Finding the best car to lease is not difficult. Leasing is a good way to drive a car without the responsibility of actually owning it and worrying about its market value once it's ready to be sold. People also love the fact that they can get a new car every few years or so.
How Leasing Works
Most car dealers offer the option of leasing a car instead of buying it. This means using the car for an agreed upon amount of time. Instead of paying off a car loan, you make monthly lease payments that are usually cheaper than loan payments. Also, qualifying for a lease is easier, as they have less stringent rules.
Usually, leases have mileage limitations. Increases to these limitations may be arranged, but the lease payment may be higher. Once the lease period is up, you are given the option to either return the vehicle to the car dealer, or purchase it.
Many people enjoy this flexibility. Once you know how leasing works, the next thing you have to figure out is what car to lease.
Affordable Cars to Lease
Finding the best car to lease may sometimes mean finding the cheapest car to lease. While most lease terms are pretty much standard across the board (the mileage limitation is almost always about 12,000 a year), the advantage comes in the make and model of the car.
The least expensive car to lease may be the Toyota Corolla. At an average of $150 per month, this is probably the best deal for a new car on lease.
In the long run, the most affordable car to lease has to be the Toyota Prius. It averages around $210 per month, depending on the dealer. But the affordability lies in its low maintenance and low miles per gallon, at 51 mpg on the highway, and 48 mpg for city driving.
Luxury Cars to Lease
More people lease high-end cars than non-luxury cars. The logic is simple. Since luxury cars are more expensive and represent a bigger investment, they are easier to lease than to purchase outright. People who drive such cars tend to want the latest model, so a lease allows you to drive a new car every few years. Because there are so many luxury cars on lease right now, there's no definitive best luxury car to lease. It all depends on personal taste and style. Perhaps the best would be the Mercedes Benz C-class, which combines the classic feel of a Mercedes Benz with all the new technological amenities available today.
When choosing a car to lease, ultimately it all boils down to who has the best deal at the time.
Understanding Lease Terms
A little preparation goes a long way toward gaining the necessary information to save money.
Choosing Closed or Open-End Leases
In a closed-end lease the residual vehicle value is preset at the time the contract is negotiated. Any excessive mileage, wear-and-tear, or damage during the contract time will cost the consumer at expiration. The advantage is the vehicle may have a market value higher than the original calculation. The consumer may benefit through a lower purchase price if selecting a purchase option at the contract's end.
Open-end leases call for the vehicle's residual value to be determined at the end of the contract. If a consumer has maintained the car exceptionally well, the higher residual value could result in the leasing company owing the consumer money. Excessive mileage and any damage experienced will need to be paid for by the consumer. On average, open-end leases do not result in savings for consumers because the nature of a leased vehicle's normal use during the term of the contract usually determines a value that is less than the arrived-at figure.
Lease Calculator Equation Formulas for Breaking down Costs
There are many costs associated with cars for lease. It is important to know the different fees and costs of the lease contract in order to get the best auto lease possible. As with car loans, each lease contract will be different depending on the person, car and lease partner. The calculations of the payment are not difficult and there are many calculators available that can be a good tool to help determine payments.
There are several factors used for the lease contact. These include the interest rate, MSRP, residual value of the car and the lease term. Each financial institute or car dealer will be able to provide these figures. Most leases are typically for brand new vehicles and last for about three years.
The main figure is how much of the car value you as the leasee will use up over the course of the lease. This figure is calculated by multiplying the residual value and the MSRP. Then subtract this figure from the negotiated price of the vehicle. So if the residual is 30 percent, the MSRP is $25,000, and the negotiated price is $22,000, then over the course of the lease the value that is used up is $14,500 of the car's value.
Take this calculated car value number and divide it by the number of months in the lease. Also include the interest, which is calculated by the residual value of the vehicle times the interest rate. Add all the numbers together and you get the monthly payments. A calculator makes this breakdown very easy.
Driving Away Satisfied
To get the best value for your money and drive away satisfied, there are a few things that you should do and know.
Research the Proper Car
Many cars can be leased, but only some will be great values that will save you money. When you lease a vehicle, you pay for its use and depreciation over time. Look for a car that will have a high residual value at the end of the lease. The less a car depreciates and the more it's worth, the lower your monthly payments will be.
Don't Be Afraid to Bargain
It is possible to get a quoted retail price on a leased vehicle that is below its MSRP. Talk to the salesperson and see if you can convince him or her to give you a sub-MSRP retail price. The lower the retail price on a leased car, the more money will end up in your pockets each month.
Look for Assumptions
An auto lease assumption is essentially a takeover of a lease. Generally, leases run from three to five years. Sometimes, lessees want to get rid of their leased vehicle before their lease term expires. If you search for leased vehicles offered by these people, you can get a good deal. You'll only have to make the remainder of the monthly payments, which can end up being a very short-term commitment. Just remember to take note of the amount of miles left under the mileage limit, and be ready to look for a new car in the near future.
Understand Your Limits
There are three major drawbacks to an auto lease: mileage, use and modification limits. You must understand these limits and be able to function within them if you are to be satisfied with a car lease. Usually, you'll be limited to driving 12,000 to 15,000 miles per year in a leased car, with additional miles costing 20 to 50 cents each. You'll also have to monitor your driving habits, remembering not to beat the car up and drive it like it is a race car. Doing so will have you paying excess wear and tear charges. Finally, you must be able to resist significantly modifying your vehicle. Installing a new audio system or repainting a leased car is not a good idea, as you're required to return the car to the dealer in the same general condition as it was received.
To drive away satisfied with a car on lease, you need to select a worthy vehicle, get a good quoted retail price or assume a decent lease and you must understand the limits of the lease. If you do these things, you'll be happy with your leased vehicle and the value you get for your money.