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.
