Suppose you suddenly need a new vehicle. You have three options: buying, leasing, or renting. You typically only rent for a short period, which won’t prove ideal in most scenarios. While you still don’t own the car, auto leasing has tons of advantages over buying that gives more financial freedom, for example with trade-ins. You can read a full comparison of the pros and cons on our other blog, “Leasing vs. Buying a Car: What’s Right for You?”.
Though to many of us, auto leasing is a scary process filled with ambiguity and a mountain of paperwork. Especially if you’re dealing with a traditional salesperson, you might find it difficult to trust you’re really getting the best deal possible. After all, you’d be dealing with a slick marketer that’s looking to make a profit off your ignorance. Your best bet is always to walk into the negotiating table armed with the best information possible to get the car of your dreams with a plan to meet your budget needs.
You should attempt to do some research yourself, but let’s be realistic. You have a busy schedule and probably don’t have time to invest in studying the lease process. What do you do?… There are many leasing sites on the internet that provide a new and innovative solution to meet your lease needs. It’s simple: shop online and cut out the salesperson altogether so that you have complete control of lease process! You don’t have to waste time wagering your lease terms back and forth with a stranger. Instead, you select the make and model, mileage, down payment, and term. Then, state-of-the-art programs will auto calculate an estimate for you! After a quick follow up call, you’ll confirm some information and finalize the deal. It’s as simple as that! You’ll finish the whole process within 5 minutes from your sofa, and the vehicle will be delivered to your doorstep within 2 business days. With incredible technology like this available, there’s no need to walk into dealerships anymore.
Still, you might still feel overwhelmed by the prospect of taking the reins of everything in the lease process. It’s a simple process but still requires some level of judgment. You’ll want the most efficient and stylish vehicle possible without busting your bank. So, for your benefit, I’ve developed a guide for five facts you must know about auto leasing. By the end of this blog, you’ll understand key tips and tricks to make the most of any lease offer.
Leasing means you’re paying for the value of the vehicle over the course of the term (or length of the lease in months). This isn’t a flat rate since the value of the car gradually decreases over time after everyday wear and tear. The rate at which a particular vehicle decreases in value over time is known as the “depreciation rate” and fluctuates with the market values depending on the manufacturer. Typically, a new car will depreciate by 20% after the first year, meaning a $20,000 vehicle will only be worth about $16,000. If you lease a car with a high depreciation value, you’ll have a much lower monthly payment, though it will also be worth way less for a trade-in (known as “residual value”). Most cars lose value for good reasons. Perhaps new technology has made specific features obsolete or even unsafe in comparison. You should consider the reliability of the vehicle over time if you want to keep it for longer than 5 years. Depreciation is always an estimate and a significant risk. At any time the manufacturer can release a new model that then lowers the value of older ones or might recall components of the vehicle. The problem is you pay the depreciation value based on the start of the lease, not a flexible percentage.
Lease dealers might also adjust the interest rates for specific vehicles. Keep an eye out for changes in our listings.
Auto leasing is similar to renting an apartment in that the exact terms of the agreement are negotiable. So, put on your poker face and get tough about getting the right deal! Start by gathering research on your desired vehicle. Know the value of every feature inside and out to weigh their worth into the lease deal. You should also get estimates from several competitors to get a range of estimates. Then, double check those estimates against a free online lease calculator. This extra step will give you an objective sense of what the general price should be around – though that’s the highest it should be! Decide on a desired lower price that fits your budget. Now when you enter the lease dealer’s office, you’ll have a frame of mind to reject obviously absurd offers. Don’t get taken advantage of by anyone – including Oz Leasing! Hold us accountable using your own research.
Having the right knowledge to negotiate is one thing – being mentally prepared and confident to call someone out is quite another! Don’t be intimidated or let the dealer do all the talking. Ask lots of questions to make sure they can back up their estimate. Don’t lose your cool and explode on them either. If you’d feel more comfortable, bring a close friend or your spouse along to support you.
Down payments are an advance payment you make on a lease that lower the costs of your monthly payments (generally known as “cap cost reduction”). While it’s a great idea, in theory, it always benefits the dealer more than you. If you ever got in an accident or, heaven forbid, the vehicle was stolen, you would never get this money back. That’s right – down payments are nonrefundable. Even if you suddenly wanted to terminate the lease, the down payment is lost money. Many dealers, like Oz Leasing, allow you make a zero down payment (0%), but some draft contract that requires a 10-20% down. That should be a huge red flag for you.
Instead of placing a down payment, if you chose to invest that money in a financing plan with a separate account in your bank, you’d actually save some money in the long-run.
Auto leasing is more affordable than buying it, but you usually need a good credit score for the dealer to approve you, typically an above 680. However, if you struggle with your credit score, you may have a larger signing fee.
The good news is meeting your monthly lease payments can be an easy way to boost your credit score. All you need to do is commit to paying on time, every time! Usually, if you’re in a crisis, you can renegotiate the terms of your agreement. Just be sure not to get in over your head and sign an unrealistic deal given your situation. Evaluate your finances carefully and consult with your credit union about what’s best for your circumstances.
Remember that residual value? Well, that was just an established estimate by the dealer. But, as I said, anything can change in the market during your lease. If it happens that the value of the car has actually increased by the end of your lease agreement more than it was worth at the beginning, you may qualify for a cash payout. This possibility is huge if you plan to trade in the vehicle at any point. You’ll want to wait for the optimal time to get the most money back out of the dealer. Take some time and study the market trends or consult an expert from the manufacturer. It will be well worth it in the end.
Also, if you drove fewer miles than you paid under the lease agreement, the dealer may opt to turn anything leftover into a cash credit. Make sure that stipulation is spelled out at the beginning before you sign!
There you go – 5 facts you cannot live without if you plan to lease. Always stay informed to make the best possible choice for the car of your dreams. And if you need any help or have any questions when getting a new auto lease, let’s work together to get you the deal of a lifetime!