Should you lease a car? No.
Thank you for coming to my Ted Talk.
If you are still reading it’s because you know that buying a quality used car and driving until the wheels fall off is the least expensive to own a car. However, you may be concerned there’s a chance that used car is a lemon and you will have throw money into it. Furthermore, you may be a retired grandma who doesn’t drive much and you don’t want to be stranded on the side of the road. Perhaps, the tax incentives as a business owner make lease attractive. Or you just are addicted to new car small every three years. You may want the peace of mind of a fixed payment and car under warranty.
If so, read on.
When: Every dealer gets desperate at the end of the month. Start talking to dealers now but wait until month end or Memorial Day or after to do anything.
Step 1: Negotiate the price of the car first.
Step 2: Ask for the monthly payment with NO money down. Why put money down? Consider the opportunity cost. New cars rarely go up in value. The whole idea of a lease is to fix your costs and keep your cash. Furthermore, as you shop around, the extra variable of money down makes comparison confusing. Customer confusion is what car dealers thrive on.
Step 2.5: Your lease will include a maximum number of miles. Pick 12,000 miles per year annually for every quote.
Step 3: Ask or the Money Factor? Should be 6% or less currently. This is a profit source for the dealer and is negotiable.
The GOAL: The best deal is a 1%. 35,000 car should have a $350 payment. Those are rare but that’s the goal. Anything between 1 and 1.5% with no money down is good. More than 1.5% is too much.
Don’t worry about the residual value. It’s not negotiable.
Step 4: Make sure there are no dealer add ons. A dealer add-on with a lease refers to optional products, services, or upgrades that a dealership offers to add to your lease agreement, often after you've agreed to the core lease terms. These add-ons can range from things like extended warranties and gap insurance to paint protection and detailing packages, prepaid service. These are inflated and you don’t need them.
Discounts/Incentives? The more the merrier. But again, no money down with a payment of 1 to 1.5% is the key.
Which Brand?:
Quality and reliability don’t matter as much because you’ll be under warranty for the 2 to 3 years you have the elase. Good looks and performance are up to you. But Honda and Toyota know they are high quality and charge you for it. Kia and Nissan have a terrible quality reputation at the moment and may be a better deal.
Electric vehicles are often leased because the battery technology keeps advancing every year. Buying an obsolete or unpopular brand may mean resale value is very low. I’ve heard a rumor that Tesla’s are so unpopular strangers will scratch or set fire to yours. That’s the type of brand you should lease. Some EV manufacturers may go out of business in the next 5 years.
So if you are dead set on leasing a car, those are the insights I’ve picked up over the years. Let me know if I missed anything.