What to Know Before Leasing a Car in Los Angeles
If you do not have much experience leasing cars, you probably do not know all of the questions to ask your dealer. While there are many factors to a lease contract, there are just a few main elements that affect the price. If you what questions to ask, you will better understand lease contract terms. Let us go over what to know before leasing a car in Los Angeles, so that you know whether you are getting a good deal on your lease.
Lease Promotions and Specials
Many car dealers offer periodic lease specials. These specials pump up interest on slow-selling models, providing a shortcut to substantial savings. It is important to read the fine print of these lease contracts to ensure there are no additional charges. Many times, the quoted monthly payment does not include sales taxes and fees.
Residual Value
A high residual value is a good start to getting a good deal on a lease. The residual value is the predicted value of the leased vehicle at the end of the lease term. The value is an estimated term set by the leasing company.
The residual value is important because when you lease a car, you are paying for the current value of the car. For example, if you lease a $40,000 car for three years, it will be worth about $25,000 after the three years. This means that you used $15,000 of the vehicle’s value. Divide this amount by 36 months and you get $417, the approximate monthly payment of that particular vehicle (plus taxes and interest).
In general, it is important to consider that a good residual value is 55% while a fair one is 45%. The difference in the monthly payment between these two values comes to about $85/month. This adds up to $3,000 over the course of the 36 month lease term. What does all of this mean? This is what to know before leasing a car in Los Angeles: the first thing to look for in a good lease deal is a car that holds its value over time, or a car with a high residual value. Ask your dealer about the residual value of the particular vehicle you are considering, and they will give you a percentage between 45 and 60 percent.
Interest Rate
In leasing terms, the interest rate is referred to as the money factor. The money factor is one of the few elements of a lease that can be negotiated. The money factor is a decimal number, but it can be converted back to interest rate form when multiplied by 2,400. Your credit score can impact the interest rate, but when dealers are trying to attract shoppers they offer low interest rates regardless.
Mileage Limits
Often times the terms of a lease sound too good to be true, until you learn about the mileage restrictions. A lease contract might include 10,000 miles a year in place of the traditional 12,000 which is the industry standard. This means that once you exceed 30,000 miles over the three year term, the dealer can charge you 15-20 cents per exceeded mile. Make sure you understand how many miles are included in your lease term so that you do not get surprised once the lease is up.
Drive-Off Fees
A drive-off fee can be a combination of fees and a down payment. What to know before leasing a car in Los Angeles is that an amazing lease deal may have high drive-off fees upfront. Ideally, you want to keep your upfront fees down to a minimum. This is because the more you pay upfront, the more you have to lose if the car gets totaled during the lease term.
Additional Fees
What to know before leasing a car in Los Angeles is that a good lease deal can be made by asking about fee reduction or fee removal from the lease contract. Some fees such as acquisition and disposition fees cannot be negotiated, but the security deposit can be waived. Keep in mind that fee amounts vary between car leasing companies. In recent years, fees have increased from $300 to more than $650.
Lease Transfer
If you think you may want to change cars in the middle of your lease term, it is important to ask if the lease contract allows you to transfer the lease to another person for the remainder of its term. Many major leasing companies allow lease transfers with some exceptions. If you think you might want to exit the lease before the end of the lease term, be sure to ask about your options before signing.
Do Your Research
It is important to understand what to know before leasing a car in Los Angeles, because you will better understand the value of the lease you are considering. Consider your options carefully after you have done your research in order to get the best lease deal possible. This way you will have a lease that will save you money while providing you with an enjoyable driving experience.