How to lease a car

How to lease a car

What important numbers do I need to know?

there are five:

1. Selling Price: Your lease payments are partially based on the selling price of the car. Just like when you buy a car, the lower the selling price, the lower the lease payment. Check out the Edmunds Average Paid Value, also known as True Market Value (TMV), to make sure you’re getting a fair selling price., This tool tells you what other people are paying for the same car.

2. Residual Percentage and Amount: The residual value of the car is expressed as a percentage, and is an important part of your deal. The higher the residual percentage, the lower the depreciation amount you pay. In other words, a higher residual percentage should get you a lower monthly payment. The residual is also the amount you would pay to the bank if you decide you want to buy your leased car at the end of the term.

3. Allotted Mileage and Over-Mileage Fee: When you sign your lease, you are allowed to drive a certain number of miles annually. If you exceed that, you’ll be charged a fee, usually assessed in cents per mile. They can be high: 15 to 25 cents per mile. If you find you’re going over the mileage limit, you can add extra miles when you sign your lease agreement for a small increase in payments. This will probably be cheaper than paying the overage later. If you go over your miles but have decided to buy the car at the end of the lease, you will not be charged for going over the allotted miles.

4. Settlement Fee. This fee is charged by the leasing company to cover the cost of cleaning and selling the car after you return it at the end of the lease. Most charge between $300 and $400. You generally can’t avoid this fee unless you buy the car at the end of the lease or, in some cases, lease or buy another car of the same brand.

5. Money Factor: This is the lease equivalent of the annual percentage rate (APR) on a car-purchase loan. As with the APR, the lower the money factor, the better. Unlike the APR, it is unlikely that the dealership will provide you with a lower money factor than your credit union or bank. Money factors are very small numbers, such as .00125 or .00074. Multiply by 2,400 to get the equivalent APR.

How do I know I’m getting a good deal?

Lease Specials is the fastest way to find a good deal:

  • Edmunds lists attractive leases from various car manufacturers in our $299 Lease Deal of the Month and Best SUV Lease Deals articles.
  • Nearly every car manufacturer has lease specials posted on their website. Cars in these lease specials usually cost less than the manufacturer’s suggested retail price (MSRP) and often represent a good deal.
  • The dealership website is also a good place to check for lease specials. Many dealerships show lease specials that have been tailored to fit the local market, and the terms are often less than those offered by the car manufacturer.

    If a dealership offers a lease that car manufacturer or Edmunds. If you want to shave every nickel off your lease payment, you’ll need to shop around for your deal, just like you would when buying a car. There are some differences between lease shopping and shopping to buy a car, so here are some of the steps to follow:

  • When it comes to buying a conventional car, many buyers first look to nail down the price of the car, and then they work out other details like APR and taxes. When you’re searching for a lease, you want to be looking for the best overall lease deal, not just the lowest sale price on the car. For most people considering a lease, the best deal boils down to two factors: the lowest amount to pay to start the loan (“out of pocket,” in lease-speak) and the lowest monthly payment.
  • Get lease quotes from three different dealers. A phone call or email to the dealership’s internet salesperson should take care of it.
  • When you shop, you need to compare like-minded terms, so ask dealers for a lease quote that clearly states the total initial out-of-pocket amount, not just the down payment. This quote should include registration, taxes and all fees. The same applies to the bid for monthly payments. Specify the total monthly payment you want including taxes.
  • Once you’ve found the deal that makes the most sense, ask the dealer for a full breakdown of the sale price, residual value and money factor. Compare this to the average price paid by Edmunds to make sure the car’s selling price is the same as or less than what other buyers in your area are paying.

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