In recent years, auto leasing has made up a bigger slice of car sales. The reason is fairly obvious – it offers a lower monthly payment than if you were purchasing the car.
A lease is not a purchase – you don't have any equity at the end of the lease – but it can make sense for some consumers under the right circumstances. And right now there appears to be some pretty low-cost lease deals available from a variety of manufacturers.
Wantalease.com, a website devoted solely to finding auto leases, reports that not only are there deals on several brands currently being offered, the monthly costs are comparatively low. It finds that the Nissan Sentra SV currently offers the lowest monthly payment of just $129 a month.
Less than $150 a month
In addition, two other makes have models going for less that $150 a month. The Volkswagen Jetta S has a lease deal at $139 a month and the Ford Focus has one at $149.
Meanwhile, seven models can currently be leased for less than $200 a month. The Toyota Corolla has a special lease deal at $159.00; the Chevy Cruze at $169.00; the Honda Civic at $179.00; and the Chrysler 200 Limited, Honda Accord, Nissan Altima, and Volkswagen Passat all at $189.00 per month.
"As the year progresses, we can expect to see more deals on leases as dealers continue to find ways to compete against last year's auto sales totals," said Scot Hall, Executive Vice President of Wantalease.com.
While this all sounds very attractive, consumers need to exercise caution when considering a lease, making sure they are not focused solely on the monthly payment. It's true that the monthly payment could make driving a new car fit into your monthly budget, but that is not the only consideration. Nearly all leases require a 10% down payment, for example.
Automotive experts say consumers considering a lease should focus on the actual cost of the vehicle and not just the monthly payment. If the vehicle isn't competitively priced, the lease won't be the good deal it appears to be.
In an auto lease, the consumer pays for the part of the vehicle he or she will be using. In a three-year lease, the starting point is the purchase price of the vehicle. The end point is the estimated “residual value” of the vehicle at the end of the lease. The difference, plus an interest rate and minus the down payment, is the basis for the monthly payment.
Things that can increase the cost
Make no mistake, a low monthly car payment is nice. But remember there are things that can lead to significant costs at the end of the lease. Going over the mileage allowance, for example, is very expensive, as costs can be 15 to 25 cents a mile.
The dealer also charges for scratches, nicks, and dents when the car is turned in, even for overly worn tires. Consumers should get familiar with the hidden costs of an auto lease before signing on the dotted line.