How to know if a lease deal is good
Car Leasing Tips (Things You Need To Know Before Leasing A Car in 2023)
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hello and welcome to the channel today
I'm going to be going over some very
important things you need to know if
you're going to plan on leasing a car
and this video is not the one you want
to go to for should I be leasing versus
should I be buying what's the best
option I made a completely separate
video just for that topic so I'll link
it at the top so you can go watch that
video first and if you need to come back
and watch this video because this video
is going to be more focused on you need
to know this versus need to know that or
make sure you don't do that and make
sure you do do this because I want you
guys to be fully equipped with knowledge
so that when it does come time for your
release nobody takes advantage of you so
let's Jump Right In the first thing you
need to do is to make sure you're
leasing the right car and when I say the
right car I'm not talking about
necessarily the car you want but more
the car that has a really strong
residual value and the residual value is
how much the car is going to be worth
once your lease is over so you want that
number to be as high as possible and the
reason for that is because your monthly
payment will be based on the
depreciation of the car so the higher
the residual value the lower the
depreciation here's an example of how
that works so let's say the car you want
is worth thirty thousand dollars and at
the end of your three year lease it's
expected that same car will be worth
twenty thousand dollars that twenty
thousand dollars represents the residual
value of the car and that ten thousand
dollar difference represents the
depreciation so your lease payment is
designed to pay off that ten thousand
dollars of appreciation over that three
year period so that's how a lease works
now let's say you have another car worth
thirty thousand dollars also but its
residual value after three years is
expected to be twenty five thousand
dollars so because the residual value is
higher your lease would only be based on
paying off that five thousand dollars of
depreciation over that three year period
so of course this would lead to a
smaller monthly payment and this is why
you want to lease a car that has a high
residual value so if the residual value
for the car is less than fifty percent
at the end of your lease it's probably
not going to be a good deal that means
the car will be worth less than half of
what it is up front and I'm basing this
off of a 36 month lease now an excellent
lease would be with a car that has a
residual value of somewhere between 55
to 65 percent and that number is based
on the MSRP and that's the
manufacturer's suggested retail price so
here's a visual of how different
residual values can actually affect your
monthly payment here you see a car worth
thirty thousand dollars and it has a 65
residual value that means when the lease
is over the car will be worth nineteen
thousand five hundred dollars so you
take that thirty thousand and subtract
that ninety thousand five hundred and
that gives you a depreciation of ten
thousand five hundred dollars
so that's going to be the number that
your lease payment is based off of so if
you divide that by 36 months your lease
payment will be 292 dollars a month
now if you look at this example you also
have a thirty thousand dollar car but
this one has a forty percent residual
value so now the residual value is going
to be twelve thousand dollars
so you subtract that 12 000 from the 30
000 that gives you a depreciation amount
of eighteen thousand dollars so now
you're paying for more depreciation so
because you're paying for more
depreciation over that three year period
it's going to equal 500 a month so you
can see clearly how the more
depreciation you have the more monthly
payment you're gonna have so you can
clearly see the importance of leasing a
car with a higher residual value so to
find out the residual value you can
either check online or you can call and
ask a dealer directly next you don't
want to sell or trade in your current
car to the Future Leasing Company it's
not the end of the world if you do but
them knowing you have a trade-in which
is considered cash just gives them the
upper hand you have to understand that
you'll be dealing with professional
number crunchers here so you don't want
to give them any additional information
up front that can be used against you
later I would personally recommend that
you just sell your car to a completely
different dealer ahead of time just to
be on the safe side and get offers from
at least five different dealers just to
make sure you get the best price on your
car as possible next thing I want you to
know is that everything when it comes to
a lease is completely negotiable and
even though you're leasing the car and
not buying it you still want to
negotiate the sales price and the reason
for that is because the sales price is
the starting point for all the other
costs to come so the lower you get the
sales price the lower you get all the
other costs too you can also negotiate
the term of your lease the most common
term is a 36 month lease but you still
have the option to negotiate if you want
more you want less and try to keep
determining your lease to equal a full
year amount so stick to 24 36 or even 48
months and the reason for that is
because if you lease a car for 39 months
you still have to pay the registration
for the full year even though you'll
only be actually driving the car for
three months out of that final year and
this is something I see quite often next
thing you can negotiate is the actual
mileage because there'll be a set number
of miles you can drive that car every
single year and this is important
because the over mileage fees are
extremely excessive so have an idea of
how many miles that you usually drive a
year that way you're not going to put
yourself in a company position but the
most common number you see will be 12
000 miles a year now another thing you
can negotiate with your lease is the
money factor so you have to pay close
attention to this part this is the
number used with the car lease to
represent that interest rate and just
like interest rates are important in
everything else that you purchase you
want to treat the money factor with the
same respect so the money factor would
be a number that looks like this
0.00235 so just by looking at that
number you have no clue if that rate is
considered to be high or low so I'm
going to teach you a trick to turn that
weird looking number into a comparable
interest rate because once you see that
number converted over to an interest
rate you could tell right away if that's
a high interest rate or not so you'll
definitely need a calculator for this
part you're going to take that money
factor and multiply it by 2400 and when
you do that you can now see that you're
being charged a 5.64 interest rate and
based on where interest rates are at the
time will help you determine if that's
considered a good rate or a not good
rate and I'd even recommend you do that
math right in front of the salesperson
because it lets them know you have an
idea of what's going on because respect
