When you lease an automobile, you are paying for the depreciation from the final sale price to the residual value once your lease term is finished.
Let's use a simple example, the final sale price of the car is $30,000 and the residual value after a 3-year lease will be $17,000. You will pay $13,000 plus interest during the 3-year lease term of your car lease deal.
The secret to negotiate the best car lease deal is to expose the "capitalized cost" or a.k.a. final sale price.
Aside from your money factor and residual value, the "capitalized cost" is one of the main variables of the auto lease that controls what your monthly payment will be and if you'll get the best deal.
And this is the first mistake people make: not knowing that they still have to negotiate the final sale price when leasing an auto, just as if they were buying it. This mistake can cost thousands of dollars over the course of a typical 3-year lease.
Always compare models for good residual values on your car lease deal. Automotive Lease Guide (ALG) provides leasing residual values for all new automobiles and gives awards to specific models and manufacturers for residual value excellence. Typically, an auto will depreciate 30%-40% of the original sale price during the first 3 years of ownership.
Let's do the simple math: 35% depreciation of a $30,000 vehicle = $10,500. As compared to 43% of $30,000 = $12,900. That's a difference of $2,400 that you would pay during your lease term!
Among this year's auto industry brand winners are Honda, Toyota and Nissan for excellence, and BMW, Lexus, and Acura for luxury.
Lastly, know how to translate an interest rate into a money factor for your car lease deal. Translating the interest rate on your auto loan into the money factor is easy: Money Factor multiplied by 2400 = Interest Rate.
To get the best lease deal you should pay the same interest on your lease as you would on your auto loan, so it makes sense to research this on your own to know if the quote you get from the dealer is reasonable.
You can find more information on how to get the best car lease deal or apply for an online auto loan quote to see what kind of interest rate you receive!
