Do Your Financial And Automotive Homework

by : Terry Z. Voster

Is leasing a car, rather than purchasing a car on time payments a good thing or not. As with questions in life, it all depends on your financial and/ or automotive situation and as well who tells the story.

It is true that business can write off lease costs whereas that is not such an advantage to an individual car user. However this is not necessarily so. First it all depends on your situation and as well you're negotiating skills. It is always better to be in an informed and prepared manner.

First of all leasing a car is downright attractive due to current low interest rates. Almost every month you will read in the popular news that the "Fed has cut interest rates again". What this means to you is that in an overall sense that interest rates are less to you. This should mean lower leasing costs to you. If interest rates, in the banking industry and market are lower, so should be the interest rate basis in your lease negotiations and payments.

What are the advantages of leasing a vehicle? You will get a new vehicle to drive. When your leasing agreement term is over - then you hand the car in and walk away.

It may be debated that by leasing the car you will have no equity or asset accumulation left at this point in this automotive transaction. If you had bought the car, with payments, the car would be yours at some point, lock stock and barrel.

However major components and overall costs of running a car are maintenance costs. With a new vehicle - it is unlikely that you will incur these costs. First of all the car is new. Major repairs and costs are unlikely. In addition the car will come with a manufacturer's warranty which should cover you for the majority if not all of the lease time period.

With modern, newer and especially smaller cars it seems that all repairs seem to be very expensive. After a certain point of time, use and mileage, it is not as if the car "nickel and dimes" you to death. Most of the innards of modern cars seem to be electronic in nature with advanced (read expensive and hard to fix) modules. There are few simple to repair mechanically based, non electronic component, cars. In addition for mechanics to work on cars now "everything is struggle' "and as well spaces are tight and very hard to work within. In a summary the old "nickels and dimes" are now "five hundreds, thousands and several thousands". With a leased car arrangement you may not own the car, with its equity. Neither do you have repair costs and heartaches. In addition you have a reliable vehicle to get you to work or to chauffer around your family.

There are several terms and factors to be knowledgeable about in your calculations and comparisons for auto purchase versus lease workup and lease negotiations.

First of all research the leasing tax rules in your jurisdictions. For example in your state you may well only pay sales taxes on monthly payments, not on the cost of the vehicle. It all depends on the negotiations of your payments- which involve the time frame and value of the car at the take back time end of lease.

Next what are the fees? For example the fee at the end of turn in, paperwork fees and fees for "excess miles". Are these negotiatiable? In the case of the "excess mileage" and "excess mileage fees" are these carved in stone or can the allotment or rates charged be reduced? In the case of the "turn in" fee. If you offer to increase your monthly payment - often this fee will be reduced.

In order to best negotiate you will have to speak the same language and terms as the lease negotiator. Several terms to know, comprehend and understand are "Capitalized Cost", "Money Factor" and "Residual Value".

Simply put the cost of the leased vehicle is confusingly described as the "Capitalized Cost". Just as you would haggle over the cost of buying a new car, you should not accept a stated price or manufacturers suggested retail price (M.S.R.P.) as the price paid.

Haggle and argue over the "Capitalized Cost" just as you would in any car or automotive deal.

Next in line in proper automotive leasing terms is the term "Money Factor". "Money Factor "is the interest rate upon which the leasing calculations are based upon. The lower the number of the "Money Factor", the better for you. As a rough guide and estimate multiply the "Money Factor" value by 2550 to get an estimate of the relevant interest rate.

Last in the line of leasing and leasing lingo is the term "Residual Value". "Residual Value" is the amount that the car, S.U.V. or truck vehicle is said to be worth at the end of the lease period. Simply put, the more the vehicle is deemed to be worth, at this time period, the less will be your total amount due to be paid overall for your lease. Thus the higher the "Residual Value" at the end of your lease, the much lower will be your monthly lease payments.

In the end, your car purchase or lease decision will come down to two factors. Reliability of transportation and the total cash outlay from your personal pocketbook or wallet.