Leasing a car seems like a much easier road to travel than buying one. No large sums of cash, loans, or problems of being upside down on your auto loan – just you and the eyes of onlookers moving towards the sleek lines and the vrooming sound of your luxury machine. It’s a feeling one can definitely get used to. But has the moment already come when you have to return your old keys and find your next luxury vehicle to lease? If so, below, you will find a step by step guide to planning upfront, qualifying for, and locating good deals to close.
Plan before your lease is up
Know when to start
Next-day delivery is not an option when it comes to the process of leasing a vehicle. Therefore, to not find yourself in such a situation where your new car hasn’t yet been delivered, and your current one is due to go back, you should not neglect the fact that the leasing process takes a while and requires good organization. To be in full control of the situation, we recommend that you begin your search sometime before the expiration date of your lease starts approaching – at least four to five months.
This way, you will have enough time to find one that fits your standards and preferences, start the new lease, and bring the entire process to a conclusion by the time the car you currently have in your possession has to go back. Moreover, you will have adequate time for technicalities regarding the process of returning your current lease when that time comes, such as gathering all of the paperwork and reviewing your current contract, preparing for lease inspection, cleaning the vehicle inside out, etc.
Know what you can afford
As with your previous lease, your financial situation plays a large role in what kind of cars you can start looking up. Luckily for you, comfort, equipment, quality, amenities, performance, and status are not an issue with high-end vehicles. Still, all the bells and whistles cost money, and you must be sure that your monthly income aligns with your desired outcome. Knowing your budget will ensure you are not late with your monthly payments.
Besides the make and model you choose, the cost of leasing a car is calculated based on residual value or the estimated value of your car when the lease is concluded, that is, after depreciation. Besides the depreciation amount, monthly lease payments also include rent charge, as well as taxes and fees, and its total divided by the pre-specified number of months in your contract. Naturally, you can reduce your monthly payment with an upfront down payment or a trade-in.
Costs to consider when entering a new lease
Some other numbers you should have in mind are the same as those of your previous lease:
- Manufacturer’s Suggested Retail Price, abbreviated as MSRP, is a negotiable list price residual value is based on.
- Capitalized Cost is the purchase price of the vehicle that can be negotiated down from the MSRP.
- Capitalized Cost Reduction is the amount that, if put down, can reduce your monthly payments that are based on the predetermined cap cost.
- The acquisition fee is, typically, a non-negotiable fee used by your leasing agency to cover administrative charges of purchasing the vehicle and setting up your new car lease.
- The first month’s lease payment is a payment you might (or might not) be required to make. The same applies to last month’s payment and security deposit.
- Security deposit is sometimes referred to as Gap insurance, and it covers car thefts or accidents. It can also be used as compensation for the amount you owe on the lease agreement.
- The money factor is the interest rate you will pay during the term of your lease. It approximates the annual percentage rate (APR) in the event of a car purchase loan.
Costs to consider when concluding the lease
While calculating the total comprised of the numbers mentioned above, given that you’re concluding one lease and entering another, you shouldn’t disregard the additional fees, if applicable, for your current vehicle.
- An excessive mileage fee is an end-of-lease fee that covers the costs in the event you exceed your mileage allowance limitations, which are typically between 10,000 and 15,000 miles per year, whichever amount you agreed on in your lease agreement.
- Excessive wear and tear fee is a fee charged when there’s any damage done to the vehicle in addition to the normal wear and tear, the terms of which are typically included in your lease agreement. It motivates the car owner to make sure that the car is kept in the right conditions to meet the standards stated in the lease agreement.
- The disposition fee of your car covers any vehicle preparations essential for sale after you have turned it in at the conclusion of your lease term to the leasing company.
- Payoff balance is charged if the lease is terminated prematurely.
Know your mileage
Besides planning your action and budget, making an educated guess about the rough number of miles you drive annually is crucial to avoid paying extra charges in the event of going over the mileage limit. Upon putting your signature on the lease agreement line, you agree to drive only a certain number of miles per year (as mentioned beforehand, it typically runs between 10,000 and 15,000 miles). In case you overstep the allotted miles, you are charged a fee that is commonly assessed from 15 to 25 cents per each additional mile.
Estimate your lease payment so you know what to expect
Unquestionably, the formula by which you would be able to calculate your lease expenses requires patience. However, it is crucial to leveling up and spotting the best possible deal as you continue shopping. Although calculating a completely accurate lease payment is unrealistic due to a great extent of variables, an approximate estimate will go to great lengths as well. Generating a payment will require you to know your lease term and mileage, as well as to collect the missing pieces of information, such as the MSRP, money factor, residual value of the car, fees (registration, down-payment, acquisition, etc.), and rebates from a dealership. You can either do it on your own or enter your parameters in an online lease calculator and generate the approximate total.
Get in the driver’s seat – Own the leasing process
Locate your next high-end vehicle
When trying to find your next luxury vehicle to lease, the internet is a great starting point for figuring out or finding exactly what you are looking for, especially the carmaker or local dealership websites. Browsing saves time and money in research because carmakers frequently post their lease deals along with their MSRP (you also have the opportunity to instantly check for rebates that your selected dealer might not know or offer), and dealerships customize auto lease deals to address the needs and requirements of their local market.
Also, consider signing up for notices to keep informed about the special deals manufacturers or leasing companies have coming in the future. As a result, special rates or introductory offers will arrive via e-mail. Shopping via the internet department enables a comfortable quote requesting experience and their quick comparison. However, although much of the details can be handled via the internet or over the phone, a test drive must be scheduled.
