It's time. Perhaps your current car has become unreliable and has seen better days. Maybe you’re concerned that the cost of repairs are now far outweighing the car’s actual value. Or it could be you are finally ready to reward yourself with a well-deserved upgrade for all your hard work. Whatever your reason may be, you’re now in the market and actively looking for the best deals on new cars. And oftentimes, those best deals can come in the form of discounted car leases. But as with any new or used car deals, there are potential hidden costs to leasing a new car. What follows are a few to consider before you sign on that dotted line.
Sticker Price – Let’s start with the most obvious one and work our way from here. You can usually find the Manufacturer’s Suggested Retail Price (MSRP) in the window of any car on the lot or the dealer’s website. Depending on factors like current inventory, general demand, vehicle extras and options, the dealership price may fluctuate up or down on any given month for any number of reasons. However, the keyword here is suggested, and that means there are always potential great car lease deals to be had if you know where to look. Never be afraid to negotiate, as you may not know how desperate that dealer is to move that car off their lot.
Selling Price – Even though you are not actually buying the car, it’s important to consider your total cost at the end of your lease agreement. So, the “selling price” in the deal is the actual price you pay over the term of your lease after negotiations, and once all of your finance charges, taxes, and interest rates have been applied. Of course, it works the other way as well. Be sure to also deduct any discounts, rebates, and any other incentives you may receive to determine a true lease estimate the properly reflects the total cost of the deal.
Depreciation Calculations – This is where things can start to get tricky. If you have purchased a new car before, you probably know that the car depreciates the second you leave the lot. Well, this principle applies when leasing a car as well. It is important to estimate ahead of time when pursuing new car lease deals the true cost of your automobile, and understand well beforehand what the car’s actual worth over the course of your lease could potentially mean in any negotiations. Yes, the car dealership will be considering the eventual worth of the car when you eventually turn it in – and you should be too.
Lease Length – While most standard leasing deals are over the course of 36 months, obviously the length of your lease and the interest rate you secure will ultimately play a big role in determining the total cost. A simpler way to think it about it is this: a car lease payment is basically your depreciation calculation divided by the length of your lease. So using round numbers in this example for the purpose of easy math, say if your car depreciates by $6,000 over the course of three years (36 months), your monthly payment would be roughly $166, plus whatever finance charges and regional fees are factored in using the same type of formula. It’s an easy way to estimate your monthly expenditures while simultaneously assessing the best lease term for you budget.
Just keep in mind, as with any car purchase or lease agreement, you’ll want calculate other incidentals if you are truly on a strict budget. Regular expenses like gas and oil changes should always be considered, as well as other extenuating circumstances like miles restrictions and general wear and tear depending on your location. Do you have a long commute? Are you often stuck in traffic? Do you go on long family road trips? Then maybe a car lease isn’t for you.
But if you do find your family is growing, your job temporarily relocating, you want to avoid the headaches of owning an older car or just want the latest and greatest toy, leasing a new car just might be the best short-term solution for long-term savings…as long as your consider all your true costs before heading to the negotiating table.