InFluential_Magazine_May_June_2017

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monthly payment even further, you’ll
have to put additional funds toward
the cost of the lease to get your payment
where you want it to be.
Bells and Whistles Cost Extra.
Just like when you’re buying a new
car, the extras cost more. Advertised
lease specials are usually for the
base model — not the one with
the navigation and safety packages
you’re probably coveting. Adding
on all the bells and whistles to your
vehicle will mean higher payments
because that raises the price of the
car. Again, you may have to put an
additional deposit down to land the
payment you think you can afford.
Not Owning Means No Asset.
Leasing is basically renting a car for
an extended period of time — three
to five years or so. Unlike buying a car,
you won’t have an asset at the end of
your lease. Which means you’ll have
a decision to make: pay the residual
value (the value of the car at the lease’s
end) to own the car outright, finance
the residual or turn in your leased car
for another. Regardless, you’ll again
need the cash for a down payment or
the upfront costs for your next lease —
whereas with buying a car you’ll have
a definitive end to monthly payments.
Once your loan is paid off, you can put
that money toward savings or paying
down debt. Or, you can use your car as
a trade-in on another ride or for cash if
you ever need to sell it.
Once You’re In It, Stay In It.
If you get halfway through your lease
and decide it’s not for you, you’ll
be charged for early termination, something
to keep in mind if your financial
lifestyle changes often. In some
cases, you might be required to continue
to pay all regularly scheduled payments
or your credit could take a hit.
Understand Complex Negotiations.
Understanding how a car loan
works can sometimes be difficult
for a first-timer, and things get even
more intricate when you lease.
Here are a few terms you may hear
during
•
lease negotiations:
Capitalized cost: Cost of the
vehicle
•
today.
Lease term: Length of the lease,
•
usually expressed in months.
Residual value: Vehicle’s expected
•
value at the end of the lease.
Depreciation: The difference
between the capitalized cost and
residual
•
value.
Lease factor, or money factor:
Cost of leasing, or interest — usually
expressed as a very small number
such as .003. Multiply this number
by 2,400 to get your interest rate. In
this example, that’s 7 percent. As a
note, interest rates on leases tend to
be higher than those on auto loans.
If you want to ace your lease
negotiation, you should study the
vocab and have A+ credit, too.
You may not get the best deal if
you’re unsure about your credit
score, leasing terminology or the
calculations mentioned above.
Mind Your Miles.
Depending on how often you get
behind the wheel and how far you
go, you could be forced to make
some lifestyle changes if you lease.
Most leases cap mileage somewhere
between 10,000 and 15,000 miles
per year, or a total of 30,000 to 45,000
miles. Driving over this limit could
cost you up to 25 cents per mile.
If you drive 30 miles round-trip for
your commute, you’re traveling 150
miles over a five-day workweek.
That’s nearly 8,000 miles just driving
to work each year — 24,000 miles
over the course of your lease.
Depending on your limit, that doesn’t
leave much wiggle room for things
like road trips, traveling to sporting
events, chauffeuring the kids to
extracurriculars or even grabbing a
bite to eat downtown. Those things
could be taken off the table if you lease.
If the freedom of driving whenever,
wherever is something you enjoy, a
lease may not be the best option.
The Choice is Yours.
Leasing might be for you if you want
to drive a new car every three to five
years, can drive within the limits and
maintain good credit. On the other
hand, today’s cars can easily last 10
years if maintained well, and once
fully paid for, allow you to sock away
monthly payments for other things.
There are sites that offer side-by-side
comparisons of buying and leasing
to help you make the right choice. This
calculator from Navy Federal Credit
Union is just one example. In the end,
it’s up to you. Armed with the details
on the real deal of leasing and your
buying options, you’re on the road to
making the right choice. (BPT) l
MAY / JUNE 2017
FLUENTIAL 79