This spring, auto manufacturers are offering their best lease deals in years. Here's how to find the right one.
Spring means more than just digging out the shorts and t-shirts from the back of your closet. In the auto world, it's also the time of year when the finest deals on leased vehicles are in bloom. And if the auto experts are right, this spring should prove particularly lush.
Relatively few leasing deals have been announced so far, but some — like the ones offered by Honda, Acura and Nissan (details below) — are highly tempting. In fact, some of these deals are the best seen in the past three to five years, says Mark McCready, director of pricing strategy for CarsDirect.com. Industry insiders predict that more manufacturers will roll out competitive deals as they start shifting their marketing dollars away from zero-percent financing and cash-back rewards and toward leasing.
Lease deals always blossom in springtime, because automakers have an easier time unloading their returned vehicles during the warmer months than during the winter. But you can thank the Federal Reserve for this year's anticipated upsurge. That's because every time the Fed raises interest rates, zero-percent financing incentives become more expensive for auto manufacturers, says Jesse Toprak, director of pricing strategy for Edmunds.com. As those deals become prohibitively expensive, manufacturers are beginning to subsidize their lease deals to move product — which could mean lower monthly payments for consumers.
Many automakers are also trying to find a better way to increase sales while preserving their brands and the resale value of their vehicles. Over the past couple of years, manufacturers learned the hard way that cash-back incentives had an unforeseen consequence: They make vehicles depreciate much faster. When GM, for example, offers a $1,000 cash rebate on a truck, the value of that vehicle instantly drops by that amount. Leases, however, don't work that way. With complicated lease financing, when a manufacturer drops its monthly payment on a lease, the residual value doesn't fall in tandem, says Toprak.
So how good are today's deals? Let's take a look at Honda's current offer. Sales have recently been a bit soft for this Japanese giant, so it's rolling out some attractive bargains. For example, you could drive off with a Honda Accord LX for as little as $199 a month for 36 months and a down payment of just $1,499, according to CarsDirect.com. Or, if you're in the market for a more upscale vehicle, you could lease an Acura MDX for $399 a month for 36 months with a $999 down payment. While it's difficult to compare these offers to historical ones, since the market is constantly shifting — interest rates change as do down payment requirements, manufacturer subsidies and fees — it's safe to say these deals are quite appealing, says McCready.
Finding the Best Deals
Discounts vary from model to model. The best deals are often offered on cars that are lingering on lots longer than others. So it's prudent to do some research to see which manufacturers are hungriest for your dollars.
You can, of course, check out lease deals just by opening up your local paper. But don't stop there. Be sure to check out the most recent incentives on auto Web sites such as Edmunds.com. In addition to good deals on Hondas and Acuras, Edmunds.com's recently posted competitive offers from Nissan, BMW, Mercedes and Jaguar, to name a few.
Once you've found a lease offer you're interested in, be sure to compare it with other lease programs for similar vehicles within the same price range. You should evaluate everything from monthly payments and down payments to mileage allowance, says CarsDirect.com's McCready. Keep in mind that manufacturers of cars that hold their value the best (like BMW) generally offer the best lease deals. (After all, they'll still get top dollar when the car goes up for resale.) But sometimes manufacturers of autos that don't maintain their value as well offer great lease deals nonetheless. Jaguar and Saab, for example, play this game at times, says Edmunds.com's Toprak, despite faster depreciation rates than those of BMW.
The final step: Crunch the numbers. Take the best deal you found and try running the numbers through our two leasing calculators. The Monthly Payment Calculator allows you to figure out how different variables in a lease deal affect the monthly payment. The Net Interest Calculator helps you figure out that nebulous finance charge.
Still aren't sure you're getting a good deal? At LeaseWizard.com, you can get up to six quotes for the same vehicle from lenders in your area for $34.95.