version of essentially the exact same car I currently lease. This is not a strong offer and it is not of interest to me. The 2020 model year saw a significant facelift and upgrade, so even if I wanted to upgrade into the same vehicle, I would want to upgrade into the 2020 version. In response, I sent George the following message.

I am considering a ______ at the end of this lease. If you can send me some of the offers available, that would be great.

No rapid replies this time. In fact, no replies at all. The silence wasn’t exactly deafening, but it was strange.

A week later, I emailed George a direct one liner.

Hi George, Was wondering did you not find any good offers for a _____? Let me know. 

This technique was adapted from former FBI hostage negotiator Chris Voss’s brilliant book Never Split the Difference. Almost without fail, something along the lines of “have you given up on X” seems to always bring a stale conversation back to life.

George quickly replied.

I would love to know what BMW has to offer in 4 months (my lease end date), but unfortunately I don’t have that information.

The offer was on any vehicles, obviously the lease term and rebates are different from model to model! I will help you in achieving what you like in terms of vehicle and lease structure, however…. I need you here, select a vehicle, I will inspect your leased vehicle and we will make sure you’re comfortable with your new vehicle.

I Just had a cancellation for my 1:00 PM appointment, can you come in this afternoon?

At least he offered the pre-lease-end inspection this time. I told George that I still cannot come in on short notice, but perhaps we should schedule an appointment time on my day off that works for both of us. I offered 9AM, since he doesn’t do business at 8:30.

George countered with a single available appointment time: 11:30 AM.

Funny, I didn’t realize we were already negotiating.

I called George around 10 on my day off, and told him that I was going to show up a little bit earlier than 11:30. Magically, his packed schedule is suddenly open, and I was “free to come as early as I want.”

At the dealership, after checking in the car for the inspection, George came out to meet me. He was a thin short man, with thick brown eye brows and graying hair.

Famed short seller Marc Cohodes has a heuristic on finding fraudulent companies. He firmly believes that CEOs who wears wigs is heavily correlated with fraudulent corporate behavior.

I have one of those weird heuristics of my own. It’s not wigs, but rather sharply pressed shiny dress shirts without an accompanying tie or blazer. The type of shirt you see on drunk bros with the sleeves rolled up at a Las Vegas night club. The type of shirt you see on sale in a glossy monotone for $29.99 at Express Men. The type of shirt George was wearing (without a tie.)

My obscure logic goes as follows. If you work in a place that requires business attire, such shirts will almost always come with a tie attached, if not a full suit. But if you work in a place that asks for business casual, then the shiny shirt is just peacocking, and honest people don’t peacock.

So I struck a conversation with George. First thing I said was that sure, I would love to  look at some available new or slightly used vehicles, but I’m done leasing. My issue with exceeding the mileage requirement on the current lease, the headaches I have at lease-end, and my plan to keep this upcoming car for a little longer past the warranty date meant that I simply do not want to pay the first 3 year’s depreciations on ever rotating new vehicles.

Greg’s eyes scrunched for half a second before quickly flattening back to neutral. “Why?” he asked, with a slightly inquisitive but mostly dismissive tone.

“Well I drive a lot and with leases I don’t want to pay extra fees at…”

“No, no That should be the reason you lease, my friend.”

Apparently I’ve already made a friend.

George started talking, makes unbelievably verbose and intricately bombastic arguments. Some of the arguments he made were legitimate. Lease does reduce the tax hit, you don’t pay sales tax on the entire purchase price of the vehicle on a lease, but only on the lease payments. However, we are in a state without sales tax, nullifying this advantage.

Other arguments were not. Lease does not magically offer fewer repair headaches, at least not for free. There’s no free lunch, so your lease payment includes the cost of the warranty. The only reason leases are viewed to have free repair costs is because you’re continuously paying for a new car. A particular gem from George is when he said “when you lease, BMW eats the depreciation and not you!”

Leases in all its convolution, are priced by a very simple formula:

(Price at beginning of lease – Price at end of lease) + Fees+ Interest+ taxes and divided by the number of months

Taxes we can’t control, but the other 5 factors are adjustable.

Dealers call Price at Beginning the Gross Capitalized Cost. Higher initial Price, Higher lease cost.

The Price at End is called Residual Value (calculated by a residual percentage x MSRP.)  Higher Residual value, lower lease cost.

(Price Beginning – Price End) = Depreciation of the car, the major cost in a lease. Higher Depreciation, higher lease cost.

The fees are called fees and they are always negotiable.

Interest rate is called Money Factor in a lease. Pro Tip: just multiply the money factor by 2400 to get a percentage rate to de-bullshit.

Lastly the more months in the lease, all else being equal, means lower cost per month. (A $10,000 10 month lease is $1000 a month. A $10,000 100 month lease is $100 a month. It’s not rocket science here.)

