When you lease an automobile, you are paying for the
depreciation from the final sale price to the residual value
once your lease term is finished.
Let's use a simple example, the final sale price of the car is
$30,000 and the residual value after a 3-year lease will be
$17,000. You will pay $13,000 plus interest during the 3-year
lease term of your car lease deal.
The secret to negotiate the best car lease deal is
to expose the "capitalized cost" or a.k.a. final sale price.
Aside from your money factor and residual value, the
"capitalized cost" is one of the main variables of the auto
lease that controls what your monthly payment will be and if
you'll get the best deal.
And this is the first mistake people make: not knowing that they
still have to negotiate the final sale price when leasing an
auto, just as if they were buying it. This mistake can cost
thousands of dollars over the course of a typical 3-year lease.
Always compare models for good residual values on your car lease
deal. Automotive Lease Guide (ALG) provides leasing residual
values for all new automobiles and gives awards to specific
models and manufacturers for residual value excellence.
Typically, an auto will depreciate 30%-40% of the original sale
price during the first 3 years of ownership.
Let's do the simple math: 35% depreciation of a $30,000 vehicle
= $10,500. As compared to 43% of $30,000 = $12,900. That's a
difference of $2,400 that you would pay during your lease term!
Among this year's auto industry brand winners are Honda, Toyota
and Nissan for excellence, and BMW, Lexus, and Acura for luxury.
Lastly, know how to translate an interest rate into a money
factor for your car lease deal. Translating the interest rate on
your auto loan into the money factor is easy: Money Factor
multiplied by 2400 = Interest Rate.
To get the best lease deal you should pay the same interest on
your lease as you would on your auto loan, so it makes sense to
research this on your own to know if the quote you get from the
dealer is reasonable.
Daniel DeHaven is the Editor in Chief of the BuyingAdvice Team. He
understands the auto business. He's been around it - all of his
life. Daniel has been a consumer advocate voice for over 15
years. He has learned every trick and profit ploy car
salespeople use... and mistakes buyers tend to make.