Finding the best car lease deals is part of the process in discovering the best offer for you. Many lenders are offering different deals for the cars they have available to lease. Knowing this should allow you to conduct your research with the knowledge that the right lease opportunity is at your fingertips.
How to Research Car Lease Deals
Today, the best place to research deals is online. The Internet offers a wealth of information on basically everything you would want to know about getting the best lease deal on a new car. However, you do have to know exactly what type of vehicle you are looking for, especially if you are like us and want a specific year/make/model/trim/color combination.
The first thing you should do when trying to get a deal on an auto lease is look for a car with a high residual value. The residual value of a car is its estimated value at the end of a lease term. The authoritative source for this information is the Automotive Lease Guide, or ALG for short. When you lease a car, you pay for its depreciation and use over a set amount of time; so, if you can find a car that will maintain a high residual value, you will end up paying less money per month for your leased vehicle. The next thing you should do is bargain with the car salesman regarding the car's quoted retail price. All new cars come with an MSRP (Manufacturer's Suggested Retail Price). If you are a cordial and persuasive customer, you may be able to get the auto dealer to give you a special retail price for your leased vehicle. If you can get a car's retail price to be quoted lower than its MSRP, less money per month will be taken out of your pocket.
In addition to searching for cars with high residual values and doing your best to get sub-MSRP retail prices, you also need to know a few things about the terms of the typical lease to keep your car lease as a deal. First, you must know that, as opposed to buying a vehicle, leasing a vehicle comes with a no-modification stipulation. This means that you cannot substantially modify a leased vehicle in any way. Swapping audio systems, tinting the windows, applying some bodywork and installing aftermarket parts are all big no-no's when it comes to auto leases.
To get a great deal on a car lease, always look for a car with a high residual value and a sub-MSRP retail price. Both of these things will lead to lower monthly payments. You also have to remember to take care of your leased vehicle, as excess charges always threaten to diminish any deal you may attain.
These steps should help you research car lease deals and determine your best options.
- Get your credit score. Obtain your credit report from one of the three major reporting agencies—Experian, Equifax or TransUnion—to correct any inaccuracies before beginning the car leasing process. To benefit from the best rates, request and maintain your credit report annually. Federal law requires that each of the three credit reporting bureaus provide you with this information upon request, free of charge. The higher a credit score, the better a deal can be made. Knowing your credit rating and what is on your credit report helps you address outstanding issues as well as eliminate erroneous items. This will work in your favor when seeking a car lease.
- Determine your shopping criteria. Select a few vehicles to do some comparison shopping by either similar pricing or similar features. If pricing dictates your search, always look at the Manufacturer's Suggested Retail Price (MSRP) for a starting point for the overall car cost. You will also want to do a little research about capitalized costs and invoice pricing before negotiating a deal.
- Perform a keyword search. Whether you have good credit or bad credit, you will be able to narrow your search to those lenders who work with people like you or who are in your situation financially. Make sure that the keyword search is specific to the type of lease deal that you are looking for. If you have bad credit, search for sub-prime lenders that offer bad credit lease financing. Keep your search as specific and narrowly focused as possible for the best results.
- Select a vehicle with a high residual. A vehicle's residual value has a great effect on the financial costs for any lease. The vehicle's residual value is its worth at the end of the contract. Certain vehicles - usually ones within the class of commonly referred to as "economy sizes" will have lower residual values than models with considerable features or luxury cars. Check out a car's residual value online at places like Edmunds or Kelley Blue Book. Vehicles have different depreciation values usually running up to 30 percent in the first year of the lease and than an additional 15 percent the second year. Lower depreciation adds to a vehicle's residual value and also affects your monthly payment.
- Identify the type of lease. Basically there are two types of car leases - closed or open end deals. Closed end deals set the vehicle's residual value at the time the contract is negotiated. When the contract expires, you pay any excessive mileage fees. With an open end deal, the residual value is determined at contract end. If the discovered value is better than market, the leasing company owes you the difference. If it is less, you owe. Typically, even with regular wear and tear, residual values determined with open end leasing result in lower values. Unless your leasing needs and your ability to care for a vehicle, returning it in tip-top shape to gain the utmost value, an open end lease is not recommended.
