How To Lease A New Car

First, you need to know the cost of buying out your lease. Read the fine print of your contract and look for the "purchase option price". This price is set by the leasing company and usually comprises the residual value of the car at the end of the lease plus a purchase-option fee ranging from $300 to $500. When you signed on the dotted line, your monthly payments were calculated as the difference between the vehicle's sticker price and its estimated value at the end of the lease, plus a monthly financing fee.

This estimated price of the car value at the end of the lease is what is termed in leasing jargon "residual value". It is the expected depreciation - or loss in value - of the vehicle over the scheduled-lease period. For example, a car with a sticker price of $40,000 and a 50% residual percentage will have an estimated $20,000 value at lease end.

Now that you know the cost of buying out your lease, you need to determine the actual value, also termed "market value", of your vehicle. So, how much does your car retail for in the market? To pin down a good, solid estimate you need to do some pricing research. Check the price of the vehicle, with similar mileage and condition, with different dealers. Use
online pricing websites, such as Cars.com, Edmunds.com for detailed pricing information. Gleaning pricing information from various sources should give you a fair estimate of your vehicle's retail value.

All you have to do now is compare the two amounts. If the residual value is lower than the actual retail value, than you're into a winner. Unfortunately, there is a good chance a car coming off a lease is a little on the high side.Don't despair though. Leasing companies know as much that residual values on their vehicles are greater than their market value and as such are always on the look out for offers. You can knock down on the price of your leased vehicle with some smooth negotiating tactics. Put forward a price that is below your actual target and negotiate hard until you wind up near that figure.

As with new car-leasing, your price research should focus on the key figures that are the initial market value and the estimated residual value of the used car. This is harder to predict since there is no factory-set sticker price on used cars, and the residual percentage is very much pegged to a subjective current retail value. Use different sources to get a rough idea of the value of the used car: your local dealerships,Internet car-evaluating tools, such as Edmunds.com and Cars.com, to name but a few. Another way to pin down a good estimate is to compare the lease on your given car to a lease on a new-car with the same make and model.

This should give you a better picture of the difference between leasing new and going for used. Just like leasing a new car, used vehicle leasing is more attractive when residual values depreciate the least. You stand a better chance of finding a bargain in the high-end, luxury vehicles that keep their values better as used cars.

Next, you need to check the initial mileage and the overall vehicle condition. The maximum mileage on a used car should be no more than 12,000 miles a year. A 3-years old car with 50,000 miles on the clock is very unlikely to make a good used-vehicle lease. Check for signs of excessive use, like worn seat fabric, worn pedal pads and dirty engine, which might indicate that the odometer has been rolled back. If the car is not certified, you need to get it thoroughly inspected. Ask your dealer for a manufacturer-sponsored certification program or have your car certified by a qualified mechanic or inspection service.

Most used-car deals don't come with gap coverage. This is a special type of coverage, normally offered on a new auto-lease, to cover the consumer if the leased vehicle is lost, stolen or damaged. Typically, auto-insurance policies cover only what your car is worth at the time of loss, not what you still owe on the lease. The difference could run into thousands of dollars. For peace of mind, do not enter into any used-car lease without gap-coverage. Arrange it separately with either the lease dealer or your auto-insurance company.