By BILL SPANIEL
California Society Of CPAs
You’re ready to lease a car, and you want the best possible deal. The California Society of CPAs (CalCPA.org) recommends these steps to help you come away with the car you need at the price you want.
Determine What You Need
You’ve seen a great offer for a low monthly payment on a car you like and you’re ready to head to the dealership. That’s good, but before you finalize anything, it’s important to get some more information. Confirm, for example, whether the car offered has the equipment or features you need, as those additions may not all be available with a very low-priced lease.
On the other hand, if you see a similar car on the lot that has numerous add-ons you weren’t expecting, remember that those additions will hike up the price. Consider what’s really important to you so that you drive away with the vehicle you really need – at the right price for you.
Know the Areas for Negotiation
The monthly payments you see advertised or that are quoted at the dealership are based on numerous factors and if you do some research in advance, you will be in a good position to negotiate those factors. For example, the capitalized – or cap – cost included in a lease contract is the price you would pay if you were buying the car. Even though you’re not actually making a purchase, when you’re aware of a reasonable sales price for the car, you can ask that the contract’s cap cost be adjusted to that level, which could bring down the lease payment cost.
In addition, the deal you make is also based on an interest rate, called the money factor. Find out what that rate is and shop around if necessary to get the best deal. Do you do a lot of driving? Leases allow you to run up a certain number of miles, but at the end of the lease you’ll have to pay for each additional mile beyond that number. If you think you’ll exceed the limit in the lease you’re offered, try to negotiate for a higher total so you don’t face added expenses when it’s time to turn in the car.
Know How Much You Want to Spend
It’s important to know how much cash you have on hand for a down payment, how much you can afford to pay each month, and how long you want the car. The best choice for you will ultimately depend on all of these factors. Want a low monthly payment? That’s okay, but to make sure you’re really getting a good deal, focus on the cap cost of the car and not just the monthly payment amount.
Remember the Penalties
Not sure you’ll need or want the car for the entire lease term? Or are you uncertain that your income will remain consistent and allow you to make your lease payments for the lease term?
In either case, you should seriously consider whether leasing is truly best for you. That’s because you’ll likely face stiff penalties if you terminate your lease early. You could be liable for the remaining lease payments or early termination fees and other costs.
Leases are often appealing because they can offer a more affordable way to drive a new car every few years, but be aware of the penalties involved if you want to get out of one prematurely. Terminating a lease early may be feasible, however, if you plan to buy another vehicle or switch to another lease from the same dealership. Be sure to talk to your auto dealer about that possibility before you count on doing it.
Your CPA Can Help
Have questions about auto leases or purchases? Remember that your local CPA can offer advice on all your financial concerns. Visit CalCPA.org/findacpa to find one near you.
The Money Management columns are a joint effort of the AICPA and the California Society of CPAs as part of the profession’s nationwide 360 Degrees of Financial Literacy program. To listen to podcasts with more financial tips, go to http://tinyurl.com/calcpafinem.