Are Car Leases Still Available? Navigating the Shifts in Auto Leasing
Download MP3Car Leasing Overview:
- Originally popular among dealers and manufacturers to promote brand loyalty.
- Encourages customers to return to the same dealer for future purchases.
- Allows dealers to offer discounts subtly, without appearing as "bargain" deals.
Why Leasing is Less Attractive Today:
- Shortage of inventory reduces the need for discounts.
- Uncertain resale values, particularly with the influx of electric vehicles, affect lease appeal.
How Lease Payments are Calculated:
- Based on the difference between the vehicle's price and its estimated future value.
- Example: For a $40,000 car with an estimated $20,000 value after 3 years, the payments cover only the $20,000 difference.
Options for Current Leaseholders:
- Consider buying out the lease at the end term if the residual value is lower than the market value.
- If not keeping the vehicle, use the potential equity towards a new car.
Comparing Lease Payments vs Finance Payments:
- Lease terms are generally shorter, usually around 3 years, offering an “out” if you want a different vehicle.
- Financing long-term (5+ years) can lead to negative equity if wanting to trade in early.
Myth-Busting: Leasing is Just Renting:
- Leasing gives a purchase option, which sometimes results in lower overall cost than financing for the same term.
- Adding up lease payments with the buyout can sometimes cost less than a full finance term.
Smart Consumer Tips:
- Always compare lease, finance, and cash deals—dealers might offer hidden incentives within leasing.
- Leasing can sometimes be cheaper than paying cash due to these incentives.
Important Considerations for Mileage:
- High mileage affects the car’s trade-in value whether leased, financed, or paid with cash.
- Lease agreements factor in mileage for end-of-term returns, so drive accordingly.
Final Advice:
- Always get competitive quotes for leasing, financing, and cash.
- If a dealer hesitates to provide detailed options, consider moving on.