- Compare interest rates. Interest rates are an important consideration when comparing lease offers. The longer the lease contract, the higher the interest rate. This is due to the depreciation expense that the dealer carries the moment you drive the car away. You should understand how the interest rates differ between offers and whether an offer being made represents the lender's best effort. Furthermore, keep in mind the factors that will influence the lender's decision in the interest rate offer. If you have a poor credit score or some items on your credit report, these aspects will cause your interest rate to go higher. Understand what is reasonable for interest rates based on your financial profile so that you can get the best possible number.
- Check out the money factor. The money factor is an interest rate converted to APR (Annual Percentage Rate) by multiplying it by 2400. Example: An automobile money factor of .00220 would translate to a 5.28 percent APR. Any rate lower than the average national new car interest rate (go to Bankrate.com) is a rate you should be looking for that will help make this a good car leasing deal.
- Look for subvented offers. The best deals for car leasing will include an offer called subvented, wherein a deal is made with a combination of high residual value, low money factor and discount pricing. A deal like this will be a genuinely good negotiated one resulting in a low monthly payment making it an attractive offer.
- Sign up for notices. Many manufacturers, and leasing companies, will keep people informed about the special deals that they have coming in the future. Sign up for the notices to be delivered in your email inbox. This way, when the leasing company offers a special rate, or introductory offer, you will know about it. Finding car lease deals online requires a little bit of patience, but in the long run you will be saving yourself a lot of money.
- Compare terms and conditions. Does the lease offer have any unusual conditions or terms that are out of line with what is generally accepted? For example, if you are required to place a large deposit prior to the purchase of the car, or must pay a high amount for additional miles incurred over the annual lease limit, you may want to consider a different lease opportunity. You should never leave the lease terms to chance without at least attempting to read the fine print and asking questions where appropriate. It is only through this process that you can determine whether the terms for one offer stacks up favorable or not against another lease offer.
- Check for rebates. Always check a manufacturer's website for current deals that might include purchase and lease rebates. These may not be known, or offered, by your selected dealer. Awareness of instant and mail-in rebates can lower the total cost of the financial arrangements made for your leased vehicles. Normally, third-party issued rebates are applied toward a down payment. Manufacturers offering a rebate through their captive finance companies like Ford Motor Credit or General Motors Acceptance Corporation will add the rebate to the vehicle's residual value. Always be wary of dealers claiming rebates are never available for leasing arrangements. Some, in fact, are specifically engineered for people seeking to lease a vehicle. Always make sure a factory rebate comes directly to you and not to the dealer.
Learn the Language
Familiarize yourself with leasing terminology:
- Capitalized costs are all items of value included in a lease that are financed.
- A capitalized cost reduction is the down payment used to reduce the financed amount.
- Termination or disposition fees are charged at the end of the contract when the vehicle is returned to either cover disposal or auction.
- Gap insurance refers to that insurance a consumer takes out to cover cost owing more than the car is worth in the event of total car loss from theft or other action.
- Inception fees are charged for filing the legal paperwork associated with a lease.
Knowing what you are getting into if you are serious about leasing will help tremendously. Use the above as a guide when you set out on your research.
Car Leasing Term Types
There are different types of car leasing deals that a consumer can look into to get the terms and prices that work for them. These terms differ to give the consumers different options to best suit their needs, budget and vehicle tastes. Here are a few of the different car leasing term types available to you as a consumer.
Close Ended Lease
A closed ended lease is the most popular of all the different types of car leasing deals. This type of term allows you be able to walk away from the vehicle after the term of the lease is over with no further financial obligation. You will not be held liable for any difference between the lease agreement and the outstanding value of the vehicle. You can simply turn in the vehicle to the dealer and walk away free and clear of the car.
The only drawback to a closed ended lease is that while you are not responsible for any deficit between the lease agreement and any depreciation in value, you will still be held liable for other extras. If the car is not regularly services, or has excessive wear and tear, there will be fees associated with this. Also, with the initial lease agreement there will be a mileage allotment. If you have gone over this number you will be paying fees up to .25 cents for each mile over. This can be a substantial fee if you are not careful.
Open Ended Lease
An open ended lease is the opposite of the closed ended lease. Here the lessee is responsible for the difference between the value estimated at the signing of the contract and the actual depreciated value of the vehicle. This is commonly referred to as an "end of lease" payment and protects the dealer against any loss they might have to accrue because of the lease. An open ended lease can also be a benefit if the market value is more than the estimated value. It is a risk to enter into this type of term, but if this does happen then you could end up with a refund. Another benefit to this type of agreement is that there are no mileage restrictions on the car. If you are involved in a business where you are driving a lot, or take several trips to visit family, you might want to consider this type of lease term.
