Common Myths About New Car Leasing

Autos & TrucksCars

  • Author Mark Meyer
  • Published September 21, 2010
  • Word count 489

Leasing can be a money saver for new car shoppers, however, confusing terms, numbers, percentages and tricky dealers’ consumers. At present, car manufacturers offer some of the best deals to lease new cars ever seen. Thanks to this more and more consumers choose leasing instead of buying.

Before making a decision, it is important to understand the fact and fiction of car leasing. The following are the most common car leasing myths.

Myth: A new car lease costs more than buying.

Fact: For consumers other than those who pay cash, drive their vehicles long after paying off loans, or drive more than normal, leasing is more expensive.

For consumers who plan to trade in their vehicle before paying off their loan, leasing is less expensive.

Leasing allows consumers to regularly update their vehicle. Lease terms are as short as 24 months, after that all the driver has to do is return the vehicle to the leasing agency. No more debt. However, if the consumer was paying off a loan for the purchase of the same vehicle, but wanted to trade it in, the remaining loan balance would be transferred to the new car loan – making the consumer pay for two debts at once.

Leasing also allows consumers to use a new vehicle for a specified period. When the contract ends, they can choose a new vehicle and begin leasing again.

Myth: Car leases cannot be negotiated.

Fact: Like when buying a new car, consumers have plenty of opportunity to negotiate lease deals.

Here are some of the key factors to negotiate.

Capital Cost: When leasing, the price of the new car is known as the capitalized cost. A consumer can negotiate this price with dealer just like when buying the vehicle. The first step is to learn the MSRP and factory invoice price before visiting the dealership. Consumers should aim to pay less than the MSRP, and expect to pay at or more than the factory invoice price.

Money Factor: Consumers looking for the best leasing options, need to understand the money factor. The money factor is a very small decimal number, the lower the number, the better the deal. To calculate the interest rate, multiply 2,400 by the money-factor. If the dealership does not openly disclose, request the money factor, if unwilling, consider working with a different dealership.

Residual Value: The residual value is the value of the vehicle after the lease period. It is expressed as a percentage. The greater the the residual value the smaller percentage of the vehicle cost is used during the lease. The best deals are vehicles that retain more than 50% of their value after 24 months.

Myth: There are no tax exemptions for leasing.

Fact: In most states, consumers have to pay tax on the amount of the monthly payments on a new vehicle. This will be the same whether the vehicle is leased or purchased. Because lease payments are less, taxes should be less.

For more facts about car leasing visit TopCarLeaseDeals.com. Learn the truth about leasing, gain access to trusted dealers, and get real lease prices!

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