Before You Lease a Car, Review This List
If you are considering leasing a car, here are some tips to help you get the best deal.
* Start like a buyer. Do what you would do if you were buying a car to keep forever. Go to the library, check out the Consumer Reports auto buying guides to see which cars hold their value, require few repairs and are loved by their owners.
* Once you decide on a car, investigate the price. Again, you can refer to Consumer Reports or a recent Kelly Blue Book, which is also probably stocked by your library. You also need a copy of Automotive News, which lists “dealer incentives.” Dealer incentives are commonly called “hidden rebates,” says David Breslow, president of Auto Purchase Consulting in Los Angeles. These rebates can be as much as $14,000 on a new Jaguar. The upshot of a hidden rebate is that the dealer may cut his price below factory invoice and still make a substantial profit. If you don’t know that, you could end up paying too much.
* Check out financing rates. The rates play heavily into the financial viability of a lease. You need to know what a reasonable rate is before you walk into the dealership.
* Negotiate terms before price. Ask to see a blank lease. You want a closed-end lease that says you can buy the car at the end of the lease term for a specific price or turn it in without financial penalty, assuming the car has sustained only “reasonable” wear and tear. Some leases--usually called open-end leases--make you financially responsible for additional depreciation to the car. In other words, you could owe the leasing company several thousand dollars at the end of the lease--and you won’t have a car to show for it.
* Figure your expected mileage. Most leases specify how many miles you can drive without racking up additional charges. The added charges typically amount to 12 cents to 15 cents per mile. (If you drive 10,000 miles more than the contracted maximum, you owe the leasing company $1,200.) Negotiate the number of miles you’ll need based on your driving patterns.
* Figure how long you’ll want the car. Never agree to a five-year lease if you don’t want the car that long. People who back out early pay tremendous financial penalties.
* Ask about the residual. This is the amount you would pay if you bought the car at the end of the lease.
* Do the math. There is no reason to talk price anymore, because if you’ve determined the price of buying the car, financing rates and the residual, it’s only a matter of plugging in the numbers to determine the monthly payments and, if necessary, the down payment. But to determine the payments, you’ll need a present-value calculator. Don’t just let the dealer tell you what the payments are.
