Auto Leasing
How do I get the lowest capitalized value on a lease?
Getting the lowest capitalized value in a lease requires the same sort of study and homework that you would need to buy a vehicle. You have to look at this as what vehicle is out there that has the best opportunities for getting the lowest price out of the MSRP and it's the same thing goes for leasing. So, do your research, find out which vehicles have special incentives, rebates, etc.; and make sure that all the available options and incentives are applied to that lease. A dealer will often say that the rebate dosen't count towards the lease. This is not true. Make sure that all the financing that's available from the manufacturer is being passed through the dealer into your contract.
What is "residual value" in a car lease?
In leasing terms, the residual value is the amount that the vehicle is expected to depreciate over the term of the lease. So, if a vehicle is expected to lose 30% of its value during that time, this is what the residual value is. This is what is set at the bottom end of the standard for how much you are going to pay for that vehicle over the term of the lease. It's really not that much more than an educated guess, no one really knows the future and no body knows how the vehicle is going to hold itself on the market. The residual value is a very strong guess and its the only standard that can be judged.
Can I negotiate the residual value of a car lease?
With regards to auto leasing, the residual value term in the lease is a predetermined amount calculated by entities whose job it is to really guess the future and assume what the vehicle is going to be worth at the end of its lease term. Therefore the residual value is not really open for discussion or negotiating, that's why it is most important to make sure that you are getting the capitalized cost or the actual transaction price for the vehicle when new, down to as low as possible to that predetermined original value.
Does a leased car cost more to insure?
When it comes to insuring a leased car versus a purchased car, both have very similar requirements. Obviously, in order to keep the car on the road, the car needs to be insured. The difference is that in some lease contracts there will be additional terminology that requires even higher limits. Therefore it's very important that you look for that before you sign a lease, because you may be violating an insurance term going forward that you're not aware of.
Will my insurance company pay off my lease if I get into an accident?
With regards to auto leasing, if you're in an accident in a leased vehicle, especially a serious accident, you really have the same responsibility to the leasing company that you would to a finance company as if you were buying it. You're still ultimately responsible for the value of that vehicle. You need to make sure you're carrying enough insurance to keep you out of any financial hardships in the event of a major accident.
Can I trade-in my vehicle for a leased vehicle?
With regards to auto leasing, if you're considering leasing a vehicle, you can absolutely apply your trade-in value to the capitalized cost (or the transaction cost) of your lease vehicle; thus reducing your payments.
Will I be eligible for a rebate if I lease the car?
Yes you are eligible for any rebates or any incentives even when you are leasing a car. Often the dealer will tell you that it's only for purchase, but insist on getting any and all factory money passed through the dealer into your contract.
Will my leased vehicle offer a manufacturer's warranty?
All vehicles are required by law to have a manufacturer's warranty attached to them, that ranges anywhere from two to five years.
Will I be taxed on a leased car?
You will be taxed on a leased car, based upon your monthly payment schedule, just as if you were buying the vehicle outright. The difference with a leased car is that your tax burden is somewhat less because you're only paying for the gap between the price of the vehicle new and the price of the vehicle at the end of the term.
Does a leased vehicle depreciate in value?
Leased vehicles depreciate in value just as a purchased vehicle would. Any vehicle going into the marketplace is going to depreciate as soon as you drive it off the lot.The difference being is that you're only paying for the gap between the new price and the depreciated price, so therefore you won't feel the same impact necessarily as if you were going to sell the vehicle outright at the end of the term. It's depreciation divided out by 36 months.
