Only pay for what you use.

A lot of people don’t understand that the primary principle of leasing a vehicle is to be able to only pay for the usage you get out of that car. In leasing, the leasing company estimates the car’s depreciation and residual value, and based on that they determine how much you should be paying overall throughout the entire term of your lease (usually 24-36 months). That amount is then divided into monthly payments accordingly (and that monthly payment will, subsequently, decrease the more you put down upfront because you are covering part of the cost of the lease or MSRP).

In short, leasing is paying for the depreciation that happens over time from using your car. At the end of your lease, you can return your car or buy out the vehicle entirely by paying for what’s left over of the car’s value.

All cars weren’t created equal.

This is due to the simple fact that some cars just lease better than others. In fact, some cars that otherwise would be the same price to buy, could lease for vastly different amounts of money. The reason is for this is basically the details of each manufacturer’s leasing programs. Every month, manufacturers release different lease programs that change each of the following:

  • Residual value: vehicles estimated value at the end of the lease
  • Money factor: interest rate (expressed as a multiplier)
  • Cash incentives: discounts and rebates if available

Dealerships love to mark up rates, fees, and selling prices.

Dealerships often advertise “leasing specials” that creates the illusion that the sales price of the car is up to the manufacturer, when in fact the individual dealers determine the selling price, and then apply the manufacturer’s leasing program to arrive at the actual cost.

Aside from the sales price, dealers also often increase the money factor of a vehicle to make extra cash – resulting in costing you an extra couple hundred to couple thousand dollars on your lease.

You don’t have to risk the consequences of depreciation.

When a manufacturer sets the residual for a vehicle, they often overestimate the actual car’s end-lease-value. The higher the residual is at the end of your lease, the less you have to pay during your actual leasing term — so you end up saving more. Some manufacturers are on point with their estimates, some intentionally inflate their numbers to make their leases cheaper, and some of them just get it wrong. Regardless, the manufacturer takes on the risk and uncertainty of depreciation when you lease.

You can cash out on any lease equity you have.

Sometimes, the opposite scenario occurs where your vehicle is worth more at the end of your lease than the estimated residual (which sometimes occurs if it becomes desirable in the used car market). Here, you can arrange a third party (like CarMax or Beepi) to buy your car at the end of your lease, and they’ll actually compensate you for the difference in residual. For example, if the estimated residual on your car is $20,000 and the actual end-lease value of your car is $25,000, Beepi will buy the car and then write you a $5,000 check for the difference.

If you can avoid putting a down payment on a lease, do it.

This is because:

  • If your car is totaled or stolen, GAP insurance lets you walk away from a lease, but you will almost never get your downpayment back.
  • A downpayment skews the cost of a lease and makes it difficult to compare deals. Any car can be leased for $200 a month, but you might need to put down $10,000 upfront to get to that monthly payment. You’re not saving money in the long run.

Instead, you can pay a larger security deposit, which lowers the money factor to lower your monthly payment.

Check out our exclusive lease deals here.