What Vehicle Leases Cost

About 25% of new vehicle buyers lease their cars nowadays and the number is higher for owners of luxury vehicles. In fact, a full half of customers driving high-end model cars like BMWs, Mercedes and Jaguars lease their cars.

Here’s a few things that we would like you to know if you’re thinking about leasing a car:

Selling Price & Residual Value

Besides the selling price, the residual value of the car is the other component to set the total amount being leased. Manufacturers set certain residual values for each car model they lease.  That residual value will be what they estimate a car will be worth, at a certain condition and mileage, when the lease runs out. As you would expect, a higher residual value lowers the monthly amount that you will pay.  High-quality cars typically have higher residual value than others.

Advertised vs What is in Stock

You have seen these types of ads. “For just $99 a month you can drive a brand new Honda Civic.”  While that figure is technically possible, dealerships often sell out of the bare-bones cars that they may offer that low of leasing rates with.  What you should know is that car dealerships typically offer aggressive lease arrangements on the bare-bones cars they have in stock, but they typically sell out of them very quickly. Usually, the real rate that you will pay for a leased car will be higher because the vehicle involved is more expensive due to how it has features that customers really want.  These are equipment features like up-graded interiors, infotainment units, air conditioning, and other creature comforts.

Don’t draw the conclusion, however, that since you see rock bottom prices in TV ads that they are executing a bait-and-switch. (Such routines are illegal). As indicated, the lease payment will really actually probably be higher than what you saw on TV, but will be the actual car you would like to drive with the features you want.

Beware of and Grasp the Money Factor

Deep into all car leases is an interest rate modifier known as the “money factor.” Unlike the annual percentage rate (APR) that’s stated in a finance contract, dealers write out their money factor in five decimals. Money factors are adjustments to annual percentage rates.  They vary from car to car and reflect the “deal” the car dealer offers you.  Example: when a car dealer wants to clean out some excess inventory, they will often tweek their money factor so your APR is less than usual.

Extra Fees

There are more fees you need to know about. Leased cars come with some restrictions that you need to know about. For example, as a leased car owner, you have to repair any damage that happens and do it right away.  You also have to have routine maintenance done and you have to keep the vehicle mileage under a certain threshold before the lease ends.  These are important things to be aware of so you should be careful to factor this into your decision to lease a vehicle.

The above tips are ones we’ve retrieved from Bossier Chrysler’s finance department, and we hope they come in handy!