Monthly Archives: June 2016

Easy Lease a Car Tips

If you’re new to leasing, you probably have some questions about how it works. This overview is meant to explain the basics, including the answers to these questions:

  • What is a lease?
  • Why do people lease?
  • What key numbers do I need to know if I’m going to lease?
  • How can I quickly determine if I’m getting a good deal?

This article won’t cover all aspects of leasing, but it should be enough information to get you started. If you want to get into the nitty-gritty, we’ve got 10 Steps to Leasing a New Car, a comparison of leasing, buying a new car and buying a used car and a deep dive into calculating your own lease payment

What Is a Lease?
Some people think a car lease is nothing more than a long-term car rental. And although that isn’t a completely accurate comparison, it is good enough: A lessee (you) pays money to the lessor (the bank, which is the actual owner) to use the car.

The agreement is set for a certain length of time, usually two or three years. During this time, you’re allowed to drive the car for a set number of miles, usually between 12,000 and 15,000 miles per year. You can raise those limits, but more miles mean a higher monthly payment.

Your use of the car and the miles you’ll drive will reduce the car’s value. Your lease pays for that depreciation. You also pay lease fees and taxes.

Here is an example, based on a new car with a $20,000 price tag. Let’s say this car is projected to be worth 60 percent of its original value after it is 3 years old and has been driven 36,000 miles. In that time, it would have depreciated 40 percent, or $8,000. So through the lease, you are paying for that $8,000 of lost value, plus lease fees and taxes, spread out over the 36 months you’d have the car.

You’re expected to return the car in pretty good shape when the lease is up. If you return the car with damage (known as “excessive wear and tear” in lease-speak) expect to be charged for it. If you drive more than the allowed miles, expect to be charged for that, too.

Why Do People Lease Cars?
Here are some popular reasons:

    • It’s less expensive: With the rising retail price of many of today’s cars, leasing is often the least expensive way to get a new vehicle. Leases tend to require lower down payments and lower monthly payments than car purchases. A lease is also a great way to get a nicer new car for less money than you’d have to pay to buy it.

    • There’s a lower cost of maintenance: Leases typically end before cars require major service or new tires, so maintenance costs are usually low. Leased vehicles are almost always under the original factory warranty, so owners don’t have to worry about the costs of repairs — as long as they are problems covered by the warranty.

  • You can have a new car every few years: Some people always want to be in the latest and greatest new car. Leases, typically for three years, offer a faster turnaround time than the standard purchase cycle, which is about six years. Leases are also easier to exit, once the lease term is complete. Assuming there are no over-mileage or excessive-damage charges, you can drop off the leased car and move on to whatever is next — which probably is another lease. This is a lot easier than buying a car with a long loan period, and tiring of the car before the loan is paid off — especially if you owe more on the car than what it is worth. That’s called being “upside down,” and it’s no fun.

What Key Numbers Do I Need to Know if I’m Leasing?
There are five:

1. Sale price: Your lease payment is based in part on the sale price of the car. Just like when you buy a car, the lower the sale price, the lower the lease payment. To make sure you’re getting a fair sale price, check out Edmunds average price paid, also known as True Market Value (TMV®). This tool tells you what other people are paying for the same car.

2. Residual percentage and amount: The residual value of the car is expressed as a percentage, and it’s an important part of your deal. The higher the residual percentage, the lower the amount of depreciation you have to pay. In other words, a high residual percentage should net you a lower monthly payment. The residual is also the amount you would pay the bank if you decided you wanted to purchase your leased car at the end of the term.

3. Allotted miles and the over mileage charge: When you sign your lease, you’re allowed to drive a certain number of miles annually. If you exceed that, you’ll be charged a fee, usually assessed in cents per mile. They can be high: from 15 to 25 cents per mile. If you think you’re going to go over the mileage limit, you can add extra miles when you sign your lease agreement for a small increase in payment. This will likely be cheaper than paying the overage later. If you do go over your miles but you’ve decided to buy the car when the lease is over, you will not be charged for going over the allotted miles.

Car Shopping Will be More Easy

You’ve done a ton of online research and you know the car you want (and need) for carpooling, grocery shopping and weekend family fun.

Now-you’re-just about ready to head over to the dealership to test drive and possibly buy that perfect car. Before you hand over your hard earned money, we have 25 quick shopping tips to make family car buying easier than you could have imagined.

Before Heading Out to the Dealership

1. Yes, it’s exciting to be on the verge of buying a new car. But don’t just rush off to the dealership expecting the vehicle you saw online will be in stock, ready for a test-drive and purchase. It might not be there, even if the dealership’s website says it is. That’s because online inventories can lag behind what’s actually on the lot. Call the dealership first to make sure the vehicle is indeed still for sale.

2. Will you have your kids with you? If so, tell the salesperson when you plan to arrive, and ask him to have the car up front ready for a demonstration and test drive. Some dealerships have massive inventory lots, and they are often off-site. You don’t want to wait a half-hour to have the right vehicle pulled up from one of these lots, especially if you have bored kids in tow.

3. If your schedule allows, do your in person shopping on a weekday. It’s not as busy and you’ll get more personal time with the vehicle to check out the features, from engine to infotainment system. When you’re buying a car for the whole family to enjoy, it’s worth taking extra time to look things over.

