How to Lease a Car
Leasing a Car Explained
This web site is one of the most popular automotive sites on the Internet, and the most popular for people looking for information and advice about how to lease a car.
We have found that many people arriving here are looking for quick, easy to understand advice and information about how to lease a car — and not make mistakes — from an independent online source that doesn’t lease cars themselves. That’s us, LeaseGuide.com.
Here, we will give you a short abbreviated guide to car leasing. If will find a more comprehensive version in our 15-part Lease Guide (free).
Leasing a Car – The Short Version
Car leasing is not car renting. It shares some common characteristics with apartment leasing or renting, but is the same as either. This is frequently misunderstood and leads to many people who would otherwise benefit from leasing to declare that “you throw your money away” when you lease a car. While that rationale is valid with apartment renting, it is not equally valid with car leasing.
Car leasing is a form of financing in which you pay for the natural depreciation of value that all cars experience, and you pay a finance charge just like with any other form of financing. The money that you “throw away” is the same money that is lost to depreciation by anyone who buys a car with cash or with a loan.
the exact same amount you pay if you lease a car for 3 years. So if the buyer sells or trades his car after the 3 years, he has nothing to show for half the money he has already spent for the car. Even if he keeps the car, he has a vehicle that is only worth 50% of its original value, and he nothing to show for the other 50%.
So, if you buy, you pay extra money each month to “invest” in the car so that you’ll have at least some of what you have paid to “show” for all your money. With leasing, you don’t spend the extra money each month for the “investment.” Simple.
Regardless of whether you lease or buy your car, you never get back all the money you put into it.
Who Should Lease a Car? Why?
If you are the kind of person who only drives an average number of miles a year (about 12K-15K miles per year), likes to have a new car every 3-4 years, and takes good care of your cars, leasing can significantly lower your monthly payment, save you money on down payments and taxes, eliminate the hassles of selling/trading a used car, and allow you to take advantage of special promotional lease deals being offered by car manufacturers.
Leasing saves about 30%-60% on monthly payment, compared to buying with a loan. It also saves you sales tax money because, in most states, you only pay tax on each monthly payment, not on the entire value of the car. At the end of the lease, you have the choice of either buying the car from the lease company for an amount that is guaranteed in your lease contract, or you can simply return the car to the lease company and walk away.
However, you must return the car in good condition. Most people who have concerns about leasing are afraid that the lease company will charge them for every little scratch and ding. This is not the typical case. However, if you exceed your mileage limits, you will be charged a modest fee for each mile (about 15 cents) for the extra miles. It is also not easy or cheap to end your lease before your contract end date. Therefore, if you think you will not be able to stick out your lease until the end, then don’t lease.
Lease a Car and Get a Good Deal
The starting point to getting a good car lease deal is to get a good price on the car you want to lease. Many people don’t realize the importance of this step. You can get already discounted prices by using a free price quote service such as Edmunds. This is the fastest and easiest way to get the best prices before setting foot in a dealer’s showroom.
The way to get the best car lease deals is to 1) negotiate your car’s price with your dealer (lease payments are based on the car’s price) — or get an already discounted price from Edmunds 2) lease cars with high residual (resale) values (generally brands and models that have high resale values, such as Honda, Toyota, etc.), and 3) keep a watch for special monthly lease deals from manufacturers.
To find the best car brands and models to lease, based on high residual values, the LeaseGuide.com Lease Kit contains a module, Vehicle Lease Ratings, that tells you which vehicles make good lease choices, and which make poor choices.
If you like any of the following brands, nearly all are currently offering outstanding lease deals on at least some of their models and styles — Audi, Acura, Honda, Toyota, Subaru, Mazda, Hyundai, Kia, Mercedes, BMW, Lexus, Infiniti, Mitsubishi, Scion, Nissan, Volkswagen, and Volvo.
Do your Homework First
Before you lease a car, you should understand how car leasing works and how lease payments are calculated. We provide a free Lease Calculator with which you can figure your own payments and determine what price car you can afford to lease. We also provide a Lease vs Buy Calculator so that you can compare the cost of leasing versus buying.
We also offer a Lease Deal Calculator that allows you to determine whether a specific lease deal is good or bad. It’s a common misconception that, just because lease payments are lower than loan payments, all leases are good deals. Nothing could be further from the truth. It’s possible that a dealer might give you a nice attractive lease payment that is actually much higher than it should be — because dealers often take advantage of customers’ ignorance about car leasing.
In short, if you don’t know what you’re doing, don’t lease. It doesn’t take much time or effort to learn what you need to know about how to lease a car. A little time invested in becoming knowledgeable about car leasing will pay off in money saved and confidence that you’ve made the best deal you could possibly make.
Summary
So let’s summarize some of the key points about how to lease a car:
- Car leasing is not car renting — car leasing is a form of car financing
- Leasing can save you money if you drive only average miles per year and like driving new cars
- Leasing is best for people who have a stable lifestyle and won’t need to end their lease early
- You must understand how leasing works if you want to get the best deals and not make mistakes
- Get the best deals by leasing only car brands that have high resale values and whose manufacturers offer special lease deals
If you want to know more about how to lease a car, you should start with the Lease Guide (free) and take advantage of all the other resources on this web site.