Leasing a Car

Do refer to the Five Things you should know before buying a car as well since there are some applicable words of wisdom there for you. The following is specifically related to leasing.

Leasing is simply this: You are looking to take the uncertainty and risk out of the future devaluation of the car and putting it on the dealer. In other words, if it’s worth less than the agreed upon “residual” at the end of the lease, not your problem, he’s still obligated to take the car back and you walk away. If it’s worth more, he still has to buy the car at the pre-arranged price.

Thing No. 1

Know these three things.

The "cap cost." What you pay for the car. Sometimes referred to as "capitalized value." Don't let them tell you that the cap cost and the MSRP are the same thing. They're not. The cap cost should be lower because it should be discounted.
The "residual value." What the dealer will pay you for the car when you return it. You want this as high as possible because you have no intention of buying the car. If you did, you wouldn't be leasing.
The "money factor." The interest rate.

If the dealer won't tell you all three numbers, walk away.

Thing No. 2

Shop leases.

Check out lending companies lease costs @leasewizards.com. Of course you will pull these out of your hat when the dealer offers you a lease deal. It will cost you a nominal fee (about $12) to get these costs but it is well worth it. Make sure you see who the lenders are when you get quotes. Check in with a variety of dealers in your area on lease quotes at edmunds.com.

Thing No. 3

It is usually more financially prudent to dump the car at the end of the lease.

This is due to the notorious and precipitous devaluation of cars. If, by some act of God, the car is worth more in the market than the residual, you can really get fancy and buy the car at that price and resell it privately for more. Check value @ kbb.com. Before you do turn it in, find out what they plan to hit you up for on extra wear and tear charges (dings etc.) and mismatched tires. It'll be cheaper to get it fixed yourself and get matching tires than to pay the penalty fees. There's also a fee built into the contract for processing the purchase.

Thing No. 4

If you drive more than 15,000 miles per year or plan to keep the car a long time, don't lease.

Some leases are 10K miles per year, some are 12K but none are over 15K and you'll get hammered on mileage fees if you drive more. Most of the advertised lease deals only include 8,000 or 10,000 miles per year. If you're going to go over that and you agree to pay $0.20 per mile over, you're talking about a $2,400 fee after three years.

Thing No. 5

Don't lease for longer than the warranty.

The last thing you want is to be responsible for repair costs on a car you don't even own.