A lease can be helpful when you want to get a new car but not pay for it in full. If you need to change your new car or aspire to drive the latest model, a car lease might be just what you’re looking for.
An auto lease requires a down payment and subsequent monthly payments throughout the lease period. The pros are the lower monthly payments versus actually buying a car, but through consideration should still be given to how payments will affect your overall budget in the future.
If you think leasing a car is the right move for you, read on to find out how to get the best lease deal.
Important Aspects to Consider Before Leasing a Car
-
Choose the right time
Timing is crucial in life, and car leases make no exception. One of the best moments to opt for a car lease is during holiday weekends such as Memorial Day, July 4th, Labor Day, Thanksgiving or Christmas. Also, a good deal can be obtained when a new car model is introduced on the market.
Car models make their debut all throughout the year, but most manufacturers introduce their new models in early spring or early fall, according to data from Leaseloco. Getting a lease is also recommended at the end of the month because car dealers are more willing to drop the prices.
-
Verify your credit report
As it turns out, having a good credit score can get you some of the best deals, car leasing included. Sure, if you have a lower score, you will still be able to lease a car, but you will have to bring more money to the table.
Therefore, if you want to know where you stand, obtain a free copy of your credit report from these three major credit reporting agencies – Experian, Equifax and TransUnion and do a thorough verification of such documents before applying for the lease. If you find any inconsistencies or a lower credit score than planned, find out what you can do to improve your score to avoid paying more to the car dealership.
See also:8 Easy Fuel Cost Reduction Tips to Put Money BACK in Your Pocket
-
Compare prices
Once you’ve found your “future” car, start searching for offers from different dealers for the same model, to be able to choose the best deal. Make sure you take your time and do your research right, as it can have major repercussions on your budget in the years to come.
Compare prices and go for the model that suits your needs as well as your budget. If you don’t want to discuss with the dealer in person, you can ask for a quite via email or phone, to avoid the pressure of having to decide on the spot.
You might also like:Electric Car Owners, Pay Attention: 5 Important Things to Know Before Making a Purchase!
-
Look for special leasing offers
Every once in a while, car manufacturers might have special leasing deals for cars that are not as popular and don’t sell as fast. Usually, a special lease offers a lower down payment or monthly payments. When it comes to reductions, every penny counts, so be sure to check these offers properly.
To make sure you find the best deal, pay extra attention to the drive-off fees. These refer to money that should be paid at the beginning of the lease, including down payments or security deposits.
-
Choose the right mileage
In general, leasing contracts set an annual mileage between 10,000 and 15,000 miles. So, this is an important detail you should take into consideration when looking for a good leasing deal. If you do not comply with this limit, you could end up paying $0.30 for every mile, warns Kelley Blue Book. In other words, you might pay $300 for every 1,000 miles over the limit.
Negotiation can bring you a higher milage allowance but once the leasing contract is signed, no other changes will be made. You should note that increasing the mileage limit could raise your monthly payments. However, this situation is still preferable than paying for penalties for exceeding the mileage limit.
-
Be aware of the lease types
As with every major purchase that you intend on making, it is important to find a car lease that is suitable for your needs. To be able to choose the best one, you need to know and understand the type of leases on the market. The following are the most common types of leases:
Closed-end lease: this is the most common type of lease with the longest term. Such a lease prevents you from paying the difference in market value when the contract ends. You will still have to take good care of the vehicle and return it in good condition once the contract is over.
Open-end lease: This type of contract does not specify a termination date. The open-end lease works on a window of time to bring back the car to avoid penalties. The biggest disadvantage is that when you bring the car back to the dealership, you’ll have to pay the difference between the estimated car value at the beginning of the lease and the residual value at the end of the lease.
Used lease: This is also a common option, although most people prefer new vehicles.
Single payment lease: This type of lease works best for people with lower credit scores. It can be really helpful in saving money by making a single payment lease than extending it throughout several years.
Subvented lease: This type of lease is similar to closed-end leases but work in favor of people with higher credit scores who can get considerable discounts.
-
Opt for a car that maintains its value
When you finally decide on a car lease, choose a vehicle whose values doesn’t depreciate in time. This means you should look for vehicles with higher residual values, that will hold their value. This way your lease payments will be lower throughout the lease period.
The residual value is calculated as a percentage of the car’s Manufacturer’s Suggested Retail Price. For instance, if the vehicle you lease has a MSRP of $30,000 and 60 percent residual value, in three years’ time, the value of the same car will be $18,000.
-
Don’t hesitate to negotiate
The monthly payments for the leased car are calculated based on the car’s capitalized cost minus the vehicle’s residual value. This doesn’t mean that you can’t negotiate with the car dealer to get a better deal. Here’s what can be negotiated, among other things:
- Lease period.
- Mileage allowance
- Purchase price
- Money factor
- Down payments
- Trade-in value
If you catch car dealers at the right moment, that is when they are trying to get rid of old inventory before restocking with new models, your negotiation can finalize with a big win.
-
Make sure monthly payments are in line with your budget
Before making any major purchase or concluding any major contract (e.g. a lease contract) have a clear understanding of your budget and financial resources. Don’t conclude any lease contract that requires you to pay more than you could afford.
According to Experian’s State of the Automotive Finance Market report for the second quarter of 2023, an average lease payment for a new vehicle is around $600. But there are other things that might add up to this amount, such as taxes, registration, insurance fees. To make sure you stay within your budget, choose the vehicle and lease conditions that suit your need and financial situation.
