Remember when you’re contemplating a lease vs buying a car, either way the car has a selling price.

People always remember this little nugget when they are buying, but few remember when they are looking at leasing a car.

With all the different types of leases, terms, and incentives in the market place today, it is sometimes at best difficult to tell whether you are comparing apples to apples.

One of the problems is determining what all of the ‘up front fees’ and the down payment requirements of the leases. How can you compare one lease offer that requires no or very little down to those that have attractive monthly payments but require more cash down?

One way to clear the muddy waters would be to take the amount of money that a lease requires you to put down at signing and divide that amount by the total number of monthly payments.

For example, if a lease ad promises a $199 a month payment for 36 months with $1800 down (due at signing), you would simply divide the $1800 by 36 and you would get $50 per month.

So, take the $50 per month and add it to the $199 promised in the ad and you have an effective monthly payment of $249 per month. Then, what you need to do is multiply the $249 per month by the number of payments (36 in this example), and you’ll be coughing up $8964 plus fees for the privilege of leasing this car.

You can use either of these numbers to compare car leasing deals.

Be familiar with the most common leasing terminology. Scrutinize all of the end of lease charges, security deposits, and other extra charges. They can all be possibly negotiated.

It’s a good idea to make sure the manufacturer’s warranty covers the entire duration of the lease and the number of miles you are likely to drive. Usually this isn’t a problem since the normal car lease deal runs for 36 months which would easily fall within the manufacturer’s warranty and leasing longer than 36 months really doesn’t make good financial sense.

Generally speaking, in the long run leasing is more expensive than actually purchasing the car. Remember though it is a viable option and really a matter of personal preference and priorities.

Is getting the most car for your buck each month tops on your list? If so, and the mileage restrictions are workable, take a look at leasing.

Getting to all the facts, figures, and the bottom line overall cost of leasing a car will take a bit more work than if you are purchasing the car. You’ll have to do some serious prying to get some of the figures from the dealer….. but by all means pry!

Be wary of leasing companies that quote you widely different residual values in you favor to lower your monthly payments. This could be a tip-off that the company is baiting you into the lease and will try to hit you with high back end mileage or wear and tear penalties.

As with any contract, take the time to read it carefully before you sign it. In fact, a dealer should allow you to take a copy of the agreement home with you so you can peruse it in the comfort of your home. If the dealer is unwilling to let you do this, then you should be unwilling to sign it.

Should I buy or lease a car?

Bottom line… leasing is just a form of financing a vehicle in which you only pay for the part of the car you use. Simply put…. with car leasing you pay for the depreciation that is projected to occur on the car.

The operative thought here is method of financing. Remember, if you have to finance you will incur financing costs as part of your overall ownership experience. And with financing costs involved there is serious negotiating to be done.

Always know and be prepared to negotiate the capitalized cost. If the sales person tells you the cap cost is fixed and cannot be negotiated, find another sales person or dealership.

Here is a quick summary of the pro’s and con’s if you are looking leasing versus buying a car.

Also, I have included a quick conversion chart to help you determine what the effective interest rate is when looking a lease money factor.

A security deposit equal to one month’s payment which is refundable will probably be required.

Also, there will often times be an acquisition fee involved, which is a sort of administration and processing fee.

Also, a disposition fee may be charged, which is a fee for reconditioning the vehicle at the end of the lease to get it ready for resale. Most all fees included in car leasing can be negotiated. Stay firm and and you can save yourself yourself additional money on your car lease costs.

More often than not the primary reason people look at car leasing is they are monthly payment driven. If this indeed the primary factor you may be considering a lease, it is a must that you research various car’s residual values.

Remember the higher the residual value of a car the lower the monthly payments will be.

A very important note and factoid to keep in mind here as you look at your various car buying options; whether you lease, take out a loan, or pay cash, let’s not forget the dealer’s primary objective here is to sell you a car.

So, if you lease, the dealer is selling the car to a finance company. If you pay cash for your car, the dealer sells the car to you. If you finance the car (take out a loan), the dealer sells the car to you with the financing institution holding the lien and the title.

Regardless of which option you choose, the dealer is still selling the car. O.K…… I didn’t see the light bulb go off yet… I’ll give it another go….

• The dealer is selling the car, therefore the car has a selling price.
• The selling price affects your monthly payments and the overall cost of ownership.
• Car selling prices can and should be negotiated upon.

Make absolutely certain you know exactly what the selling price of the car is when considering leasing the car.

Do not accept the terms of the lease based solely on monthly payments. The dealer may be including items in the selling price of the car that you don’t have to pay for, or worse yet may never receive!

Check for add-on’s such as fabric guard, paint sealant, pin striping, rust proofing, etc.

If you lease just because you got real happy about those monthly payment figures that were presented to you, you may have just leased (paid for) much more than you should have. And to top it off, these dealer ad-on’s do nothing to increase the car’s future value.

Remember just about any of the pieces of leasing an automobile are negotiable. If it’s a number….. it’s probably negotiable.

But you gotta stay firm and don’t take no it isn’t for an answer. If the dealer wants to sell you that car, and you hold tough…. you’ll see.

Scrutinize and negotiate every number in the costs associated with the lease.

Next Lease vs Buy Car

I feel it’s best to contain the length of your lease to no further in order to get the best car lease price and terms for you.

Making a sale is making a sale, and remember sales personnel are not their for your best interest.

They are trying to get you into a car.

Trying to get you to a monthly payment where you’ll say yes. If the approach during the discussion of a lease goes beyond 36 months….. your pushing the value at that point; and generally a 48 month lease is as far as the envelop will go.

Remember, in leasing retaining as much residual value as you can is the key to keeping your leasing option advantageous. When you start getting out past 36 months your turning the car’s residual value from a friend to a foe.

When it comes to leasing terminology, wear and tear is a little vague to be sure. Defined as ‘normal’ wear and tear….. doesn’t help either.

Bottom line. If you’re in a lease, keep the car in good condition. If you’re the type of person that doesn’t you could wind up owing more at the end because you’ve exceeded the normal wear and tear. Be sure to check how the contract defines ‘normal’ and ‘excessive’ wear and tear.

Getting out of the lease early is, I guess, a more comfortable way of asking how to break a car lease.

Here’s why the leasing company frowns upon early termination of an automobile lease.

Any vehicle’s depreciation is the heaviest in the first two years of driving. Meaning this is when the greatest market value loss occurs. During a lease, however, the projected depreciation of the vehicle (the amount you’ve signed up to use) is spread out equally over the life of the lease.

Because of this, if you wish to get out of the lease early, you will have, from a market value of the car perspective, used up more of the car than you have paid for.

So, it only stands to reason that car leases will carry penalties for early termination. If you decide to lease, resign yourself to carrying the lease to full term.

Next Car Lease Costs