When it comes to leasing a car, it is everything you do not know that could end up costing you a lot. Auto leasing is at a record high; however, before you think about the low monthly payment on a leased car, you need to learn more about what you’ll be getting. By following our leasing tips, you’ll be sure to receive the absolute best deals on a lease from your local car dealerships.
Focus on 3 basic components of the lease deal: sale price, residual value and the money factor. These components are critical to ensuring you get the best car lease deal possible.
1) Negotiate the Lease Capitalized Cost:
The biggest misconception that exists among car lessors is that you do not need to negotiate the car’s sale price the same as if you are buying it. Huge mistake: The sale price of the vehicle is a key factor in your car lease monthly payment. In leasing terms, the final sale price is called the ‘capitalized cost’, the lower it is, the less the monthly payment will be and the better lease deal you will get!
2) Research the Vehicle Residual Value:
The higher the residual value of your vehicle, the lower your auto leasing monthly payment. Your monthly payment is essentially the difference between the Capitalized Cost (i.e. actual sale price) and the Residual Value of your vehicle. Automotive Lease Guide supplies this data on all new cars and makes, not just for specific models and auto manufactures for residual value excellence. Normally a car will depreciate between 30-40% of the original sale price during the first 3 years of ownership.
Here’s an example: 30% depreciation of a $30,000 vehicle = $9,000, while 40% of $30,000 = $12,000. That’s a difference of $3,000 that you will pay during your car lease agreement. Selecting an automobile with a good residual value will help you save in the long run on a car lease deal. It will mean a lower monthly payment and a lower price for the lease.
3) Remember Money factor = Interest Rate:
The money factor, which is also known as the lease factor or lease rate. To convert an annual interest rate (APR) into a money factor, and vice versa, is relatively straight-forward: you multiply the money factor by 2400 and that will give you the interest rate. You should expect to pay the same interest on a new car lease as you would on a car loan.
Remember, that even the best lease deals mean that you are agreeing to make consistent car monthly payments, keep the appropriate level of auto insurance (which is typically full coverage), pay any applicable taxes and state licensing fees, and take good care of the automobile until the end of the lease term.
Most importantly, your lease term is for a specific number of months – typically 24, 36, or 48 months –you’re also expected to fulfill the entire contract. If you decide to terminate the lease contract early or, at the end of your car lease, your car has any damage or extra mileage over the automobile lease agreement-specified limits you will be charged significant penalty fees.
