Understanding Car Leasing

Posted by





Since that $36,000 vehicle might depreciate about $18,000 over that same 36 months, the principal portion of the monthly lease payment would be based on $500, about half as much as for the loan. Of course, at the end of the lease, you have to return the car (unless you come up with the remaining $18,000 of the residual value to buy it).

Sourced From: http://www.consumerreports.org/cro/2012/12/buying-vs-leasing-basics/index.htm

Entering into a leasing contract may be the better way for you. But getting the facts right on the downside of leasing should be the first thing to consider. There are a number of things you should make sure that you get right when it comes to charges on such issues as exceeded mileage and insurance cover.

Personal Contract Hire

Penalties for going over your agreed mileage limit can be expensive. You will also never actually own your car as there is no option to buy it at the end of the agreement. And because you don’t own it, you will always have to take out fully.

Personal Contract Purchase

Again, as you don’t own the car, you will have to take out fully comprehensive car insurance.

Hire purchase

Interest rates on hire purchase agreements can be high, so compare deals carefully. And watch out for an ‘option to purchase’ fee which can be thrown in at the end of the contract.

Sourced From: http://www.moneysupermarket.com/c/news/all-you-need-to-know-about-car-leasing/0026401/

You always have the opportunity to discuss matters on leasing; you may have to settle to the reality that there are some things you will not be able to negotiate on the deal. There are some elements that determine your pre-tax monthly payment, most of which are dependent on the decision of your lessee.

The leasing company (NOT the dealer) determines the residual value, so it can calculate how much to charge for depreciation. The reference “bible” leasing companies use to establish this value is the Automotive Lease Guide’s “Residual Percentage Guide,” which is published every two months, listing projected wholesale values of vehicles after 2, 3, 4 and 5 years. Residuals are stated there as a percentage of a vehicle’s original retail/sticker price (MSRP). They are realistic estimates of the price leasing entities will realize when they auction the leased vehicle to dealers selling that nameplate. (We subscribe to that Automotive Lease Guide publication.

The leasing company also determines the interest rate, or “money factor.” Lessees with the highest credit scores typically get the best rates, just as they do when they are buying. If the rate is at or near the going retail market interest rate for car loans, chances are the dealer will earn some profit on it. But if it’s a factory-subsidized lease through an automaker’s captive finance company with a money factor/interest rate well below the market rate, there’s usually no money in that for the dealer. in that instance, the automaker is charging you a lower rate then it’s paying for the money, using some of the profit it made selling the car to the dealer to cover that cost.

Sourced From: http://www.fightingchance.com/auto_leasing.php