Monthly Archives: June 2016

Find The Car Lease Strategies

A lease contract can be both economical and flexible if you know the options that are available to customize the contract to your personal situation and budget.

As leasing grows in popularity, banks offer more finance options to serve a broader range of shoppers. However, only experts know many of these strategies. Furthermore, the rules of leasing programs are always changing and not all lenders offer these options.

If any of these strategies sound interesting, and you want more details, check the carmaker’s Web site undercar buying tools. You can also speak with the finance and insurance officer at a dealership, but “he has a vested interest in making sure everything goes smoothly and you sign on the bottom line,” says Dave Cavano, manager of the Automobile Club of Southern California’s car-buying service. A representative from the leasing company might prove to be a more neutral source.

Here, then, are five leasing strategies from the experts that can cut costs and customize leasing for your individual situation.

1. Make multiple security deposits to reduce your interest rate.
In most leasing contracts, the security deposit is equal to one month’s payment rounded up to the nearest $50, explains Oren Weintraub, president of Authority Auto. So if your monthly payment is $425, the security deposit is $450. If you agree to pay two or more fully refundable security deposits, the leasing company reduces the interest rate (which is called money factor when leasing) because its risk is lower. A lower money factor means a reduced monthly payment.

This option isn’t available for all leasing programs, and many lenders limit the number of security deposits that you can use. However, if you have the money and you are not investing it, this strategy could save $1,000 or more over the three years of the lease. But Cavano adds: “It actually flies in the face of what leasing is all about — keeping your money liquid.”

2. One-pay leasing works for some.
A similar strategy to the multiple security deposits is the one-pay lease. A major benefit of leasing is that you know exactly what your total automotive expenses are for the length of the lease. For example, if you paid zero drive-off fees and your monthly lease payment was $350, then your total cost over three years would be $12,600. In a one-pay lease you make all the payments upfront, and the leasing company reduces your interest rate. So rather than paying $350 a month, you would pay less interest and the equivalent of $320 a month for a total of $11,520 in one lump sum. That saves $1,080.

The one-pay lease works best for people who have a lot of money, but little established credit, says Cavano. This could be a person entering the country for a short period of time, such as a student. Anyone considering this approach should also consider whether they could invest the lump sum of money more profitably elsewhere.

Weintraub occasionally mentions this strategy for people who are intending to pay cash for a luxury car. Rather than making a larger cash payment to own the car, he suggests arranging a one-pay lease, then paying for the rest of the car at the end of the lease. This allows the person to maintain some flexibility and also hold on to their money longer.

3. Continue your lease month-to-month until you are ready to get your next car.
Some people panic as the end of their lease approaches because they don’t know what car they will get next. But Swapalease Executive Vice President Scot Hall points out that most leasing companies will allow you to keep the car on a month-to-month basis.

You don’t want to do that for too long, however, Cavano points out. If you ultimately decide you want to buy the car you’ve been leasing, you might have to pay the original residual figure, which will now be outdated, and possibly too high.

Here’s why: Leasing companies set the residual figure at the beginning of the lease, and it is a prediction of what the car will be worth at that time. Forecasting company ALG sets lease residuals as a percentage of the original value of the vehicle. So, if you extend the lease, and then buy the car, you are buying the car for what it was worth several months previously.

Still, as long as you go month-to-month as a short-term fix, it can help you buy extra time in your current car. After all, it’s never a good idea to buy a car in a hurry.

4. It’s easier than you think to transfer your lease before the end of the contract.
According to SwapaLease’s Hall, it is possible to transfer about 80 percent of leases with no strings attached. SwapaLease and rival LeaseTrader find a person to take over the lease and, for a fee, handle the paperwork.

How to find a good lease for your car

A car lease contract may appear complicated, composed of a dizzying array of figures and fees. But you can spot a good lease quickly, once you learn how to X-ray the deal. And once you understand what goes into a good lease, you can more easily see which manufacturers are offering deals worth your time.

Here are four ways to spot a good car lease:

1) High residual value: Leasing experts agree that the single most important factor in a lease is the vehicle’s residual value, which is a prediction of what it will be worth at the end of the lease term. This “perceived value of the vehicle” is set either by leasing-information provider ALG Inc., or the bank that is writing the lease contract, says David Cavano, manager of the Automobile Club of Southern California’s car-buying service.

Here’s why residual value is key to the car shopper: The higher the residual value, the lower the monthly payment. Knowing this will explain why you can sometimes lease a Lexus for less than a Toyota, says Sergio Stiberman, CEO of LeaseTrader.com, a company that helps consumers transfer leases. The Lexus likely has a higher residual value, which offsets the higher price of the car, Stiberman says.

