Car Leasing and Monthly Auto Lease Specials.

Starting with this article, Product Review & Ratings will be producing monthly, recurring ratings on the Top-10 Car Leases or monthly lease specials. The Top-10 Car Lease ratings are intended to give you some financial guidelines when choosing which car you want to drive for the next 2-4 years.

August 2009
July 2009
June 2009
May 2009
April 2009

March 2009
February 2009
January 2009
December 2008

Leasing cars is a way for car enthusiasts to conserve monthly cash flow and drive the best cars for their money. Since cars are depreciating assets, many people want to buy a car and make it last for as long as they possibly can. Others simply want to drive the best car for their money, and trade in for something new, with a warranty every 2-4 years. Though, the financial and 'new-car' motivation behind leasing makes good sense, I can understand why some people prefer to buy cars. My intention is not to say leasing makes more financial sense than buying. There are actually good financial reasons for buying a car and keeping it, but more than that, there is a personal mindset based on preference that is neither right nor wrong. Leasing makes sense when you want to drive a new car every 2-4 years, and you don't want to spend all your savings for it. So, given that leasing is an attractive way to finance a car, how do you know you're getting a good deal?

I talk to so many people who won't consider leasing because they are unfamiliar with all of the confusing financial terms, i.e. Residual value, lease factor, capitalized cost, cap reduction, lease termination fees, mileage, etc., etc. What worse, is many people have been told horror stories about leasing, and because they have no experience with it, assume that there was something riskier about it than a car purchase. The simple fact is, there are just as many horror stories about car buying as car leasing. Both, are financial contracts, and it is every bit as possible to get into a bad car-buy as it is a car-lease. In the early days of leasing there used to be some risks such as open-ended leases. Since I started leasing cars in the mid 1980-s, I've never seen an open-ended lease, but since I heard about them, I always make sure that my contract reads, "Closed-End Lease" somewhere on it, anyway. Only two realities should really keep you from considering a lease, in my opinion: One, if you drive more than 12,000 miles a year. Two, if you have a below average credit rating. Aside from that, don't worry about all of the confusing lease jargon. By following a few simple guidelines, you can lease a new car with very little risk or worries.

The monthly payment and total cost in the car is based on several factors: MSRP, Sales Price (MSRP less discount), interest rate (lease factor) and value of the car when the lease term is up (residual value). Even though I know what all these things mean, I really don't worry about all of this information when I lease a car. I believe the two most important things to know are my total monthly costs and the retail value of the car. Monthly cost is different than a monthly payment. I factor in an average monthly payment that includes the down payment, known as a Cap Reduction by the dealer. It would be better, of course, to make no down payment at all, but if it helps get your total cost of leasing the car down, it could make sense to put a little cash up front. Car dealers try to entice us with low monthly lease payments. A $159 a month payment on a 36 month lease may not be as good as it sounds if I had to pay $3,600 down to get it that low. The way I see it, making a big down payment is really the same thing as paying a portion of my monthly payments in advance. The $159 payment is really averages out to $259 per month over 36 months. Because I prepaid $3,600 in advance, I factor that in with the monthly payment. Wouldn't it be better for me to just keep that $3,600 in the bank and use it to help pay the $259 monthly payment, if and when I need it? Unless the downpayment reduces your total cost of leasing the vehicle, then why not hold on to your cash? This is why one of the other things to know is the total cost needed to lease the car for 36 months: $159.00 x 36 plus $3,600 down = $9,324. Total cost is good to know, but isn’t leasing cars really about cash flow and what kind of car you can get in return for that non-ending monthly expenditure associated with leasing one car after another? While it is true, you may have some equity in your car at the end of the lease; it is impossible to know in advance. Even the best leased cars are designed to be worth exactly what you owe when the lease is up. That’s how banks calculate the trade-in and depreciation of the vehicle and make money on their side of the deal. The objective is to get the best car for the lowest monthly expense. Total cost is irrelevant to me if my goal is to continue leasing one car after another. Also, despite what the experts say, I’m not afraid to lease a car for as long as 60 months if I’m getting a great car for a low payment that I don’t mind driving for five years. Many cars, especially Toyotas and Hondas are considered as good as new after five years. I don’t get real itchy for a new car in the first 3-4 years, if I'm driving a car I like. Again, my goal is to get the best car I can at the lowest monthly total cost. So, in order to put a value on this, I’ve devised a simple formula. The result, is what I call the Lease-Value-Ratio. I take the Average Monthly Payment and divide it by the MSRP (Manufacturers Retail Price) of the car. Let’s say the car in my example above had an MSRP of $18,000. The formula would be $259 divided by $18,000. ($259/$18,000 = 1.4%.). Lower Lease-Value-Ratios are better deals. So, wouldn’t it be great to know several of the car makers special lease offers in advance and compare them for the best deals? Wouldn’t it be nice to have the Lease-Value-Ratio at your finger tips from month to month, year-after-year?

Welcome to Product Review Ratings (PRR) Top 10 Auto Leases. These are interesting times for all matters financially. Car Leasing is no exception. Due to difficult times with banks and loans, leasing may not be quite as popular as it used to be. The American Car makers have nearly abandoned leasing agreements with banks altogether due to the declining auto values and difficulty reselling their used cars. I believe American car companies will come back, and so will their leases. Meanwhile, there are still some great deals and opportunities, but we need to find them. We look forward to bringing you Top-10 Car Lease ratings each and every month. December car deals are still alive for the Christmas Holiday. Check back often for the top-10 car lease specials for the latest month.

March 2009
February 2009
January 2009
December 2008

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