A primer on buying vs. leasing: Read fine print

Some people thrive on haggling. Not I. Give me the price and I either pay it or say “no thanks.’’

So, when reader Steve asked me to take the mystery out of leasing vs. financing, I shuddered. That’s a no-can-do. There are too many variables and much too much to negotiate with the dealership.

Another Steve, my son-in-law, thrives on haggling. So do the Harrisons—Richard, Rick and Corey—the main family in one of my favorite TV shows, “Pawn Stars.’’

Not I. I’m way too introverted.

When it comes to leasing, I always felt the buy-and-hold route was fiscally more sound. I also always promised myself that when the car was paid off, we’d keep putting that payment money aside each month toward the next car. Of course, that never happened. There were always home repairs or tuition bills that siphoned off the savings.


When I buy a car, I avoid talk of monthly payments as in, “How much do you want to spend a month?’’ or “I can put you in this for $399 a month.’’

There are only two figures I want to see: The price the dealer is paying me for my car (the trade-in), and the price he’s selling the car I want (with the destination fee included). Subtract the trade-in from the new-car price and divide the result by the number of months you want to finance and round the number up for interest and you have a ballpark figure for your payment. That’s the only math I can handle under a stressful (at least for me) situation.

If you’re like most buyers, you’ll have spent much more time online researching and comparing vehicles than you will in a dealership. It’s likely you know the model, trim level, and price of the car you want.

Side note: If your credit is good, the dealer should be able to beat, or at least match, an outside lender’s rate.

You’ll also want a list of all the fees and charges up front. It all sounds simple on paper, but in the emotion of the purchase we often lose track of our guidelines. Having a written or mental checklist is important.


Leasing continues to be a significant part of the automotive landscape. “We tend to average 15 percent leasing,’’ says Ford sales analyst Erich Merkle. “That number held before the recession, during the recession, and now during the recovery.’’

For some consumers, there are advantages to leasing, but only if they understand how leasing works. For most of us, it’s a lesson learned the hard way—to a dealer’s profit.

Two basic facts: In the short-term, you spend less to lease. In the long run, you pay more to lease. In the middle, you might break even.

Leasing can work for you if you:

• Like to change vehicles frequently.

• Like having a car that’s always under warranty (though you must perform all scheduled maintenance).

• Want lower monthly payments OR a more luxurious car for the same payment.

• Don’t care about building equity in your vehicle because when you turn a leased vehicle in, you won’t get a trade-in allowance— or have a car to drive.

• Drive a predictable number of miles each year, say 10,000 at the low end or 20,000 at the high end.

If you fit the profile, remember there could be a lot more to negotiating a lease than simply buying a car outright—not that buying is a simple matter.

However, if you’re going to lease, it seems that you should start out as if you were buying a new car.

Negotiate the value of your trade-in, if you have one. That money can be applied to the net cost of the lease to lower monthly payments or you can offer to sell the car to the dealer outright and receiveacheck, especially if it’s a desirable vehicle.


Negotiate the price of the new vehicle.My personality is such that I’d be upfront and say, “Let’s negotiate the price, then we can work the numbers to compare leasing vs. buying.’’

For leasing, ask what additional fees will be part of the deal—items such as acquisition fee, destination charge (if not negotiated in the original price), and documentation.

Then there’s the “look ahead’’ part of the day because the lease cost will be based on the difference between your negotiated purchase price minus the dealer-set residual value—the worth of the car when you turn it in at the end of the leasing period.

You’re not finished yet. Ask about the disposition fee (set by the lending institution) and option-to-buy fee. You’re likely looking at a fee to either turn in the vehicle or buy it.

Bottom line: be a savvy buyer and be willing to negotiate. Unless you’ve set a lot of ground rules—and dealers like to work with savvy, reasonable, and prepared customers—you can find yourself in a contract with unpleasant surprises.

Now all of this was supposed to be a preamble to a story on one solution for what to do when you want or need to get out of a lease contract ahead of time, but we’ll save that for next week.


Motor Sports Marketing Resources (mmrsite.com) is presenting an evening with Le Mans and vintage racer Alain de Cadenet, host of theTV series “Victory by Design,’’ Tuesday at 7p.m. at the Newton Marriott. Seating is limited and ticket information is available by emailing Peter Bourassa at peter@mmrsite.com.

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