Take the example of a $30,000 car that a consumer wants to lease for three years. In most cases, the average car will be worth half its value after three years, Stiberman says. So the residual value of this hypothetical car is $15,000. Over three years, it has lost $15,000 of its value.

Here’s a simple way to estimate what your lease payment would be for such a car. Take that lost value and divide it by the number of months in the lease: $15,000 divided by 36 months equals a $416 monthly payment. Keep in mind, however, that there are additional fees, sales tax and interest that will make the actual monthly lease payment higher.

Compare this scenario to another $30,000 car that has a residual value of 65 percent. This car will be worth $19,500 at the end of the lease — it only lost $10,500 (35 percent) of its value. Divide $10,500 by 36 months and you get a monthly lease payment of $292, to which you’d add fees, tax and interest.

So when you’re shopping for a lease, the first rule of thumb is to look for cars that hold their value better — the ones that have high residual values. This means the monthly payments will be lower. Stiberman says an old leasing adage is true: “When you lease, you can drive more car for less money.”

If you want to calculate what the lease payments would be on a car you’re considering, you’ll need to know that residual value. You can call the dealer for an exact residual value or make an educated guess. Fifty percent residual value is the average, while 64 percent is about as high as the value ever gets for three-year leases.

2) A competitive interest rate: A high residual value “gets you 80 percent of the way to a good deal,” Stiberman says. The interest rate also affects the monthly payment. In leasing, many of the terms that salespeople use are different from those used in buying, so it can be confusing for the average car shopper. In leasespeak, the interest rate is called the “lease factor” or “money factor.”

Cavano says car salesmen often suggest leasing to shoppers as a way to reduce their monthly payments. These customers might not be familiar with leasing terms and are unprepared to negotiate the interest rate, however. Rather than just accept the interest rate a dealer offers, Cavano says shoppers should call the finance managers at competing dealerships to find the best interest rate available. It makes the most sense to talk to other dealerships. In the past, many banks offered leases. Now, however, just a few big banks will write them, and the dealerships generally handle such deals, Cavano says.

3) Low fees: Shoppers looking to improve their lease contracts might also have success if they ask for some fees to be reduced or removed from lease contracts. The fees — such as the security deposit, acquisition fee and disposition fee — are not the same from one leasing company to the next. In recent years, Cavano says, they have crept up from $300 to more than $650. Sometimes shoppers can get the security deposit waived. The other fees may be harder to remove but it doesn’t hurt to question them all, he adds.

4) Customer retention Another factor to consider is how well leasing companies retain their customers.Data from Leasecompare.com shows that 41.7 percent of customers who leased from Honda didn’t return to another Honda lease, indicating they were displeased with either the fees or the structure of the lease, says Stiberman. Acura, Infiniti and Nissan all had low lease retention rates, the data shows. Conversely, Stiberman says, he never hears complaints about BMW leases.

Car at the end of a Lease and how to return about it

You’re coming to the end of your car lease and it suddenly occurs to you: Will you get charged for all those dings, dents and upholstery stains? Is there anything you can do to offset these lease-return charges?

There are, of course, other end-of-lease questions to consider, such as whether you should purchase your leased vehicle and whether it has equity that you can leverage. Our “3 Ways to Turn Your Lease Into Cash”story has answers on those subjects. This article will only deal with avoiding charges in the lease turn-in process.

You are probably aware that the leasing company will charge you for any damage it considers to be more than normal wear and tear. But you are probably wondering what “normal” is.

“The term ‘normal wear and tear’ is the largest disconnect between consumers and manufacturers,” says Jeff Huang, who has worked in the lease inspection business in Southern California for years. Manufacturers want to minimize what they’ll have to spend on reconditioning, he says. Any damage to the car that’s going to cost more than an average amount of money to refurbish is called “excessive” wear and tear.

Mary Hellen Owen, market planning manager for Toyota Financial Services, agrees that the lease return is a moment of anxiety for people. “There’s a lot of apprehension about ‘What do I do? When do I do it? What can I be penalized for?'”

Toyota Financial Services developed a comprehensive lease-end program to let them know the lease is winding up “and we are going to be ready to help,” she says.

The Lease Inspection
While there is some variation in the process, the lease return process typically starts about 90 days before the end of the contract, says Joe Spina, an Edmunds car lease expert. The leasing company (technically called the “lessor”) will contact you to let you know your lease contract is coming to an end. It will then contact you to set up an appointment for an inspection of your car.