4. If possible, have the whole crew come along. You’ll want them to try out the car in which they’ll spend hours over the next few years. Maybe it’s the one that will become their first car.

5. Remember to bring along your research, whether on paper or on your smartphone. And just in case you do buy that very day, remember to bring your driver’s license, proof of insurance and approved car loan from your bank or credit union. (Pre-approval is a good idea. If the dealer can improve on the terms, so much the better.)

At the Dealership

6. Some people buy cars purely online, as though they were washing machines or refrigerators. They come to the dealership only to handle final paperwork and drive off. Don’t be that shopper. Do check out the new car in person, even if it’s a model you’ve owned before. Cars change, and the features in a previous car might not be the same in the new one. Have your salesperson give you a thorough demonstration and then take the family-mobile out for a test-drive. Put it through its paces. Make sure it’s right for everyone, not just you.

7. Do a fit test. Check out the cargo area with seating positions set the way you’d expect them to be during daily driving. Will everybody fit? What about the dog? Is there room in the back to carry sports and school gear while all the kids are aboard?

8. While you’re checking out your potential new family vehicle, consider what it will take to get your crew in and out, especially if you plan to move youngsters or grandparents. Not everybody can easily climb in the back of a tall SUV.

9. If you’re buying a vehicle with three rows of seating, pay close attention to seating position of the second row, and how it affects the one behind it. That third row can be a challenge to get into, depending on how the seats are set up in the second row.

Something to say that you should say it on your car salesman

You never get a second chance at a first impression. I must have heard that adage a million times during the 12 years that I sold cars.

And it’s true: If done well, the first impression a salesperson gives a customer can go a long way toward setting her at ease. A bad first impression, though, can set the stage for a bad few hours for all involved.

But what about the first impression the shopper gives the salesperson? Many buyers don’t know (or don’t think) that the first impression they give the salesperson is valuable, too. Those first several minutes can determine the flow of a deal and either get the salesperson on your side or relegate him to the role of a guy who’s merely trying to sell you a car. And here is a car-business insider tip: You always want the salesperson on your side. A salesperson on your side might mean a few extra bucks off the deal, time shaved off the paperwork process or an extra-clean car when it comes out of the wash.

As a former car salesperson, I have a few suggestions for things a shopper can say to make a deal easier and let the salesperson know exactly where you stand: all for your benefit.

For starters, I always suggest that shoppers begin by smiling and being friendly, regardless of whatever bad sales experiences they may have had in the past. After that, here are 10 things you can say to get your deal moving quickly and flowing smoothly:

1.”I plan to get my new car this weekend.”
When you contact the dealership, be sure to tell the salesperson that you’re ready to buy now (some people don’t do this, for whatever reason). If you are frank about being ready to buy, you go from being an average sales lead to a hot prospect. A hot prospect is incredibly attractive to car salespeople, and being one will get you faster, more enthusiastic service and better deal offers. Conversely, if you’re not planning to buy your new car for several months, tell the salesperson that, too. You may not want a lot of immediate follow-up from the dealership if you’re not yet ready to pull the trigger. Telling the dealer you’re six months away from a purchase will slow down the follow-up calls and emails.

2. “I’m calling to confirm my test-drive appointment this evening.”
Here is a car business truth: Many customers who set appointments to test-drive a car or see a vehicle in a particular color simply never show up. After a few years of being stood up by customers, a salesperson who isn’t confident his 7 p.m. appointment is actually coming may not take the extra steps to make the appointment easier. He might skip things like getting the car out of storage and having it rinsed off or gassed up ahead of time. In such cases, the shopper who keeps the appointment might have to wait while the salesperson handles the things that could have been handled earlier. Calling to confirm your appointment can save you some serious wait time.

There’s another reason this confirmation call works to your benefit: Your salesperson may use the call to suggest things you can do to speed up the visit while you’re there. This includes such things as paperwork to bring along and maybe even where to park on the lot. Another pro tip: If you’re looking to see a specific car, this is a good time to verify it is in stock and ready to go.

3. “I have a trade-in, and I’d like to have it appraised as soon as possible.”
Getting a trade-in appraised can take time. Moving that process up earlier in the deal-making can speed things along. It also lets the salesperson know that it’s very important to you to get a good trade-in value. If it turns out you and the dealership are thousands of dollars apart on the trade-in value, the earlier you know that, the better.

4. “If you make me a great deal, I’m ready to buy right now.”
If you’re ready to buy on the spot (assuming you get the right deal), say so. Very few things fire up salespeople more than knowing they’re in front of buyers who are ready to do immediate business. In addition to getting the salesperson’s attention, that simple buy-right-now statement can move you from being a looky-loo to being a priority customer in the eyes of management.

5. “I want the cheapest car that will get the job done. Here are the features I need.”
Here’s a fact about car shoppers: Some people buy cars because they love what they are about to purchase; others buy cars because they need to fulfill a purpose. A salesperson won’t know which buyer you are right off the bat. If you’re the latter, buying a car the way you’d buy a refrigerator, tell your salesperson that. He or she may be able to suggest a vehicle that works just as well for your needs as the one you’ve picked out, but can save you cash along the way. Perhaps it’s a holdout from the previous model year. Or maybe it’s an unpopular color that can net you a nice savings. If you’re flexible on brand and model, your salesperson might be able to save you a few hundred bucks.