Page Sections - Should you buy that car at the end of the lease? | What Car Leasing Means | MSRP - Manufacturer's Suggested Retail Price | If you cannot fulfill every single payment of a lease, you should NOT be leasing. | Driving Records

Many people forget there is also a $300-$400 non-negotiable "purchase option fee" buried in your lease contract should you buy the car at the end of the lease. Your strategy: I would wait until the very end of the lease and ask the leasing company if they will take less for the car.  Don't offer them any more than market value for the car.  Many leasing companies are extremely arrogant and still want to play hardball, and our visitors are still reporting that the leasing companies flatly reject any offers to lower the buyout price.  Digest this: 90% of you who lease took it on the chin going into the lease if your gross cap cost was MSRP.  So if they don't budge on the buyout price, exact your revenge on them by dumping another car on them where they will lose $2000-$4000. Don't let them scare you with over mileage penalties, or mis-matching tire fees, it's still less than paying $4000 more for a car than the market value.  They'll call you in advance to pressure you to buy the car at lease end. Research the prices first, then dodge all their calls, and just show up at the lease closing, with a check made out to them for the amount you want to pay.  Haggle smartly, telling them you know used cars are worth a lot less now, tell them you're giving them market value, whereas they would have to dump the vehicle at wholesale auctions. Don't hand them the check until they sign the buyer's order first! If they reject the offer, just walk away, game over. Now they have no time to strategize on what to do with you, the deal is now over, and for once, you pinned them against the wall.  Maybe they'll chase after you before you drive out to give you the lower price, but if not, just keep on driving with a grin on your face, and thank me later.

Everyone wants to know how to get out of a lease.  Remember that an auto lease is a contract, and early lease termination comes with stiff penalties, they usually want the remainder of the payments plus penalties. It makes no sense to terminate a lease early. They can ruin your credit and you won't be able to buy your next car. Most people don't even know they are paying stiff penalties because the car dealers mislead you with their radio ads and make you think your lease obligation is gone once you trade in your leased car.  What dealers really do is stack those penalties into the new car and spread out payments over 72 months so you don't notice, but the penalties are there, and digging a deeper financial grave for you, as now you'll be paying off 2 cars! That old school strategy benefits the salesman and not you. But there is a new way for you to get out of paying early lease termination penalties.  Shift your strategy from terminating a lease by trading in your car, to a strategy of transferring your lease to another person via an auto lease trade. That's why we recommend you look at sites like Swapalease.com and LeaseTrader.com to transfer your car lease. It's your only salvation. They can do a car lease swap for you, and reassign your auto lease to another buyer. You list you car, and pay some fees.  While you want to get out of a lease, there's plenty of buyers looking to get into a lease.  They want your BMW lease, because you already paid he down payment, several months of payments, and took the brunt of the depreciation hit. Here's some benefits:

• With the car lease trade, a buyer takes over your car lease, and it's in their name, your name comes off the auto lease
• No early lease termination penalties for you, and your credit stays intact
• No matter what it costs you, it's cheaper than paying thousands in early lease termination penalties
• You avoid car dealer scams, because you are not trading in a car, you are just getting rid of it
• You can also assume a short term car lease with no money down, everybody wins

 To attract more buyers to your car, I suggest you offer them an incentive, like $100 cash to take over the lease.  People love to get "discounts" or cash back.  It works for the carmakers, so let it work for you too.

Analyze the numbers on one of your old leases and you'll find you should not have signed that lease.  Your jaw will hit the floor when you find out how badly you were taken.   Don't sweat it, after today it will never happen to you again.

Let us first point out that leasing is good for VERY FEW people, but it's a great deal for those that it is good for.
So buckle up, it's going to be a bumpy ride!

What Car Leasing Means

Auto leasing is a way to drive more car than you can afford and change cars every 3 years without the hassle of selling your car.  Many cars your coworkers drive are probably leased.  If you understand all the terms as we explain them, and study the sample ads and exercises in this article, you will be poised to negotiate a value added lease.  But overlook one detail or forget to check their math, and you'll lose your shirt.  We'll show you how to be a proactive deal maker and level the playing field when shopping for a lease. 

Don't fall into the gap!
If you owe more on your car than it is worth or if you lease, you should get gap insurance to protect you. Get it online for 60% less than the car dealers.  Click here for more info.  Let's say you owe $20,000 on your car, but it's only worth $16,000, you're  upside down. You total the car or it's stolen, your insurance company gives you $16,000. You must still come up with $4000 to pay off the bank, plus your $500 deductible!  In the case of a lease, the lease becomes due. Gap insurance protects you against this. The better ones cover up to $500 of your deductible.

When you lease a car, the dealer sells the car to the leasing company who leases you their car for 24, 36, 48 or more months. The leasing company can be an independent, the car dealer, or a car manufacturer like Ford Motor Credit.  The selling price to the leasing company is called the Capitalized Value, or Gross Cap Cost.  You can reduce the monthly payments by reducing the cap cost, or putting cash down.  This is called cap cost reduction. Your monthly lease payments on a $30,000 car are lower than buying the car, as you are only paying for the approximate 50% depreciation + interest, but at the end of a 36 month lease you have no equity in the car.  Had you bought the car with a 36 month loan, at 36 months you'll still have $15,000 equity in the car. 