Many manufacturers use an independent company to conduct the inspection, which is free for the lease-holder (technically called the “lessee”). The inspector will come to your home or office, and the process takes about 45 minutes.

Most manufacturers look for damage in these general categories:

  • Mechanical problems: In the engine or any of the car’s systems.
  • Dents, dings, scratches and scrapes: On the car’s exterior, bumpers and wheels. “Curbed” wheels are a frequent issue.
  • Cracks, stars or excessive pitting: In the windshield and other windows.
  • Abnormal or excessive wear: To the tires. They’ll also be looking for mismatched tires.
  • Tears or stains: On the upholstery that can’t be cleaned or repaired with normal refurnishing.

Huang said inspectors measure the size and depth of dents and scratches and then enter this information, and other problems, into a computerized template that estimates the cost of repair. At the end of the inspection, or shortly thereafter, you will receive a condition report that lists any damage above the normal wear and tear and what it costs to fix the problem.

Prepare for the Inspection
Most manufacturers’ Web sites provide specific information about the end-of-lease process and a detailed definition of wear and tear, also referred to as “wear and use.” Owen said Toyota created a lease turn-in sitethat is as customer-friendly as possible, and even includes a sample inspection report so people can see what kinds of damage will incur a charge.

Owen says inspectors look for any dents or scratches in Toyota vehicles that are bigger than an area that can be covered by a credit card. She adds that customers are not often charged for “curb rash” (scratches to alloy wheels and wheel covers) or normal tire wear.

What is the best question before you lease a new car

unduhan-20If you don’t know a lot about car leasing, you probably don’t even know what questions to ask the dealer. Relax. While there are many pieces to a lease agreement, there are just a few elements that really drive the price. If you ask the right questions, you can more accurately evaluate a lease deal. We will reveal those critical areas and show you what is important to getting a low monthly payment — and an overall good lease deal.

1. Are there any lease specials?
Many carmakers periodically offer highly discounted lease specials to pump up interest on slow-selling models, says leasing expert Joe Spina, Edmunds.com’s director of remarketing. These specials could provide a shortcut to substantial savings for you. However, check the fine print of the lease ad to see if there are any additional expenses. Often, the quoted monthly payment does not include sales tax and fees and may require high drive-off fees (similar to a down payment when you buy a car). Check Edmunds’ Incentives and Rebates section for current offers.

2. What is the car’s residual value?
A high residual value “gets you 80 percent of the way to a good deal,” says Sergio Stiberman, CEO ofLeaseTrader.com, a company that helps consumers transfer car leases. The residual value is how much the car will be worth at the end of the lease. This figure is an estimate, set by the leasing company and expressed as a percentage (for example, 55 percent of the original value) or a price (the car will be worth $20,000 three years later).

Here’s why the residual value is important: When you lease a car, you are paying for the amount of the car’s value you use. For example, if you lease a $30,000 car for three years, it will be worth about $18,000 three years later. That means you used $12,000 of the car’s value. Divide that $12,000 by 36 months and you get $333, which is approximately your monthly payment (plus interest and taxes).

To demonstrate how significant the residual value is to the monthly payment, let’s look at a $30,000 car and apply three residual values to it:

Residual Value
Depreciation
Base Monthly Payment
55%
$13,500
$375
50%
$15,000
$417
45%
$16,500
$458

Another way to think of this is to consider that a good residual value is 55 percent and a fair one is just 45 percent. The difference between the good and fair residual values is nearly $85 each month, or $3,000 over the three years of the lease. So when you’re shopping for a lease, the first rule of thumb is to look for cars that hold their value: the ones that have high residual values. If you calculate your own lease payment, you will see how important the residual rate is to the monthly payment.

You can always ask the dealer for the residual value of the car you are considering. He will probably give you a percentage between about 45 and 60 percent. Or, you can research residual values by reviewing the vehicles mentioned in this article about retained value.

3. What is my interest rate?
The interest rate is called the “money factor” in leasing jargon. It’s one of the few elements of a lease you can negotiate, says Oren Weintraub, president of Authority Auto.

The dealer converts the interest rate into a mysterious-looking decimal number. To convert the money factor back into an interest rate, multiply by 2,400. So if the money factor is 0.00125, multiply it by 2,400 to get 3 percent.

Of course, the leasing company will give you an interest rate that is based, to some degree, on your credit. However, when manufacturers are trying to attract shoppers, low interest rate offers abound. So when you ask a dealer, “What is my interest rate?” he might respond by saying, “Well, the money factor is 0.00125.” Convert this to an interest rate and make sure it is the rate you deserve for your credit score.

