Navigating the world of car leasing can be complex, but understanding the key factors can help you secure the best possible deal. For those looking to drive a new vehicle without the long-term commitment of buying, leasing presents an attractive alternative. This guide will delve into how to find the Best Car Leases, focusing on strategies to save money and make informed decisions.
Unlocking Savings with Subsidized Car Leases
Automakers sometimes offer what are known as subsidized, or “subvented,” leases. These leases can be significantly cheaper because the automaker is essentially contributing money to lower your costs. This subsidy can take a couple of forms. Firstly, automakers might provide an upfront rebate specifically for lease deals, reducing the initial capitalized cost. Secondly, they can artificially inflate the residual value of the vehicle at the end of the lease term. Both of these actions decrease the amount of depreciation that you, as the lessee, need to finance through your monthly payments. In rare cases, a subvented lease might even feature a below-market money factor, representing an exceptionally low interest rate.
To discover these special, budget-friendly lease offers, your best bet is to explore the websites of car manufacturers and local dealerships. These are the primary places where subsidized lease deals are typically advertised.
Manufacturer-Backed Leases: Often the Cheapest Route
Often, the most competitive lease deals are those provided by the automaker’s own financial services arm. Think of entities like Ford Motor Credit, Ally (which handles financing for brands like GM and Chrysler), and Honda Finance. Because these are directly linked to the manufacturers, they are often empowered to offer more attractive terms and incentives to move vehicles.
Be Aware of the Fine Print in “Sweetheart” Lease Deals
It’s important to approach exceptionally cheap lease deals with a degree of caution. Often, these “sweetheart” offers are designed to clear out inventory of models that aren’t selling quickly. This means the incredibly cheap lease you find might not be for the car model you truly desire or one that perfectly fits your needs. Furthermore, these special deals frequently come with credit score requirements. They may only be available to customers with top-tier credit. However, with lending standards being more accommodating than in previous years, it’s still worth checking if you qualify, even if you’re unsure.
Decoding the Money Factor: Your Lease Interest Rate
Whether you are comparing multiple lease offers or evaluating a single one, always pay close attention to the lease interest rate, which is known as the “money factor.” This is expressed as a small decimal, often extending to five decimal places, for example, 0.00166.
To understand the equivalent Annual Percentage Rate (APR) of a money factor, you can perform a simple calculation: multiply the money factor by 2,400. So, a money factor of 0.00166 translates to an APR of 4 percent (0.00166 x 2,400 = 3.984%, rounded to 4%). Conversely, if you know the APR and want to find the money factor, divide the APR by 2,400. For instance, an 8 percent APR would equal a money factor of 0.00333 (8 / 2,400 = 0.00333).
Why Lease Rates Can Be Lower Than Loan Rates
Lease interest rates are frequently more appealing than interest rates for comparable car loans. This is partly because lease contracts are considered less risky for the financing company. Since the finance company retains legal ownership of the car throughout the lease term, repossession in case of default is a simpler process compared to a car loan.
If you find that the lease rate offered to you is higher than a loan interest rate you could secure, don’t hesitate to explore other leasing companies or dealerships. Remember that lease rates, just like loan rates, are influenced by your credit score. However, lending criteria can vary from lender to lender. Crucially, remember that the money factor is negotiable. Don’t be afraid to try and negotiate for a better rate.
Online Resources to Find and Compare Lease Deals
You have the option to arrange a lease independently or compare various lease offers using online platforms. Websites like TrueCar.com and Credit Union Leasing of America (cula.com) are valuable resources for researching and comparing lease deals from different providers, helping you in your quest to find the best car leases available.
In conclusion, securing the best car leases involves understanding subsidized deals, manufacturer incentives, the money factor, and utilizing online resources. By being informed and proactive, you can navigate the leasing process effectively and drive away with a favorable deal.