Single Payment Lease
This is something that will make sense if you can afford a large payment upfront. This is an agreement where you pay a large lump sum at the beginning of the lease agreement to avoid any interest charges.
Short Term Lease
In the event that someone returns a leased car before their contract is up, you may be able to drive off the lot with a reliable car in a short term lease. This type of lease is usually for a term of about 12 months and is for the same terms as the original lease contract. If you cannot afford a new car, or only need a vehicle for a short period of time, then a short term lease agreement is a great option.
The Benefits of Leasing
One of the benefits of leasing is that very often it results in a person being able to drive off the lot in a new car they might not otherwise be able to afford if they purchased the same car. For people who regularly want or need a new car, the benefit of being able to get into that car often outweighs any potential disadvantages to leasing.
Many leases are for a few years and at the end of the lease, you need to either turn in the car and find another car to either purchase or lease or, alternatively, keep the car but pay off the balloon payment due at the end.
For people who use their cars for business, they may find it possible to expense a monthly lease cost for their taxes or write it off as a business expense. This can be an especially attractive prospect for individuals who really need a current car for their job, like real estate agents.
When a car lease is advertised, the emphasis is on the potential monthly payment amount. However, once a customer is in the showroom, what usually becomes obvious is that the car that is advertised is not the car that the lease will ultimately be written on. If this is the case, then it is important to understand the deals of the lease, including the limit on yearly or total miles, the total price of the car and the balloon payment that will be due at the end of the lease. For individuals who regularly need a new car for work purposes, leasing is one way of ensuring that they will always have a new car at their disposal.
What Is the Best Car to Lease?
When looking at cars for lease, you should realize that not all cars are created equal. Some cars are better suited to lease than buy. This is due mostly because of the rate of depreciation. It is determined that a car will lose 50% of its value over three years. This means that if you lease a high end car, you will only have to pay on half of the value rather than the full value. Here are a few of the best types of vehicles to lease for the best mileage.
- High-end exotics. Vehicles like Jaguars, Mercedes and BMW make great cars for lease options. While these vehicles retain a little bit more of their retail value after three years, they will still depreciate to the point where you will owe more than what they are worth. Leasing these types of vehicles means that you will be able to save your money and only pay the actual value of the car.
- High resale values. Some cars just retain more value than others. For instance, a Mini Cooper will hold more value than the similarly priced Kia Amanti. Before entering into a car lease for a new car, look at the overall resale value of the car. This will help you keep your payments lower and secure a great car for lower than similar priced cars.
- Sport utility vehicles. When looking at cars for lease, a consideration to look into is vehicles that are highly sought after. For the last few years, and for the foreseeable future, the sport utility vehicle is one that will hold its value after a 3-year lease better than a standard 4-door vehicle. However, there is some risk with this. A vehicle that is saturating the market will drop its value more than one that is not as widely distributed.
The 5 Best Makes for Car Lease Deals
Several auto manufacturers that have been highly competitive in the car lease arena for the past few years:
- Toyota. Toyota remains one of the best car leasing companies in the United States today. They continue to offer major models for good lease rates including Camrys, Tundras, and Corrollas, in addition to popular models like the gas-saving Yaris, Matrix and RAV4. In an attempt to seduce car shoppers who have been stunned by the economic downturn and are cautious about spending money, Toyota continues to offer incentives in the form of excellent car lease options that vary from region to region.
- Honda. Honda and Acura also continue to offer generous lease deals through the summer in an attempt to draw out cautious car shoppers. Not only has Honda substantially reduced their monthly lease payments, but they have also increased their mileage allowances and now have easy payment terms that include automatic payment plans and online account access. In addition to lease deals on almost all Honda and Acura models, Honda also offers leases on certified-used Hondas and Acuras, and a special new graduate leasing program and a Leadership Leasing Program for individuals currently leasing a Honda or Acura. Both of these programs offer special incentives to tempt individuals to lease Honda and Acura vehicles.
- Hyundai. Hyundai continues its drive to be on the leading edge of car lease deals. In addition to their unprecedented purchase incentives, they are also offering extremely attractive lease rates on their Genesis and Elantra models, starting with monthly lease payments of around $240 per month.