4. How many miles does the lease include?
Sometimes, you hear about what sounds like a great lease deal, but learn (by asking) that the lease only includes 10,000 miles a year, rather than the 12,000 miles a year that’s the industry standard. Now the lease isn’t quite as good a deal as it appeared at first. First of all, if you exceed 10,000 miles a year (or 30,000 miles for three years), the dealer charges you from 15-20 cents per mile. So, if you don’t ask how many miles are included, you could be in for a nasty surprise at the end of the lease. Also, quite simply, the lease has less value because you can’t drive the car as far as with a normal lease.

5. What drive-off fees do I have to pay?
This is a great question to ask if you see a newspaper or TV ad offering a low monthly lease payment. You also want to ask the dealer this question if he offers you a “killer” lease deal.

Drive-off fees are a combination of fees and a down payment. The effect of a bigger down payment is lower monthly payments, of course. Ideally, though, you want to pay as little as possible up front, and never more than $2,000 down. The more you pay up front, the more you have to lose if you total the car shortly after you begin the lease.

6. What fees does the lease have?
Shoppers looking to improve their lease contracts might also have success if they ask for some fees to be reduced or removed from lease contracts. Auto Authority’s Weintraub says nearly all contracts have acquisition and disposition fees that can’t be negotiated out, but the security deposit can be waived. Furthermore, fee amounts are different from one lease company to the next. In recent years, fees have crept up from $300 to more than $650. Fees may be hard to remove, but it doesn’t hurt to question them, Weintraub adds.

How much for lease deals of a car

Drive a brand-new car for only $199 a month. It isn’t too good to be true. At any given time, there are manylease deals clustered around that price.

Here are the lease deals currently listed on their manufacturers’ websites at or near $199 per month. Although all were featured as of October 6, 2016, some aren’t available in all regions of the United States. For comparison’s sake, we’ve calculated the total cost of each lease to completion and further calculated the cost per mile, assuming that you’ve used the full mileage allowance. Keep an eye out for additional charges, such as unaccounted acquisition and lease-end disposition fees.

Not all leases are built exactly the same. Some ask for more money up front but have lower monthly payments. Some are the opposite: They entice you with very low drive-off amounts but have slightly higher monthly payments. Try to find a lease that strikes a balance among the miles you drive, a low monthly payment and low drive-off fees. Always add up the entire cost of the lease and compare those numbers before deciding. If you need clarification on all this or you need to bounce ideas off someone who knows what’s going on, don’t hesitate to reach out to the Edmunds.com Shopper Advice team for free assistance.

These premium deals are generally available only to customers with sterling credit ratings. There might be other programs for those with lower credit scores. And when you’re leasing, remember that these monthly payments do not include sales tax and other fees.

There are subtleties to all leases. And tailoring a lease before you sign it is the single best way to ensure you’ll be happy as long as you’re in it — and on your way out of it. These heavily advertised leases with their discounted factory financing and aggressive pricing are a good starting point for your lease shopping.

2017 Acura ILX — $199 and $239 per month/36 months
Acura’s smallest sedan is available at our monthly price point in Southern California, and for $40 above it in the New York and Chicago metro areas with $1,351 less money due at signing. Taking all charges into account, the New Yorkers and Chicagoans are paying $89 more over the course of the three-year lease. Offers end October 31.

2016 Buick Encore — $179 and $189 per month/39 months
Buick’s small and versatile crossover is available for $179 per month with only $739 due at signing — if you’re currently leasing a competitive vehicle and live in the right area (Edmunds found this deal in New York City). Keep in mind that these leases are for 39 months, but they cover only 32,500 miles of use. Offers will vary by region and end on October 31.

2016 Buick Verano — $199 per month/39 months
Buick offers its small, nimble Verano sedan through various regional leases at $199 per month. Money due at signing will vary by region and depend on whether you’re coming from a competitive lease. Offers end on October 31.

2016 and 2017 Chevrolet Cruze — $169 and $189 per month/39 months
Depending on region, Chevy’s small sedan is available at either $10 or $30 below our monthly price point. Money due at signing will also vary, dropping if you’re coming out of an existing GM lease. Offers end on October 31.

2016 and 2017 Chevrolet Equinox LT — $189-$199 per month/24 and 39 months
The Equinox is a practical midsize SUV and consistently one of Chevy’s bestsellers. The carmaker is offering it in a blizzard of slightly different leases, depending on region. All these leases include 10,000 miles per year, but the money due at signing differs depending on whether or not you’re coming out of a current GM lease. Offers end October 31.