Should I Lease a Car?
See the Real Answer to the Unreal Question, Here
I am a long time fan and believer in the value of leasing cars. I have been leasing my own cars since 1988. How many times have you been asked, why lease a car? Probably a great deal more times than you’ve heard anyone ask, why buy a car? In the last 25 years, I have never gotten into a car lease deal I regretted. Sure, there were things I could have done better, but the same is true for buying cars. Experience means everything. My first car lease was a Ford Tempo back in 1987. Despite all the warnings about how you were stuck once you leased a car, I sold the car 1-year before its lease was up and the car dealer that leased me the car closed the sale and paper work for me. Since that day, I’ve leased 14 brand-new cars . While not every new car exchange was the perfect experience, for the most part the transactions have been smooth, painless and accomplished an essential goal for me; getting a new car with full warranty ever 2-4 years. Leasing has allowed me to drive cars that I would otherwise not be able to afford. Don’t get me wrong, I made some mistakes along the way and have done some things I wish I could have done better. Usually, my biggest mistakes had to do with accepting too little for trade-ins. Most importantly, however, I have learned a thing or two about leasing cars that inspired me to write this blog and share them with other buyers. Keep in mind, whether or not you should lease a car depends on a variety of circumstances. Since no two people are the same, the advantages and benefits of leasing cars is not the same for everybody. On the other hand, most financial experts have closed their minds to leasing, so asking them, ‘should I lease a car’, will almost certainly get you a negative response. I hope to clear-up some of the negativity behind leasing and give you the knowledge to make the decision that works best for you. Fortunately, you don’t need to be an expert to learn how to lease cars.
How to Lease a Car
My Four Simple Rules For Leasing Cars
- First Rule: Don’t Buy into Car Leasing Myths. One of the reasons so many people have never tried to lease a car is because there are so many people telling them not to do it. These car-leasing naysayers have either never leased a car before and so they know nothing about it, or they had a very bad experience and assume that is the way it is with all car leases. The important thing to remember is that for every negative car leasing experience out there, there are dozens of equally bad car purchasing sagas. Face it, every investment has risks. Leasing is a way to minimize those risks because you are putting little or no money down up-front. This is just one of the reasons why I tell people to never pay cash for a new car.
- Second Rule: Don’t make a down payment on a lease. You can make any deal a no-money down car lease. This is a rule that I will admit to breaking every now and then, particularly when it comes to using my trade-in as a down payment. It is a psychological lift to get that monthly payment under a certain amount. When I recently leased a Honda Accord, I took part of my down payment back from the dealer in the form of a check to help with registration fees. I used the other part to bring the payment down under $200.00. While it may have made me feel better to have a payment under $200, it really didn’t lower the total cost of my lease. I could have just as easily kept that money in the bank to help with the payments. This leads up to my third rule.
- Third Rule: When evaluating a car lease deal, only worry about the average car payment. The average payment is what you get when you add in any down payments or fees and divide the total cost over the term of the lease. Following this rule helps us avoid getting suckered in by those ultra low, monthly car lease payment advertisements in the newspaper. Read the fine print, then calculate the average payment and you’ll see how good of a deal it really is.
- Fourth Rule: If you drive a car significantly more than 12,000 miles a year, you should probably not lease it. I have never had this problem since my commute distance to and from my job is very close. I am usually able to take 1 or 2 long car trips a year on top of that. If I ever retire and decide to take really long driving trips across the U.S, I will have to consider buying instead of leasing. There are some excellent, no-interest or low interest car loans as well. These are only a few basic rules I recommend to help guide you to getting a better car lease. I offer you a great deal of detailed information on the Monthly Car Lease website, including a glossary of car leasing terms; my leasing guide and in-depth article on How to Lease a Car. In addition to leasing cars, I have a few other interests, hobbies and websites that take up my free time. Please feel free to visit them all:
Car Leasing Myths
Most Skeptics have Never Leased a Car
Though there are a number of car leasing myths and untruths, they all have one thing in common: They usually come from those who have either never leased before or got a bad deal on the one time they tried it and have therefore concluded that car leasing is bad for everyone. . I would bet that at one time or another, most of us have gotten into a bad car deal on either a purchase or a lease. The difference is that one bad car loan doesn’t paint the entire industry bad for the rest of us. In reality, car leasing is much less risky than either buying or paying cash for a car because we haven’t sunken all of our cash into it all at once. Despite, popular believe, there are plenty of good options for getting out of a car lease without taking a huge loss.
Car Leasing is Car Fleecing
How many times have you heard this tired, old motto? Are there people who have gotten fleeced leasing cars? Absolutely. But, there are an equal number of people who get fleeced on car loans and cash purchases. As stated above, the latter two options require a riskier chunk of immediate change. Bad Car Lease Deals are no more common than Bad Car Purchase Deals.