Back To Back Leases Cost you More in The Long Run

This is because you suffer 50% depreciation on a new leased car every 3 years.  At lease end, bring the car back and buy it or lease another.  It's like renting an apartment instead of owning a house.  Dealers trick you by stating leasing is a better investment than buying. No car is an investment, but I'd rather have 100% equity after 3 years, than 0%.  One of the biggest complaints I receive from readers is the car dealer pulls the old Jedi mind trick on you and says "the selling price of the car on a lease is not important".  If they tell you that, they are lying.  The selling price is the gross cap cost, and the higher the gross cap cost, the higher your monthly payment.  Only an idiot believes that the selling price (gross cap cost) of a lease does not matter.  You MUST negotiate a lower selling price on a lease, just like you would if you are buying the car. Do not fall for this scam.

Depreciation In A Lease

Depreciation is how much value the car loses during the lease.  It's the difference between the "capitalized value" (selling price)  and the residual value (predicted value at lease end), supplied by the Automotive Leasing Guide (ALG) or equivalent.  It does not matter whether you lease or buy the car, it still depreciates the same 50% in 36 months. So when a salesman tries to tell you that buying is a bad investment, he's forgetting that leasing is too.  Ignore those Jedi Mind Tricks. Cars that don't hold their value are not good cars to lease because you pay more depreciation.  If you lease a $20,000 car and it's worth $11,000 after 36 months, you pay for the $9000 depreciation, plus interest.
 

Leases don't have interest rates, they have a confusing term called "money factor".  Dealers avoid telling you the selling price of the car, quoting only the monthly payments, so how do you know what you're signing up to? This is why dealers push leasing so hard.  It's easy for them to hide the fact that they gave you nothing for your trade-in after you spent an hour negotiating top dollar for it.  Many people think the heck with it, their company is paying why should they have to negotiate?  Why should your company have to give the dealer full MSRP?  Why should you have to sit there and listen to a salesman saying "come on, your company is paying for it, what does it matter?"  Don't tell the dealer you are leasing until you agree on a selling price.   Negotiate the car down to a good selling price as though you're buying it.  Then if you want to lease, the purchase price becomes the gross cap cost for the lease. Higher residual values mean lower lease payments.

MSRP - Manufacturer's Suggested Retail Price

While many salespeople are good, some live by this principle:

Thanks to tricky lease terminology, dealers can agree to all your demands, then steal it right back.  You negotiate the price of a $25,000 car down to $22,000.  Now you think you are getting a great deal.  The only problem is some dealers still skirt the law and fail to disclose this $22,000 "cap cost" (selling price) on the lease papers.  Instead they use the $25,000 MSRP as the "cap cost" for their formula then show you only what your monthly payment will be, and not the selling price.  Since lease payments are less than a loan to begin with, the payments are low and you are happy.  On a 48 month lease,  they packed your payment by $62 per month.  If you speak up they make you feel guilty saying "We're saving you money here, you're paying less than you would on a loan.  They just stole $3000 from you but you don't notice because it's spread out over 48 months.
 

The "purchase price" of your leased vehicle is critical!  The higher it is, the higher your lease payments and the dealer makes more profit.

A large cap cost reduction (down payment) hides a bad lease.

Many dealers require huge down payments at inception.  The fine print in a BMW ad lists fees and down payments totaling $5289! On the BMW ad, they divert your attention to the low monthly payment of $275, but let's add up how much the entire lease is costing us. You must amortize the $5289 down into the 30 months of the lease.  This means your effective average monthly payments during the 30 month lease will be $275 + $5289/30 = $451    They mislead you into thinking your monthly payments are only $275, which is right, but it's actually costing you $451 because you are only focused on the low monthly payment, ignoring what they did to you up front. 

Zero Down does not mean you owe "zero".  It just means you don't have to put money down up front.

Some dealers mislead you "$0 down payment" ads.  Your brain makes you think you don't have to put any money at all down, when in reality, it means the down payment part of your inception costs is $0.  Confused?  Remember, their definition of down payment is cap cost reduction.  The other fees due at closing (i.e. dealer fees, acquisition fees, bank fees, add up to over $1000.  So "0 Down" does not mean zero down.  They can shift fees to the end of the lease in the form of disposition or termination fees, or into the cap cost.  Closing costs should always be used in the calculations to tell you how much the entire lease will cost you.
 

If you cannot fulfill every single payment of a lease, you should NOT be leasing.

Before signing a lease, be sure you are doing the right thing.  Are you going to have kids next year and need a different car?  A lease is a contract and if you break this contract, the penalties are stiff.   You can have your credit rating tainted, meaning you'll pay more for your future cars, and higher interest.  The lessor can sue you for breach of contract.  Usually they just quote you the early termination penalty, which you are stuck with.  There have been successful lawsuits against lessors accused of padding the early termination penalty, because you can't verify if the penalty is correct.

Driving Records

Driving Records are state driver's license reports containing details about a driver's history including accidents and violations.  Each state maintains records of their registered drivers' activities occurring only in that state.

Driving records can be obtained by insurance companies to determine your rates as well as by companies during their employment screening procedures when hiring.  Some employers may even require that you submit your driving record along with your employment application.  A single typo on your driving record can cost you hundreds of dollars in insurance rates.  It can even cost you a job.

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