Auto manufacturers are consistently offering new promotions and incentives to entice consumers to lease new vehicles from them.
Their marketing departments especially love to flash what they call “special lease rates and terms for well qualified lessees” across your television screen, and in their print campaigns.
The problem is that most people don’t qualify for those rates and terms.
What’s worse, is that many consumers don’t quite understand what the true cost of a lease may be and auto dealerships take full advantage of this fact.
This knowledge would not only make consumers much better comparison shopping, but it would give them a leg up when it comes to dealing with the dealers.
The big thing that people don’t realize is that shopping for a lease on a car is not about just the monthly payments, and that is where the dealerships get them.
The dealer can always fit you into your desired car with the exact features you want and at your targeted monthly payment.
That, for them is as easy as increasing the down payment.
They are armed with the knowledge that most consumers are only concerned with the bottom line, which is that monthly payment, knowing full well that consumers are quick to dismiss the down payment as a one-time cost of getting the deal they want.
The truth of the matter is that the amount of money you have to put down is just as important as the payments, as they both are components of the true cost of leasing a car.
Let’s look at a few different scenarios using the same model car at different pricing options at the same lease term:
Option A is being offered at $199 a month with $3,499 down for 39 months.
Option B is being offered at $250 a month with $1,495 down for 39 months.
Option C is being offered at $280 a month with $0 down for 39 months.
So, which one is the better deal?
Most people would say that on the surface, Option A would be the best choice because it has the lowest monthly payment of the 3 plans.
They immediately look at the money they could be saving each month by going with a lower payment.
They would be dead wrong, however, as Option C calculates out to the lowest total cost of ownership over the life of the lease.
It actually comes to $340 less overall, and the dealer is accomplishing their goal of putting you into the car you want at the monthly price you want, but getting the total amount that they want!
Option A totals $11,260 or $288.71 per month true cost
Option B totals $11,245 or $288.33 per month true cost
Option C totals $10,920 or $280.00 per month true cost
It’s all about psychology, and knowing that people don’t necessarily like to do math, especially not while shopping, and that when it comes to cars, the decision is normally a rush to judgement.
But, that’s not the only place they will get you.
They also make huge profits off of selling service plans.
They will tell you that for adding only $15 a month, you can get coverage that provides 4 oil changes a year, maintenance such as tire rotations and tire replacement.
They tell you that based on the prices they charge for that stuff you will be doing yourself a favor and saving a ton of money.
Of course, that is because dealerships charge some of the highest prices around for service.
That extra $15 each month comes to $585 over the life of the lease.
They make you think that you are getting a deal, when the real deal would be to save the additional charge and go to a national chain or local shop for oil changes, which often times come with a tire rotation included for almost half the price that the dealer charges.
New tires follow the same pattern as well.
What you need to remember when shopping for a lease is that everything you have to pay to get that car is part of the cost.
It doesn’t matter if it’s a one time payment like a deposit, or an up-charge like a maintenance plan.
Be sure to have a calculator handy so that you are not at the mercy of the dealership and you know exactly what you are spending for that car.
You need to be able to calculate the true cost of that lease in order to compare deals accurately as well as to see how it fits into your financial plan.