- Volkswagen. VW also continues to offer strong vehicle leasing programs, especially for the Jetta, which is now being marketed at a low $189 monthly lease payment amount. Other strong contenders are the Beetle and Rabbit. Almost all of their other models are competitively offered in the $200 to $299 per monthly lease payment range. VW has continued its tradition of offering cars at reasonable prices that are good quality and have a dedication to safety standards. VW is the fourth largest auto manufacturer in the world and stands strong in the automotive industry even today.
- Audi. As with the past several years, Audi has kicked of its Summer of Audi lease program and is now offering most of its models with no money down. Consumers can shop at Audi dealerships to find that almost every model has been not only marked down in price, but their overall approach to leasing is to do whatever they can to work with customers to entice them to lease a current model and drive it off the lot that day.
Lease Deals to Expect Based on Your Credit Score
Finding the right new car lease deals can be easy or hard based on your credit score and credit history. If you have always paid your bills and taken good care of your finances, you will likely find yourself in a position to qualify for cheap car leasing with low interest rates. If your credit score is tarnished you may still qualify for used car leasing deals, but will pay a higher interest rate than those with a clean credit history.
350 to 499: Very Bad Credit Score
With this credit score, you probably will not be able to find a legitimate car loan. A credit score in this range usually will suggest to lenders that the only items currently on your credit report are unpaid utility and medical bills, liens and judgments, and collections activities.
500 to 549: Bad Credit Score
If your credit score falls into this range, you can still get a car loan if you have a considerable down payment and a long, solid job history.
550 to 599: Same Credit Score as 1/3 of Americans
If your credit score falls into this category, and is 560 or less, then many banks will not submit your application for a loan. If it is over 560, you might be able to get an auto loan, but you will have to have a down payment, be willing to pay a higher interest rate and have a good job where you have worked for a significant amount of time. You will have to prove that your debt to income ratio is no more than 45 percent.
600 to 649: Below Average Credit Score
If your credit score falls into this range, although it is considered a below average score, you can still be approved for many different loans and credit cards as long as you have some open lines of credit that are reported in good standing. If your credit score falls into this range, you should go ahead and apply for the car loan that you want.
650 to 699: Average Credit Score
If your credit score falls into this range, you are considered to have average credit and should be able to get some good interest rates on loans and credit cards. However, you might not get the lowest rates.
700 to 749: Preferred Credit Score
If your credit score is in this range, you are in the preferred credit score range. You should be able to open a credit card with very low rates, and you will be likely to obtain pre-approval for a home loan. You should also get a very low interest rate on any car loans. Anything over 720 will typically receive the best deals.
750+: Rarely Seen/Perfect Credit Score
If your debt to income ratio is not too high, a credit score of 750+ will allow you to enjoy the lowest possible interest rates on credit cards and car financing. You will also enjoy the lowest rates on a home loan. With a credit score this good, you can purchase two cars on credit if you want to.
Car Lease Deals or Steals?
There are many car lease deals on the market today—you see them almost every time you watch television for any period of time. However, before running out to sign a car lease, it is worth a close examination of the fine print to determine whether a lease is a deal or not.
Advertised Car Lease Deals
In many cases, the advertised lease is what prompts consumers who are interested in leasing or purchasing a new car to go to the showroom. However, usually the advertised lease deal is not the car that most customers actually want to own. In many cases, the advertised deal is a stripped down lower-valued car. Additionally, the advertised lease usually also includes only the minimum number of miles-usually 10,000 miles per year. For a 3-year lease agreement, this adds up to only 30,000 miles, which would be extremely difficult limitation for most individuals.
For most people, adding the features that would make the car into a car they would really like and would meet their needs results in adding at least a few hundred dollars to the monthly lease payment, turning what seems like a really good advertised deal into an unattractive and burdensome prospect.
Another aspect to consider is a required deposit. In a lease contract, the monthly payment is actually a rental payment, since in actuality leasing is simply renting a car for the length of time of the lease contract. A deposit is an up-front rental payment that cannot be recouped if something happens to the car.
Limits Can Crush a Deal
Some of the most important things to know about car leases are the limits that usually accompany them. There are three types of limits you need to be aware of: modification limits, usage limits and mileage limits. First, you've got to stay away from modifying a leased vehicle. Doing things such as painting it, installing some new audio equipment, doing some considerable engine work, etc. can cost you a lot of money when you return the vehicle at the end of the lease. You always want to make sure that you give the vehicle back to the dealer in the same condition that it was in as when you got it.
