* What car leasing means, how it works, advantages and disadvantages of car leases
* We’ll review the best free discount new car quoting web sites like InvoiceDealers, Cars.com, Yahoo!Autos, Edmunds.com, MyRide.com and CarsDirect, to get you new car price quotes
* How to get out of your Car Lease via an early lease termination without paying any penalties
* Swap a lease strategies: How to use sites like Swapalease.com and LeaseTrader.com to transfer your Car Lease
* Our free Car Lease calculator Excel spreadsheet download to help you make informed decisions on auto leasing
* Reviews of Car Lease calculator tools Expert Lease Pro
* Who should not lease a car
It does not matter whether you lease or buy the car, it still depreciates the same 50% in 36 months.
What Car Leasing Means
Instead of buying a new car with a bank loan, you rent or lease the car for 3 or more years then give it back to the leasing company at the end, with a residual value of about 50% of when the car was new. Auto leasing is a way to drive more car than you can afford and change cars every 3 years without hassles or trading in. If you understand all the terms as I explain them, and study the sample exercises in this article, you will be poised to negotiate a value added lease. But overlook one detail or forget to check their math, you’ll lose your shirt. I’ll show you how to be a proactive deal maker and level the car leasing playing field. When you lease a car, the dealer sells the car to the leasing company who leases you their car for 36, 48 or more months. The dealer handles all the financing paperwork in the lease, you usually don’t talk to anyone at the leasing company at all. When we talk about the dealer financing your lease, we are referring to their handling of the paperwork on your behalf, you normally are not leasing a car from the dealer, but from the leasing company.
The leasing company can be a bank, the car dealer, or a car manufacturer like Ford Motor Credit. The selling price to the leasing company is often called Capitalized Value, or Gross Cap Cost. You can reduce your monthly lease payments by reducing the cap cost. This is called cap cost reduction, and can be accomplished by haggling a lower selling price, and by putting down cash to reduce the cap cost. Your monthly lease payments when leasing are lower than your car loan payments would be when buying the car, because you are paying off only 50% of the car’s value on a lease, and paying off 100% of the value on a car loan. In an auto lease you are only paying for approximately 50% depreciation + interest, but at the end of a 36 month lease you have no equity in the car, you’ve paid hundreds in useless in dealer acquisition and disposition fees, and now you have to do it all over again on your next lease. Had you bought the car with a 36 month loan, then after 36 months you’ll have $15,000 equity in a $30,000 car, but now you have a used car that you need to sell or trade in order to buy another car. A Vehicle depreciates the same 50% over 3 years whether you buy it or lease it.
Empower yourself with lease payment quotes, don’t be a victim of your next auto lease
DON’T BE MISLED by services that claim to provide you with comparative quotes. Look closely. Do you see a list of lenders? Probably not. Do you see a credit application? Probably so because the same service that is giving you a quote is trying to lease you a vehicle! That means the quotes you see represent the terms on which THEY will lease you a car, and NOT necessarily what the most competitive lenders in the market are offering through most any dealership.
Should you buy your leased car at the end of the lease or should you dump it?
Many people ask me if they should buy the car at the end of the lease. Usually the end of lease purchase price, known as “Residual Value” is $3k -$4k more than actual market value of the car. Smart shoppers know the buyout price is thousands over market value, and will turn in their leased cars to the leasing companies instead of buying. That caused used car values to tank unexpectedly in 2001-2003. Many people forget there is also a $300-$400 non-negotiable “purchase option fee” buried in your lease contract if you buy the car at the end of the lease.
Your strategy: I would wait until the end of your auto lease and ask the leasing company if they will sell the car for less. Offer less than market value for the car. Many leasing companies are arrogant and still play hardball. If you leased and took it on the chin going into your lease or if your gross cap cost was MSRP, don’t give them one cent more. If they don’t budge on the buyout price, exact your revenge on them by dumping another used car on them where they will lose $2000-$4000. Don’t let them scare you with threats over mileage penalties, or non-matching tire fees, it still beats paying $4000 over market price for a car. They’ll call you in advance to pressure you to buy the car at lease end. Research the value, dodge their calls, and show up at lease termination with a check in the amount you want to pay. Haggle smartly, telling them you know used cars are worth a lot less now. With no sale they have to dump the vehicle at auction. Don’t pay them until they sign a buyer’s order first! If they reject your offer, walk away, game over. Now they have no time to strategize, the deal is over and you pinned them against the wall. Maybe they’ll chase after you before you drive out to give you the lower price, but if not, just keep on driving with a grin on your face.
Watch out for mileage limits!
Most leases crossing my desk sent in by our visitors limit you to 12000 miles/year, I’ve also seen some as a low as 10,000 miles. Many people end up owing thousands in mileage penalties at the end. The better car leases will allow you 15,000 miles per year. Some dealers arrogantly email me what an idiot I am for pointing this out, and they try to Jedi mind trick you into buying your excess mileage ahead of time to protect yourself from over mileage penalties. But the this is an icing on the cake scam, because if you don’t use those extra miles that you paid extra for up front, you don’t get your money back for them. So forget about falling for their tricks and “buying your miles up front”. Just haggle with them to allow 15,000 miles per year on your lease, problem solved. If they refuse, then leave.
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com