Why Are Leases Better?

best car lease dealsWhy are special lease deals offered by car companies better than any other type of incentives?

It’s true that lease payments are always less than loan payments for the same car, same term, and same down payment — even with a 0% APR loan. But that doesn’t necessarily make leasing a better deal. And it doesn’t mean that leasing is the best solution for all people.

What makes a good lease deal?

A good lease deal is one in which three different factors are being offered at better-than-normal values. First the price that the lease is based on must be discounted. Second, the money factor (lease finance rate) must be discounted. Finally, the lease-end residual value must be boosted higher than normal.

Car companies like to create good lease deals because it delays their financial impact (losses) that come with any kind of incentive. While the impact of a price discount or rebate is immediate, the effects of a low finance rate are spread over the life of a lease or loan. And here’s the real kicker — the impact of setting a high lease residual value doesn’t come until the end of the lease, when the customer returns his car.

Furthermore, a lease is the only way a customer can get both a price incentive (“rebate”) and a reduced financial rate at the same time. As you may know, if you buy with a loan and the car is being offered with either a rebate or low interest rate, you must take one or the other but not both.

Therefore, if a car company is offering rebates, low-interest loans (even 0%) and special lease deals on a particular vehicle, the special lease will always — always — be the best deal.

However, before you lease you should understand how leasing works and if leasing is right for you. We suggest you visit LeaseGuide.com before you make your decision.

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