If you Can’t Afford to Buy a Car Don’t Lease One
This motto, perhaps, expresses the most ignorance of all car lease myths. Unfortunately, it is one that is used by many of our, so-called financial experts. The ones who are telling us we need to have ‘X” number of dollars in our bank accounts to live a safe, secure and responsible life. Folks like Dave Ramsey and Suze Orman come to mind. These are nice people who mean well, but unfortunately, they either don’t realize or fail to mention that thousands of very, savvy people, successfully lease new cars every 2-3 years and are preserving cash flow and wisely saving for their retirement while doing so. It is precisely because we are unable to afford the ultra-high cost of a new car loan or put five years of our life savings into paying cash for a new car that we lease cars, instead. In the popular debate on Lease or Buy a Car, not enough consideration is given to maintenance costs of keeping cars for more than 4-5 years. Are there hidden costs involved in leasing cars? Absolutely, but no more so then with buying cars. Car lease offers are prone to many of the same hidden fees such as dealer and handling charges and other misleading, fine-print advertisements that often entice unsuspecting victims into thinking they are going to get something for less than they thought. I’ve outlined some of these hidden, car lease fees below.
Hidden Costs of Leasing Cars
Security Deposit: No one should pay for a security deposit regardless of what type of car you are leasing. While the security deposit is refundable at the end of the lease term, it is simply a way for finance companies to collect more interest out of the loan. Security deposits these days, are rare.
Disposition Fees: This is one I’ve fallen for myself a couple of times. Some dealers charge a rather hefty disposition fee at the end of your lease term, usually $300-$600. Flat-out refuse to do business with any dealer who tries to enforce this.
Military, Graduation and Owner Loyalty Rebates: Either you are eligible for these rebates or you are not. Unfortunately, most of the car dealers promote low payments with $1,200-$1,500 factored in for these rebates whether you are eligible for them or not. So, unless you are a previous owner of the same car brand, a recent military veteran or college graduate rebate, you may not get the low payment shown in the fine print of the advertisement from your dealer. Every thousand dollars affects your payment to the tune of $25.00 to $30.00 a month, so these offers can often make a car lease payment look much lower than it really is. Your best bet is to follow the Monthly Car Lease car lease ratings each month to get a true picture of the actual, Average Car Payment.
Low Mileage Allowance: A good lease should give you an allowance of 12,000 miles per year. Some dealers will limit this to 10,000 miles in order to make your payment look lower. Ask for a 12,000 miler per year. If you are going to go over this, you might even ask for a 15,000 mile lease which should only raise your payment by a few dollars per month.
Excess Wear and Tear: In all my years and numbers of cars I’ve leased, I’ve never been charged for one dime in excess wear and tear, but it can happen. These fees are usually listed in the mileage allowance
section. Most car lease deals allow your typical tire wear and body dents and scratches a quarter or less in diameter. If your car incurs damage above and beyond this, it is best to get it repaired before you turn the car lease in.
Beware of Unusual Lease Terms
The typical lease term is 24 or 36 months. Occasionally, car makers will offer odd terms such as 27, 30, 33 or 39 months. If you live in a state like Colorado, these odd, lease terms will force you to pay an expensive, yearly registration fee twice in one year. In the case of a 27 or 39 month lease, this means you will pay a registration tax twice in a 3 month period. Always ask your dealer to modify the terms to 24, 36 or 48 months to match your yearly, state registration costs. To see which lease term is right for you, visit my Lease Term Guide.
How to Negotiate a Car Lease
Informed with the the confidence that leasing cars is a safe and secure way to finance, it is now time to arm yourself with the information necessary to negotiate a car lease. Don’t worry, there is no need to learn all of the industry terminology, buzz-words and jargon. Refer to my Car Leasing Guide, if you would like to gain a full understanding of Car Leasing Terms. Your first step is to learn what a reasonable car payment is for the model you are interested in leasing. There are plenty of online car leasing resources like Edmunds, which provide listings of car lease payments on all of the car models, from month to month. Unfortunately, these resources usually do not reflect the, actual low payment reflected by manufacturer incentives and offers. These car lease deals can be found online, but it is a lot of work shopping each car manufacturer’s websites to locate the offers on the models you are interested in. This is where I can help. Monthly Car Lease selects and provides listings of the top 30-40 car lease offers each and every month. You can use this list as a starting point to help you negotiate a low payment on the car your are interested in leasing. Negotiating a car lease is greatly simplified when you focus on the Average Car Payment. By doing this, you will not have to concern yourself with down payments, extra fees, etc., etc. These costs are all factored into your average payment. When negotiating with a dealer, start with a payment that is substantially lower than what you are willing to pay. Don’t be concerned about offending the dealer with an unreasonable starting payment. It works both ways, and more often than not, dealers are going to be the ones who offend an informed customer with their first offer. Before you visit your dealer, Use my Car Lease Ratings Guide and Lease Value Ratio to help you determine a payment that reflects an excellent value.
Remember, my car lease value formula is only based on the manufacturer’s incentives and offers on their website. These payments are the least you should expect to pay for your desired vehicle. Always ask your dealer for a better deal than what the car maker’s website shows. During the negotiation process, always insist that the dealer is open and transparent about any of the hidden fees that we’ve talked about in the section above.
Leasing Cars is a worry-free experience when you equip yourself with basic, easy-to-use knowledge beforehand.