Lease deals might not be favorable for you if you shop around for a car to lease and you don't have any idea
how to get one. Ignorance will cost you plenty, not because you will get scammed by dealers (although some are unscrupulous enough) but because without a clear knowledge of the leasing game, you will fall for unfavorable deals.
First of all, keep in mind that when you lease a car , just as when you buy one, its cost is negotiable. Nothing is set in stone. The lower the total price, the lower your lease payments will be.
Also in case you don't know, when you lease cars, a separate leasing company actually buys the vehicle from the dealer and then charges you the monthly payments for it. However, you will be working entirely with the dealer throughout the leasing process. They handle all of the paperwork for the the leasing company.
To get the best lease deals, keep the car's costs down. Choose a model that has a higher resale value. There are some sources for this information. You can consult a used-car pricing guide to see how well a vehicle's value has held up historically, ask the loan department of your bank or a leasing company to compare new vehicles' residual values. Go to your local library and ask if they carry the Residual Percentage Guide issued monthly by Automotive Lease Guide. Charts estimate how much each vehicle will be worth after specified periods of months, as a percentage of the car's original selling price. This gives a clear picture of which cars hold their value best and are therefore your best choice for leasing. Avoid those with low residual value, because those cars will cost you money at the end of the lease.
Look around for good lease deals, especially one when a car manufacturer is trying to promote a specific model. Sometimes, its leasing terms might be even more favorable.
Make sure you compare costs for identical vehicles. A lease with low monthly payments and a hefty down payment might cost more overall than one with higher monthly payments but no money down. Do the math, and consider the total amount that you'll be paying-both now and over the leasing term. A free calculator below can tell you your monthly payments and the interest charged to you if you know the cost of the car, the interest rate, and the terms of the loan (usually 36 months).
New-car dealers are a good place to start your shopping. You can use leasing agents or brokers that lease
several brands. Some banks and credit unions also offer consumer leases.
To get the best lease deals, you need to familiarize yourself with some lease terms that leasing companies employ. Their terminology is quite different from conventional auto and mortgage financing and is quite confusing.
Capitalization Cost (cap cost): The total price of the vehicle, which the lessor uses to calculate the amount that the customer will be paying. This is equivalent to the purchase price of a vehicle that's sold.
Cap Cost Reduction: Equivalent to a down payment on a purchased vehicle, this is the amount that you pay when signing the lease, in addition to any separate fees that are assessed. When you pay a larger sum initially, monthly payments will be lower. A smaller cap cost reduction means a higher monthly payment. The value of your trade-in (if any) can be applied as part of this amount. You know if you have good lease deals if your trade-in has been factored in by the dealer.
Residual Value: A prediction of what a vehicle is likely to be worth as it ages, usually expressed as a percentage of its original price. Residual values may be supplied for vehicles that are 24, 36, or 48 months old
Security Deposit: A deposit, usually refundable, required before the lease contract takes effect.
Depreciation: The amount by which a vehicle loses its value over a specified period of time, which is the difference between its original price and its residual value later. It's usually supplied by the Automotive Leasing Guide (ALG) or equivalent. No specific figure for depreciation appears in lease contracts, but it's taken into account in setting residual values. If you have less depreciation, you got good lease deals. That's why it's good to know what car models depreciate the least (loses minimum value during the terms of the lease).
Money Factor: You probably won't hear or see this term, but it's the cost of money, equivalent to an interest rate.
Don't tell the dealer you are leasing until you agree on a selling price. Negotiate the car down to a good
selling price as though you're buying it. Then if you want to lease, the purchase price becomes the gross cap cost for the lease.
The value of your trade-in (if any) can be applied as part of Cap Cost Reduction. Good lease deals result when you are able to maximize the amount of your trade in. Watch out for some dealers who bump up your capitalization cost to MSRP after the amount of your trade in had been factored. Because of the complex nature of the paperwork, it's hard to see if it's there. Look at the figures and don't be afraid to start asking questions. After all, it's your hard money which is involved here.
An important warning about Money Factor. Some unscrupulous dealers avoid telling you the selling price of the car, quoting only the monthly payments. Dealers are not required to divulge the interest rate. Be cautious of artificially low interest rates. They might quote a low money factor, but if you check out their numbers, it's really higher. If they amortize some of the closing fees like security deposit and dealer acquisition fee into the lease, tell them you want to pay cash up front for it. To assure yourself of getting good lease deals, ask them in writing their interest rate (money factor).
There are two types of car leases: closed-end and open-end.
Closed-end leases allow you to walk away from the car at the end of the lease term. If you owe for any mileage coverage or unusual wear and tear, this is when you'd have to pay for it. This is when they tell you that your Security Deposit pays for the wear and tear. Most consumer groups suggest that the closed-end lease is the best option, because it poses less risk upon the expiration of the lease term.
With an open-end lease, you must purchase the car at the end of the lease period for a predetermined amount. This is often the type of lease used by individuals who have high mileage or by businesses. Wait until the end of your auto lease to ask the leasing company if they will sell the car for less. If you are not careful, you might get charged thousands of dollars above market value. Always research the value of your car by going to free internet websites like Edmunds.comand show up at lease termination with a check in the amount you want to pay. Haggle with them. The used car that you've been driving during the last 3 years had gone depreciated 50% so be smart to get the best lease deals.
Make sure you read and re-read the information in this website so that when you lease a car , you will enjoy good lease deals.