Confused About Auto Leasing?

I get a lot of leasing questions on my radio show.  Generally, I like leasing for people who do not drive more than 15,000 miles per year, and for those who like to get a new car every few years.  One of the problems with the car business is that it has its own language, and often people in the car business use their internal terms when talking to consumers.  Most people today know that “upside down” means they owe more on their car than its value, but not too many years ago, it was a bit of a mystery term.

Leasing has a language all its own too.  I am going to give you some of the most common leasing terms and translate them into the simplest explanation.

Residual value: The car’s wholesale value at the end of the lease as projected at the beginning by the lease company.  Higher residual values translate to lower monthly payments, but increase the cost to buy the car at the end of the lease.  This number is set in stone and you will know how much the residual value is when you enter into the lease.

Single-payment lease:  A lease in which you can pay all of the lease fees and payments at the beginning. A likely user is an buyer who could pay cash to buy a car, but wants to have a new vehicle every three years or so and doesn’t want to bother with selling or trading the old one, or with making monthly payments.  There is often a lower interest rate on the lease since the lease company gets all its money up front.  This is what I did almost two years ago and have enjoyed this type lease.

There are other lease terms, but these are the most common and understanding the leasing language will make you feel less intimidated.

Reprinted from Car Pro.