August 2, 2018
Why Millennials Love Leasing Cars
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Many personal finance blogs are anti-car leasing for numerous reasons. But leasing a car may be a great option for you depending on your lifestyle and needs. Just make sure that when you lease a car, you’re getting a good deal. Here are some tips and tricks to get a great deal at an auto lease broker and avoid being scammed.
Always do your research ahead of time. Walking into a dealership without know what you want is like a sheep walking onto a lion’s dinner table.
Leasing has different terminology than sales. Salespeople will throw out words that you don’t understand to intentionally confuse you, expecting for you to need them to guide you into making “the right” decision. Cars U.S.A. News provides key terminology in auto leasing, Glendale, CA:
Capitalized Cost: The capitalized cost (or cap cost) is simply the price of the vehicle. Don’t confuse it with the car’s MSRP, which is the price shown on the window sticker. The cap cost reflects any discounts that you are able to negotiate.
Cap Cost Reduction: Anything outside of negotiation that reduces the capitalized cost of a vehicle is called the cap cost reduction. It can include the value of your trade-in or special lease deals offered by the vehicle’s manufacturer. Maximizing the cap cost reduction effectively lowers the amount you have to pay for the car.
Money Factor: The money factor is the interest rate on the funds that are financing the lease. It can’t be directly compared to car loan interest rates, but it can be used when you are comparing different lease offers.
Residual Value: A car’s residual value is a professional estimate of what a specific vehicle will be worth at the end of the lease contract. It reflects the expected depreciation of the vehicle and is determined before the lease contract is signed. What you pay for a lease is determined by subtracting the residual value from the cap cost, then adding fees and interest. Residual value is an educated guess and may be higher or lower than the car’s actual retail value as a used car.
Buyout Price: If you decide to buy the car at the end of the lease, this is the purchase price. It may or not be the same as the residual value. If the residual is way off at the end of the lease, the dealer may make or lose money on the deal when they sell the vehicle on the open market.
Acquisition Fee: The acquisition fee is an administrative charge tacked on at lease signing to cover the costs of preparing the lease. You’ll also have registration costs and taxes due at the beginning of the contract.
Disposition Fee: The disposition fee is one of the charges that you’ll pay at lease end. It’s intended to fund the car’s refurbishment and preparation costs as it is sent to the used car market. You’ll also be liable for any excess mileage or wear costs at lease end.
Due at Signing: The amount due at signing is the total price that you’ll have to pay to drive the car home when you initiate the lease.
Purchase Option Fee: The purchase option fee is an administrative fee that you’ll have to pay if you choose to buy the car at the end of the lease. It is tacked onto the buy-out price.
Whether or not you feel confident in your negotiating skills, bringing backup is always a good option. Your friend may catch something that you may have missed, ask questions that you may forget to ask.
The car you want should be sitting on the lot, not somewhere else. If a salesperson has to make a special order, they will be less inclined to give you a deal and can play the “I’m doing you a favor” card. If you are looking for auto leasing in Glendale, CA, we are just one call away! Contact us to check the availability of any car make and model.
Check the car’s driver’s side door for the manufacturer’s date. That is, the date the car came off the production line. Add up how long the car you’re looking at has been on the lot. If the car has been sitting on the lot for a while, the dealer is definitely ready to get rid of that car, giving you an upper hand in negotiation.
While negotiating a lease, understand that there are some number that cannot be changed, like registration and taxes, residual value, acquisition fee, and disposition fee.
So, instead, focus on the numbers that you CAN change: Capitalized Cost, Interest Rate, Cap Cost Reduction, Buyout Price, Mileage Cap and Charges, and Trade-In Value.
Always double-check any documents you’re about to sign, especially a leasing agreement. Make sure you are agreeing to the terms that you negotiated and nothing is being slipped into the leasing agreement.
Don’t let anyone try to convince you that you have to purchase these things from the car dealership:
Extended warranty–You can buy an extended warranty from your insurance company or lender for much less than at the dealership.
Window etching–It’s a ripoff. Period.
Key protection–Get key protection from the much less expensive AAA.
Nitrogen for your tires–Do you really need it, Speed Racer? The answer is a definite NO.
Any type of wheel/dent/cloth protection–Just say no to these bundles. They’re not worth it.
Theft protection–today, most cars come equipped with anti-theft systems. Theft protection bundles are just a markup and do little to prevent car theft.
Rear-seat entertainment–One word: iPad.
Tire and wheel package–you can get a better deal at your local tire store.
If negotiations just aren’t bearing fruit, you don’t like what the salesperson is saying, walk away. You don’t owe him or her your time. And your time would be best spent elsewhere.