We're all taught that if something looks too good to be true, it probably is. So what does that mean for those deals you see advertised everywhere? Can you really drive a new Lexus, BMW or Mercedes for $350 or $400 a month? Or are these offers too good to be true?
The fact is, you can have a new car with a monthly payment that low if you're willing to lease. But there are strings attached. Leasing can be a good option, but it depends very much on your personal circumstances. Deciding if new car leasing is right for you requires a good understanding of both the leasing process and the pros and cons.
Here we'll explore:
You can think of leasing as a long term rental. You'll never own the car, but in exchange for a monthly payment you can drive it as you want. (Within reason - drag and circuit racing are not approved!)
A lease deal is for a fixed term, typically 36 months. At the end of that period you give the car back and walk away. Unlike buying, where at the end of the loan period the car is yours, at the end of a lease you own nothing. However, you've likely paid less per month than a traditional retail purchase would have cost.
Before you begin the lease or purchase process for a car. You still want to make sure you pay the lowest new car price available for the vehicle you want to drive.
Ryde Shopper has one of the largest new car dealership networks in the world. Select the make and model you're interested in and they will instantly search clearance pricing within your local area. Don't forget to select as many dealers as possible to increase your chances for the greatest discounts and savings.
Browse new car inventory at Ryde Shopper here.
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Search new car inventory at Motor Trend here.
Cars Direct has been in business since 1998 and has all the right tools to help you find your next new car. They offer a no-hassle experience from configuring a car to making the final purchase. You'll find your next car quickly and easily.
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Remember how cars lose 40 - 60% of their value in the first three years? Well when you lease you're paying for that depreciation. You don't pay for the balance of the car because you'll take it back to the dealership at the end of the lease term. This is what lowers your monthly payment compared to buying.
Let's look at a simplified example. Say you've picked out a smart coupe that retails for $30,000. After three years and 50% depreciation it will be worth $15,000. So over the three year term of the lease you just need to pay back that $15,000.
Of course it's not quite that simple. The lease company, (who actually buys and owns the vehicle on your behalf,) is effectively financing your use of the car, so you pay interest on the depreciation charge. And in addition, they'll likely add in a few other fees. Typically this $30,000 coupe will cost around $475 per month to lease. On top of that, in most States sales tax is payable on the monthly bill.
You can lower the monthly charge by making a down payment. In our example if you put $3,000 down you're left paying $12,000 over 36 months. Add interest and you'll be looking at around $385 per month.
When estimating what a lease car will be worth at the end of the lease, the company assumes a certain mileage, (because mileage has quite an effect on value.) Typically they'll calculate this residual value on 12,000 miles per year.
Higher mileage makes the car worth less than projected. To cover this lease companies charge a penalty per mile driven over the limit, often around 25 cents. However, return the car after three years with less than 36,000 miles on the odometer and you won't get a rebate. That might seem unfair but it's just the way the system works.
There are lots of advantages to leasing, although many will depend on your personal circumstances. The main ones are:
New Car Leasing Pros:
If leasing is so great, why isn't everyone doing it? Leasing will not benefit everyone. There are many situations you may want to avoid using this option when getting a new car. Here are a few examples of why leasing a car not be right for you:
New Car Leasing Cons:
Leasing can be a good option if you like driving a newer vehicle, have good credit and don't cover a lot of miles. This is especially true if you don't want to put a large sum down at purchase and like the idea of low monthly payments.
If you're focused on minimizing the total cost of your motoring and are happy to keep a car for a long time, (say five years or more,) you'll be better off buying. If you finance the car you'll probably pay more each month than the person who leases, but in terms of total cost you'll eventually come out ahead. Likewise, if you're a long distance commuter leasing could work out quite expensive compared to buying.
Still wondering how you can get into a prestige car for a low monthly payment? Well these deals assume a low annual mileage, a large down payment, and excellent credit. If you're okay with those limitations, sign those papers. Remember though, the new car buyer probably gets the better deal in the long run.
Beginning your car shopping online is the smart thing to do. If you are going to lease a car or purchase a car. You will still want to begin the process by finding the best possible new car price first. Most, if not all, dealerships look at online car deals as "high volume - low profit" transactions. This means you will get your best deal by contacting them through the internet.
Do yourself a favor and make online car shopping the way you buy your next car. For more hints and tips on navigating the new and used car buying process, spend a little time upfront before beginning your car leasing journey by browsing through the rest of my website AutoCheatSheet.com.
Once you've figured you're budget and ready to start shopping for you next new car, take a look at my “New Car Buying Guide” for insider tips and secrets on how to get the best price on a new car and avoid dealer scams.
As always, I recommend using an online referral service such as Ryde Shopper or Motor Trend before visiting a car dealership. Their free online price quotes will automatically include any discounts or cash-back incentives currently available in the marketplace.
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