Your other option is the traditional shopping experience in which you visit a local dealership to look at the inventory, the benefit of which is the convenience of immediately sitting down to talk price with the sales manager, as well as test-driving.
Figure out your type of lease
The two types of vehicle leases are a closed and open-end deal. With the closed-end deal, the car’s residual value is determined when the terms of the contract are negotiated, and if there are any excess mileage charges, you settle them upon the expiration of the agreement. This kind of deal is only recommended if you are absolutely positive that you will be able to take proper care of your luxury car. On the other hand, with open-end deals, the residual value is set at the end of the contract, and the difference is settled either by you or the leasing company, depending on the discovered value of the vehicle.
Maintain a high credit score
Obtain your free-of-charge credit score report before you start shopping for your next luxury vehicle from either Experian, Equifax, or TransUnion reporting agency. Although it best works in your favor if you maintain it annually, you can address any inadequacies and issues before the beginning of the car leasing process for the purpose of making a better deal. In other words, you need a high credit score for a better car leasing deal.
Request quotes from several dealers
Your next step is getting quotes by contacting at least three dealers via the internet or the dealership’s website. Of course, it goes without saying that you first need to confirm the car is in stock. Once you find out it is, inquire about their asking price, and make sure that it is e-mailed to you as well. Do the same with at least two other dealers.
Spot a good lease
Comparing lease offers implies paying attention to certain details such as which of them offers the highest percentage discount when it comes to the cap cost vs. MSRP, whether they compensated for this by increasing the money factor or not, as well as whether the residual value of the car you were inquiring about was consistent with each dealer. Naturally, you need to have all the numbers included in the deal, and your down payment, mileage allowance, and lease term will have to match.
High residual value
Experts agree that the leading factor when trying to get the best deal on a luxury auto lease is to look for vehicle audio with a high residual value. The higher the percentage, the less the car depreciates, and the less you pay for its depreciation. Simply type in the keywords “vehicles with high residual value” and let your favorite search engine do the rest.
Low money factor
As for the money factor, the lower the number, the lower the payment. Negotiating a lower amount if you are not happy with the one you are offered might be possible with some dealerships, although it is fixed and unalterable with others.
Next to high residual value and low money factor, discount pricing is the third part of the so-called subvented offer you should aim for. You know you’ve spotted a sweet deal if you’re offered aggressive rebates and discounts. These are often offered if the dealership or the manufacturer wants to keep you as a customer or win you away from their competitors. Other customer appreciation discounts are offered to first responders, people in military service, etc.
Negotiate before you say yes to a deal
Now that you have a handful of quotes, improving your lease deal is possible by taking the lowest offer amongst them and contacting other dealers to see whether they can beat that price or not. For instance, your capitalized cost is a perfect place to start. Even if you previously had no success in negotiating a better lease, you shouldn’t be afraid of making an attempt.
Finalize the deal
Once you’ve managed to find your next luxury vehicle to lease and closed the deal, you will be ready to sit behind the wheel and drive your new jaw-dropper off the lot. Upon settling on the lease price, make sure that everything matches what is written in the contract and check if it includes gap insurance. Once you’ve made sure everything’s in order, you are ready to sign the lease and start making your monthly payments. Never forget that you don’t own this car, and take great care of it to avoid paying for the excess wear and tear when the time comes to turn it in.
Frequently asked questions
Q: How soon should I start looking for the next luxury vehicle to lease?
The leasing process in its entirety takes time and, accordingly, good organization because you also have to consider that your current vehicle is due to go back very soon. So, to avoid the scenario in which you’re left without a means of transport, start your search roughly 120 days before your current lease expires.
Q: How much will leasing a new car cost me?
It’s impossible to know precisely how much the process will cost. First and foremost, your car’s model and make will dictate the total amount you will pay to lease a car. However, you will also need to know your lease term and mileage, as well as the variables, such as cap cost, acquisition fee, etc. We strongly recommend using an online lease calculator to generate the approximate monthly amount you will have to pay.
Q: Should I opt for the online or traditional shopping experience?
This is a matter of preference. Some people prefer going directly to the dealership lot and talking price face to face, while others choose the benefits of doing most from the comfort of their office chairs. However, truth to be told, a lot of quality research can be done online. You can browse websites of manufacturers and dealerships, see their offers or sign up for notices, quickly compare different ones, and send requests for price quotes. On the other hand, the more conventional option offers the possibility of test-driving and negotiating on the spot.
Q: What qualifications are necessary for generating a good deal?
One of the most important steps you can take is maintaining a good credit score and a clear credit history. If you pay your bills regularly and take proper care of all of your finances, you qualify for inexpensive car leasing without high interest rates. If not, then you will most probably have to settle for higher ones. An average credit score runs between 650 and 699, a preferred one between 700 and 749, and the perfect, but rarely seen, is 750 and above.
Q: What type of lease should I choose?
There are, basically, two types – a closed and open-end deal. Since with the closed-end deal the residual value of the car is determined at the beginning, you need to be sure of your ability to take excellent care of your vehicle so you don’t pay any extras. With open-end deals, however, the residual value is determined once the contract is concluded, and any difference is settled either by you or the leasing company, depending on the discovered value of the vehicle.
Q: How do I know that I’ve spotted a good deal?
Upon receiving offers from several dealers, you need to compare the details based on the so-called Subvented offer. The best deals are a combination of three things: High residual value, low money factors, and, lastly, discount pricing.
Q: Should I negotiate the price?
It’s in your interest to get the best deal possible for the lowest possible price. Therefore, any variables that can be negotiated, such as the vehicle’s capitalized cost, should be. Once you have offers from multiple dealers, take the lowest one, and ask if another dealer can make you a better one.