goes a long way and that can definitely
help limit the amount of disrespectful
numbers they plan on putting from you in
the future next thing you want to do is
get all your quotes with zero money down
because once you start putting money
down it gets harder to determine if the
actual deal is a good deal or not and
right from the start you want everything
as clear as possible so another tip for
you that will help you determine if this
is a good deal or not is to get your
quotes with no money down for 36 months
and have them put 12 000 as the mileage
and make sure they include the taxes and
all the fees and from all that you'll
end up with a monthly payment amount now
take that monthly payment amount and
divide it by the MSRP so let's say your
monthly payment was six hundred dollars
and the MSRP for that car was fifty four
thousand dollars when you do the math on
that you'll end up with .01 then take
that .01 and multiply it times a hundred
and then you'll end up with 1.1 percent
and you want that percentage number to
fall within 1 to 1.5 percent to be
classified as a good deal and obviously
the lower the better and don't allow
them to manipulate your monthly payments
by extending your lease term further
than what it already is now the next tip
is pretty straightforward and that's do
not put a down payment down for your
lease it is not required at all the
number one thing to keep in mind is that
putting money down does not lower your
overall cost and it doesn't save you
money in the long run the same way it
would if you had a loan and if you were
to make a down payment and that car got
totaled from an accident or got stolen
you would not get any of that money back
and the amount you're paying for the
lease is already predetermined so
putting more money down is not necessary
at all and while we're on the topic of
accidents make sure you have gap
insurance that's something else that's
important but also gets overlooked it
used to always be included in leases but
not so much anymore that covers the
amount above what the insurance company
would pay out in case of an accident
because without gap insurance you'd be
personally responsible for paying out
that difference to the leasing company
and I'm sure that's the last thing you
want to do next don't wait till last
minute to start shopping around for your
options when your lease is almost over I
would say start planning somewhere
between 6 to 12 months before the end of
your lease because if you wait to the
last minute you can get a bad deal
regardless of whatever your plans are
with that car because you'll need that
time to shop around from different
dealers especially if you're trying to
get into a new lease because the more
dealers you speak to the better increase
your chances of getting a better deal
versus just going with the first person
you speak to and because of everything
you learned in this video plus your
personal experience with the least
you're currently in you'll be in a
really good position to even shop online
so you won't physically need to go from
dealer to dealer anymore but either way
don't wait to the last minute now for
this next tip this may be the most
important tip of all of them and that's
if you plan on turning your car in at
the end of your lease don't just go to
the dealer drop the car off and just
leave that might be the worst thing you
can do because believe it or not you may
have equity in your car and no it's not
usual that you hear people talking about
you may have equity in your car but
that's a huge benefit that comes along
with leasing because remember when you
start at your lease you were given a
contractual residual value and that
value States how much your car be worth
when your lease is over so at the end of
your lease you can actually purchase
that car for that set amount directly
from the dealer now here's how you use
that to your advantage just because the
residual value states which you can
purchase the car for at that specific
time doesn't mean that's how much the
car is actually worth in open market
because when you get at least the dealer
is assuming the future value of that car
but markets change and so does car value
so before turning in your car make sure
you check the Kelly Blue Book value of
your car and if the current value is
more than actual residual value given to
you by the dealer you can actually sell
your car for that current value and when
I say sell your car I'm not talking
about driving around with a for sale
sign in your window or something like
that I'm talking about selling a car
directly to the dealer themselves and
walking away with a check because
otherwise they would just pocket the
equity themselves which is what they do
most of the time because most people
have no clue about these details so
here's what that looks like let's use
that same example of the car being worth
thirty thousand dollars with an expected
twenty thousand dollar residual value
over your 36 month lease you would have
paid off the ten thousand dollars of
depreciation so before you go turn your
car in you actually check the Kelly Blue
Book value and you see that your car is
actually worth twenty three thousand
dollars you can literally sell the car
directly to the dealer for that twenty
three thousand dollar price so it would
be as if you purchased a car for the
twenty thousand dollar amount and
immediately sold it to the dealer for
the twenty three thousand dollar amount
so when it's all said and done you will
literally walk away with a check for
three thousand dollars directly from the
dealer and that's one of the most
powerful tools about leasing so that's a
tip for if you plan on turning in your
car but I have a different tip if you
plan on actually buying the car and
keeping it for yourself so if that's
something you plan on doing don't go
back to the direct dealer you got the
lease from because they will do their
best to add all kind of fees and
probably jack up the price on you so
what you want to do is call the leasing
company and ask for a direct payoff
quote and then you'll need to get
financing from your bank or from your
credit union and then pay the leasing
company directly this can save you a lot
of headache and unnecessary fees now if
you're in a state that requires that you
must go back to that same dealer the
workaround is that you can technically
go to multiple dealers under the same
manufacturer so it still doesn't have to
be that specific one you got the
original lease from but overall just
remember when your lease is up you have
options you can either buy the car you
can sell the car you could train the car
or you can get a brand new lease but now
regardless of whatever you plan on doing
you will be more equipped so I hope this
video was helpful if you received any
value at all please leave a comment even
if this is like a little happy face or
something because that's the only way
YouTube knows this is an actual decent
video and it helps them decide if
they're going to send it to more people
or not and I truly believe everyone
leasing the car needs this information
also don't forget to subscribe to the
channel and I will see you in the next
video
Related queries:
how to tell if a lease deal is good
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