So everything looks good. Your credit
score has reached new heights and you are ready to have a new car.
You've don't the research and settled on what you want. Now, do you
want to buy it or lease it? It's all up to you.
Leasing does make for lower monthly
payments and no down payment. For example, you purchase a
new car for $24,000. You make a $3,000 down payment and by the car.
You finance $21,000 for 48 months at 2.9% interest. This equals a
monthly payment of $464.89.
Okay, let's say you decide to lease
the vehicle instead. You pay the same interest rate and down
payment. You don't have to pay off the $21,000 in four years. You
simply pay the amount the car depreciates over the four years, plus
the leasing fee.
An auto lease payment has two parts:
the depreciation payment and the leasing fee. On this vehicle, you
take the $21,000 and subtract the residual value, which is the
amount the lender says the car will be worth in four years. Let's
say they say that your residual value is $10,000. You will have to
pay the $11,000 that the vehicle depreciates over 48 months. That
equals $229.16.
Then you have to add the leasing fee.
This is kind of like interest. You take the capitalized cost (minus
the down payment), add the residual value and then use the
equivalent of 2.9% to find the leasing fee. The equivalent is .0012
and your fee calculates to $39.20.
Your total monthly lease payment will
be $266.36.
That is a savings of $197.53 a month
- almost 40%. But keep in mind that you are only "renting" the
vehicle. At the end, you don't own anything.
When you buy a new car, the value of
the car depreciates from the minute you drive off of the dealer's
lot. Now it's a used car. So if you buy a new car every few years,
you would loose a lot on your investment. By leasing, you can drive
a new car and avoid the significant loss of value.
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