Automobile Leasing - Is it All that It's Cracked Up to Be?

Here's What You Need to Know Before Leasing Your Next Car

So, it seems too good to be true - then it is! It seems the car dealerships say you can drive this luxury car for monthly payments no higher then you've been spending on your economy model. It may work out that way for some people, but for more and more people, that dream turns into a big nightmare.

It seems that consumers are lured in by the low monthly payments and don't really know what they are getting into. As most of us know, unlike a purchase, a car lease expires, leaving you no car to drive, sell or trade in for a new one. 

Leasing is generally more profitable for dealerships, who end up owning the car in the end and can turn around and sell it. So many dealers will try and steer customers into a lease, whether the consumer wants it or not. If your credit is not all up to par, a salesman may try and tell you that your only option is leasing, although leasing usually requires better credit. Many salesmen may base the lease on a higher price without telling you, and it could cost you more. Most people only consider what the monthly payments will be and that is a big mistake. It seems that the dealer almost always has the upper hand in lease negotiations because customers don't know how the monthly payments are determined.

Before agreeing to any lease, make sure you find out the following: What is the capitalized cost; that's just a fancy name for the price on which the lease is based. Make sure you compare the capital cost to the manufacturer's sticker price.

Now there's the money factor: this is for the most part the interest rate. Make sure you get it translated into the equivalent annual percentage rate, so you can make comparisons.

Then there's the trade-in value: If you happen to be trading in your old vehicle, make sure its value is used to reduce the capital cost of the new vehicle. You should insist that the dealer give you the exact numbers used in the computation, otherwise, your trade-in value could get lost in the paperwork.