Archive for January, 2012
Now, we will talk about other important categories to consider in order to determine if auto leasing is right for you.
Want to get a head start in finding updated lease prices with low monthly payments? Simply request an online lease quote today.
Still can’t make up your mind? Read on.
Category 3: Lease a New Car or Buy a Used Car?
All of us want to drive a brand new car. Nothing comes close to the sensation of driving a new car—not to mention the alluring scent of a car that is delivered fresh from the factory.
However, the cost of acquiring a new car nowadays is not similar to buying a new car in the 1960’s. The average price of a small compact car now hovers in the $12,000 to $20,000 range. Compare that to the cost of a car in 1965, which was only around $2,600.
Car buyers cannot be blamed for purchasing a used car instead. Can you expect college students to spend $14,000 on a brand new car? This is where auto leasing will prove handy.
In an ideal world, people from all walks of life should be driving a new car. The truth remains, however, that the current state of the global economy has prevented millions of people from living an ‘ideal life.’
What does a new car symbolize? Does it symbolize wealth? Does it mean that you are on your way up? Modern cars, despite being more expensive and complicated than your grandfather’s old clunker, are more fuel efficient, lightweight, and easier to drive. They tend to last longer, too.
New cars are also clean-burning as well. Technology gave us the power to drive better cars without totally poisoning the air.
We find nothing wrong with buying a used car. Although you will have to be extra careful before handing over your hard-earned cash to a used car salesman, because you have no idea if the car was treated properly by the previous owner.
For those who want to avoid the headaches associated with used car buying, we offer auto leasing as an acceptable and economical option.
Leasing a car is not complicated at all. You just need to choose the car that is right for your needs, and ask for multiple online lease quotes. Study and compare the prices in order to determine the right leasing deal that you can truly afford.
We will talk more about auto leasing in the next post.
In the previous post, we talked about the factors that you need to consider if you are planning to lease a new car. After considering your monthly income, it is now time to talk about other factors that will help you determine if leasing is right for you.
Category 2: Your Credit Score
Car leasing companies will require you to have a credit score of at least 640 in order to lease a car. Those who have bad credit can rejoice in the fact that there are leasing companies that specialize on bad credit auto leases.
Your credit score is not just a set of numbers printed on a piece of paper. It measures your capability to pay debt, along with determining your spending habits.
If you have a low score (FICO of 500 to 600), you should take the time to analyze the situation and do something that will help improve your credit. Obtain your credit report from the top credit bureaus and inspect each entry on the report. If you find any errors, you should report this right away.
The Importance of Your Credit Score
Your credit score will help lenders and leasing companies determine the money factor in your car lease. The money factor (or the interest rate of the lease) is where lenders earn money. Since auto leasing is similar to financing a car, lenders need to charge a certain amount of interest to compensate for the risk involved in leasing.
Take comfort in the fact that your credit score alone will not give you a cheap car lease. Leasing is based on the MSRP and the residual value of the car. If you decide to lease a cheaper car with a high residual value, you can expect to pay less in your car lease.
Having a good credit score will also make it easier for you to get approved for the car lease. This is because car dealers consider you as ‘less risky’ compared to people with a low credit score.
We will discuss more about auto leasing in the next post. In the meantime, you can check out the latest car lease deals in the market with a simple online lease quote. It does not matter if you have good or bad credit. Our free online lease quote will help you find the best car lease in an easy and hassle free way!
You may have heard some good and bad things about auto leasing. In reality, there is nothing wrong in getting a good quality auto lease as it will all depend on your personal preference.
Most horror stories about car leasing are, most likely, the result of not fully understanding the leasing terms and lease contract. There are car buyers who think that they can buy the car at the end of the lease term at a much lower price than expected. Think about this for a minute: if you really wanted to buy the car, then why bother with leasing in the first place?
This is the reason why we have come up with a series of posts that will help you to determine if leasing is right for you.
Is Leasing Right For Me?
Car leasing is applicable if you belong to the following categories:
1. If you have a stable and continuous source of income.
2. If you have a good or, at the very least, average credit score.
3. If you really prefer a new car over a used car. Of course, buying a new car remains an option but we will discuss that in another post.
4. If you don’t mind returning the car to the dealer at the end of the leasing term, and forking over monthly payments for the past 2 or 3 years in obligation of the lease contract.
5. If you want low monthly payments along with low or $0 down payments.
Category 1: Your Monthly Income
Yes, you will need to have a stable job or a reliable source of income in order to become eligible for auto leasing.
This is more important if you happen to be recovering from bankruptcy. Bad credit auto leases are available for those who have a mediocre credit score, but these types of auto leases will naturally command a higher down payment and slightly higher interest rates.
This also holds true if you have no credit, or have no history of credit at all! Remember that your proof of employment or proof of income will play a big factor in getting approved for your next car lease!
We will discuss the next batch of categories in the next post. If you want a cheaper way to drive a brand new car, then leasing is definitely worth the money. Check out the latest lease offers in your zip code by simply asking for a free lease quote. Instantly find hidden lease offers that are guaranteed to save you money!
If you want to lease a car, you should choose a vehicle with a high residual value.
This is due to the fact that a car with a high residual value will be cheaper to lease. Of course, we still have to factor in the interest rates and the lease term in computing the leasing rates. You will see from the illustration below that a car with a high residual value will give you lower monthly lease payments.
How the Residual Value Affects the Lease Price
Let us assume that car A has an MSRP or sticker price of $20,000. Let us also assume that the dealer demands a down payment of $2,000 for a 36-month lease term. The residual value of car A is 55% of the MSRP.
The MSRP of $20,000 should be multiplied to the residual percentage of 55% to arrive at the residual amount. Using the example above, the residual amount is $11,000 ($20,000 x .55).
Deducting the residual amount to the MSRP will give you a capitalized cost of $9,000 ($20,000 – $11,000.)
Deduct the down payment from the capitalized cost to determine the net cap cost of $7,000 ($9,000 – $2,000.)
Finally, divide the net cap cost over the lease term to arrive at a lease payment of $194/month ($7,000 / 36 months.)
Let us assume that car B has the same MSRP, lease term, and required down payment as car A. The only difference is that car B has a residual value of 45% of the MSRP.
Using this data, the residual amount is adjusted to $9,000 ($20,000 x .45).
The capitalized cost is now $11,000 ($20,000 – $9,000 residual amount.)
The net cap cost will become $9,000 ($11,000 – $2,000 down payment.)
The monthly lease payment for car B is $250/month ($9,000 / 36 month lease term.)
You can clearly see that the residual value makes a huge difference on the lease price.
The next time that you lease a car, try to determine which car has a higher residual value in order to get the lowest lease prices in your area.