Next, you must drive the car with care and responsibility. Slamming on the accelerator pedal at every green light, jamming on the brakes at stop signs and taking extremely sharp turns will put some unneeded wear on your car. Avoid race car-like driving, unless you want to pay for excess wear and tear charges at the end of your term.
Finally, you must always be aware of the mileage you put on a leased car. Generally, you'll have to stay under 15,000 miles per year when driving a leased vehicle. Additional miles will cost you 20 to 50 cents each, and these excess costs can do a number on the lease deal you worked so hard to get.
Getting specials and deals on auto leases are not very difficult things to do, provided that you educate yourself a little bit and are unafraid of some bargaining. However, if you are not responsible with your leased vehicle, your deal will vanish before your eyes. Always remember to look for car's with high residuals, do some good bargaining, and be aware of a lease's limits.
Cheap Car Leasing Deals: Average Rates to Expect
In addition to your credit score, the availability of cheap car leasing deals depends on the model of the car and its age. When you sign a car lease, you agree to make monthly payments, have the right insurance, pay vehicle licensing, fees, and take care of the car for a precise number of months. This is usually around twenty-four, thirty-six, or forty-eight month leases. You are expected to honor and keep the lease agreement for the whole leasing term and will have to pay extra fees if the lease is broken by you. Car leases are not different from other types of leasing in the fact they cannot be broken easily or by a vehicle exchange. Though, you can expect to pay anywhere between a few hundred to over a thousand dollars depending on the lease and car.
How Dealers Set the Price
When leasing an automobile, you arbitrate the cashing price with the dealer. It is not matching the sticker price, and it is not true that the sticker price can be lowered. The sole time you would not need to arbitrate the price is when the dealer is presenting a distinctive advertising bargain. The cost and elements of the lease are set prior in order to entice your business with them.
You can get the best car lease deals from Edmunds, and ask an invoice dealer as to what the going rate is. From Edmunds you can get previously discounted price quotes. A regional and local dealer who has the car can tell you more info about the car and the price range they are leasing it for.
This will be the price your lease will be grounded on and built around. You can also use sites like CarsDirect for more info and price quotes. You can also visit showrooms to ask for more info on different models and their car lease price.
Setting up the Lease
Once you have an agreed price on the lease, you will go to the dealer, pay down on it and sign the lease. Then you will be allowed to drive the car off the lot and use it regularly. The price that was agreed upon will be your monthly rate you will pay.
When you begin to make monthly payments, you will get a bill and have to send in the check or credit card info to them with the slip they provide you with for that purpose. Once they get it, they will mark off so much as been paid. As time goes on, the less you will owe on the lease.
You will only contact the dealer or leasing company again if your car runs into issues. Each company will have their own protocols when it comes to this, so you have to contact the leasing agency for more info on how this will go. Pretty much after you sign the agreement, you will be done dealing with them and expect to make monthly payments.
However, once the lease is up, you will need to either release it or buy a car. That will be up to you, and you may be able to get a price on a previously owned or leased car.
Controlling Your Leasing Costs
Finding a good deal on a lease is only the beginning of managing your leasing costs. Here are some tips to help you prevent paying extra when the lease is up.
- Drive with care. Beating up your car and racing it up and down the street is certainly one way to ruin any type of deal that you may have gotten on your lease. Leased cars are assessed at the ends of their lease terms for any signs of excess wear and tear. Frequent heavy acceleration, hard braking and sharp turning will all lead to high levels of wear on your car. Sure, have some fun while driving your vehicle, but remember to maintain a certain level of responsibility when driving to avoid these extra charges.
- Go easy on road trips. Most leased vehicles come with a 12,000 to 15,000 yearly mileage limit. Going over this limit can cost you an additional 20 to 50 cents per mile. If you go way over your allotted mileage limit, these extra charges can stack up and end up being deal breakers.
- Don't modify. When you lease a vehicle, you are renting it. As opposed to buying new or used vehicles, leased vehicles must be returned to the dealer after a certain amount of time. Because lessees do not actually own their vehicles, they are not permitted to perform any substantial modifications to the vehicles. These types of modifications include changing the car's bodywork, significantly altering the engine, installing aftermarket parts, etc. To keep the deal you received on your car lease, be sure to return the car to the dealer in the same shape as you got it.