The boom in auto leasing has been nothing less than astonishing. In 1990, just 10 percent of the people who shopped for new cars opted to lease instead of to buy. Last year, it was 32 percent. Leasing began as an option for businesses and buyers of luxury cars. Now it's common across the board -- partly because it can cost less per month to lease a car than to purchase one with an auto loan.
There's no slam-dunk answer to the question of whether to buy or lease. It depends on how you'll use the car and what the car means to you: Is it part of your personality or simply a motorized mule? Do you bond with your car or love the excitement of something new?
Consider Buying If...
You expect to drive the car for at least five years or more. Once you pay off your auto loan, you'll have transportation without writing regular monthly checks.
You think you might drive the car for more than 18,000 to 20,000 miles a year. High mileage can be expensive on a lease.
You want to save money in the long run, and you are looking only at your cash costs. In theory, you could lease your car and invest the difference between the low lease payments and the higher payments you'd owe on an auto loan. In that case, leasing would be cheaper. But if you don't invest the difference, then buying is cheaper.
You're in the market for a used car. Thanks to the popularity of leasing, dealers are flush with cream-puff cars that were driven for two years and then turned in. Look for one that's "manufacturer-certified" as being in top shape.
Consider Leasing If...
You want a more expensive car than you could otherwise afford. Monthly payments on leases are generally lower than on comparable auto loans. Also, leases don't require big down payments.
You want to drive a new car every two to three years and don't mind having permanent monthly payments.
Six Ways to Minimize Leasing Costs
When you take a lease, your monthly payment is based primarily on the difference between the car's initial cost and its expected value when the lease is up. For example, if you lease a car with a sticker price of $20,000 that's expected to be worth $12,000 when you turn it in, you'll consume $8,000 in value over the life of the lease. To hold your lease costs down:
1. Don't start by discussing how much the lease will cost per month. First bargain down the price of the car, then use that price for figuring monthly costs. For example, you might negotiate that $20,000 car down to $18,000. You'd then be consuming only $6,000 in value over the life of the lease. That would reduce your monthly cost.
2. Look at several different leasing packages from one or two dealers. Some lessors charge lower fees than others.
3. Estimate how many miles you're likely to drive. The lease will typically cover the first 12,000 to 15,000 miles per year. You'll pay an extra 10 to 25 cents for every additional mile driven, when the lease is up. If you know you'll drive more than the basic amount, it's cheaper to pay for the excess miles in advance.
4. Check your credit union. Many offer cheap leases to members.
5. Keep the car for the full term of the lease. You'll pay a significant price for returning the car ahead of time. The disclosure statement you get from the dealer will tell you how the cost of breaking the lease is figured.
6. Drive carefully. There's a charge at the end of the lease for unusual wear and tear on the car.
Lease and Buy
When your lease is up, you can turn in the keys and lease another car. Or you might decide to buy the car you've been driving, usually at a price that was set in advance in your leasing contract.
Do some research before you buy: Used-car prices are weak today. The contract might call for a higher price than the car is worth. You can find used-car prices in the Kelley Blue Book ($9.95, available in bookstores or by calling 800-258-3266; prices can also be found at www.kbb.com and www.edmunds.com).
If the car's market price does indeed turn out to be lower than the price in your leasing contract, you can often bargain the dealer down.
Finding the Cheapest Lease
Given two leases for the same car -- with identical down payments, mileage allowances, and other terms -- here's how to tell which one is best, according to Randall McCathren of Bank Lease Consultants in Nashville:
If you intend to keep the lease for the full term and then turn the car in, the best deal is the one with the lowest monthly payments.
If you intend to buy the car at the end of the lease, add up all the monthly payments plus the end-of-lease purchase price. The best deal is the car with the lowest total cost.
No comments:
Post a Comment