In the end, the simple math is that depreciation is higher in the initial 3 years of a car than subsequent years. In the long run over multiple leases, you will almost always pay more in depreciation switching from new cars to new cars, than if you stick with the old car for a few more years. Finance stripped of the bullshit is really not that complicated.

Curious what else George would say, I told him I’ll keep an open mind on the lease option. (I wasn’t.)

George decided to finally do some inventory search on his two screen setup. Sifting through pages quickly, scribbling a few numbers down, find a car and proclaims “this is your car!”

The car looked good on the screen. It’s shiny and sleek. It has 4900 miles and has been a service loaner. George proceeded to explain how great the car is. It has been a service loaner, he says, and it is so close to the 4800 mileage limit where he is no longer able to lease. “I can get you $7500 of rebates on top of the high discount!” George proudly announces as he turn the screen towards me. Initial price: $49,999 after discounts, with a $7500 in manufacturer’s rebate, plus $599 in added accessories.

George started inputting the numbers into his spreadsheet program. The way the car price is inputted into the program is MSRP – offered discount = initial selling price. In his spreadsheet, he would input the MSRP and the discounts, and the program would calculate the initial price ($49,999).

George puts in the MSRP as labeled $57,980 and types in the discount and add ons.

“57,980 MSRP”

“6,979 Discount”

This Geroge’s last name must be Soros, because he just made a cool $1,002 with a few taps on a keyboard. (57980 -6979 =51,001. this number is not shown anywhere on the spreadsheet)

A few more taps laters, with George completely silent as he slides past the money factor (high) and the fees (very high), while making sure I was reminded of his generous rebate offer, a monthly payment number came out.

“Now this number is for a 30 month lease, because I want you to be covered for the free maintenance offered for 3 years, and with this car being a service loaner, the maintenance was already started. So if you lease the full 36 months you may be on the hook for a maintenance.” George said, smirking, “I’m trying to minimize your cost here.”

What a fucking guy.

The crazy thing is that George did not change any of the other factors.By ending the lease 6 months early, the residual value (price at return) should be higher. In essence, if I rent something for 30 months, I should pay less than if I rent for 36 months. George kept the residual value exactly the same, which meant the total amount paid was the same. George’s magnanimous offer is to keep the total amount paid the same, but to shorten the lease by 6 months in order to avoid the charges of one oil change. Again, this guy’s last name is definitely Soros, because he just made an additional 20%.

“Hey George, can you print this price sheet out for me so I can run it by the accountant?” I asked.

“Absolutely not, this deal is for your eyes only” He said, slyly pointing to the $550 figure on his spread sheet. “My boss would kill me if he sees this offer.”

Just to see what he would do, I grabbed a pen, took a business card and started copying the numbers off the screen.

“You don’t have to do that!” George exclaimed with noticeable disagreement. But ultimately he did not move the screen or try to close the spreadsheet.

“No, I do. I need to run the numbers by my accountant.” I replied.

“Your accountant don’t pay your bills man. This is a great deal.”

“I understand this is a great deal George, but I don’t make the decision until I talk to somebody. I’m terrible at math George.” I shrugged at George.

Muthafucka you don’t pay my bills either.

Sensing that the great deal is probably busted, George finally went silent.

At this point George has tried to strong arm the time of meeting, lied about his availability, ignored my requests to not lease, manipulated the sale price, maximized on the interest and fee charges, shortened the lease term, and refused to print out the numbers, all the while repeated on how great of a deal this is. What a fucking guy.

There is a classic exchange in The Big Short where Vinnie (the buyer of esoteric credit default swaps offered by DeutscheBank) grills Jared (DeutscheBank seller) by asking “How are you fucking us?”

This level of due diligence was hardly necessary here. This guy has so openly offered such an unbelievably shitty deal. He is right that this is the deal of the century, for the dealer.

I asked if I can have the inspection report. George replied that I shouldn’t worry about the inspection, and that if I sign the lease, he can have the lease end charge wiped clean. I thanked him for his generosity, however, I maintained that I would still need the report.

Noticeably dejected, George fumbled an iPad from his desk and pulled up the lease end report. He had it this whole time. I asked him to have the service center print it out for me.

If George is going to waste my time with these type of unbelievable sales tactics, I decided that I was going to waste his. I asked if I could see the car, knowing that he can’t possibly say no.

We got up and started pacing slowly towards the garage. When we got to the car, I  pressed every button there is to press and asked every question there is to ask on what was essentially the same car I currently lease. George was visibly annoyed and his answers were clearly getting short. He knew I was now just wasting his time, but he had no way out of it. He was getting squeezed.

When we got back, the report was on his desk. I took the lease-end report and said I will think about his great offer.

George didn’t walk me out.

The final kicker was, there was actually no way to end the lease early. George was simply going to add the remaining lease payments on the current car into the price of the new lease, allowing me to pay the lease payments for 2 cars while having just 1.

Again, what a fucking guy.