Car leasing is growing in popularity nowadays for people who wish to use a vehicle without having to pay for a hefty initial payment and pricey monthly fee. You will not own the car when the lease contract expires unless you decide to buy it out in the end for its residual value. If it’s no longer under warranty, you need to spend for the repairs and maintenance out of your pocket. There is also a mileage limit and fine if you go over that. If you feel that leasing a car is for you, here are some tips on how to get the best car lease deal.
Understand important terms
It’s vital that you know the common terminologies used in the car lease business to have a better understanding of what’s offered. This will help you determine if you are being offered cheap car lease deals or not. Here are some of the words to familiarise yourself with.
- MSRP – it’s also called the manufacturer’s suggested retail price or sticker price. It’s the suggested selling price of the manufacturer and one that you will see on the sticker on the window of the vehicle.
- Invoice price – the amount of the car paid by the dealer to the manufacturer.
- Cap cost – also known as capitalised cost, it is the agreed price of the vehicle, including the discounts that you get.
- Money factor – the interest rate on the car lease.
- Buyout price – amount to pay at the end of the contract to purchase the leased vehicle.
- Residual value – the projected value of the car at the end of the term.
- Depreciation value – the difference between the original cost of the car and the residual value. This will also determine how much you will pay for the lease.
Choose the right car
There are various models of vehicles offered for lease. The one with the lowest monthly rate is not necessarily the best deal. Find one that meets your needs and personal preference. For instance, if you need a bigger vehicle with advanced security features, one that is cheaper but does not have what you are looking for is not the right choice. Once you find the right vehicle, compare your options. Add the total amount that you have to pay for the term including the monthly fee, down payment, security deposit, and taxes, etc. to see which will give you the best deal. Sometimes, the monthly rate is lower, but if you compute the total cost of what you have to pay, you’ll realise that you are not saving as much as you think you are.
Like when buying a car, you can also negotiate the cost of a leased car. Note that there are prices that cannot be negotiated such as taxes, registration, acquisition fee, and residual value. However, there are those that you can, and you should try to get them lower. This includes mileage limit, buyout price, interest rate, and capitalised cost.
Leasing a car is a long-term commitment as it will last for years. Make sure that you are prepared, and you are in your best state when finding a vehicle to lease to ensure that you will make the best decision.