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Strategies for Smart Car BuyersSM
Best Lease Deals for the Holidays
Edmunds uses data to reveal top lease deals
By editors at Edmunds.com
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This monthly column presents crucial, stand-alone car-buying strategies to help you avoid dealership tricks and traps and get the best price on your next car or truck.
Edmunds.com has leveraged its extensive data resources and discovered a new way to identify the best leasing deals for car, trucks and SUVs. Using this new method, the Santa Monica-based online auto information resource has announced the top five best lease deals for cars, SUVs and trucks.
"The promise of leasing was always that you got more bang for your buck than when you bought a car," said Alex Rosten, manager for pricing and market analysis. "Using this new method of evaluating leases clearly shows how to get the 'most' car for your money."
Simply put, Edmunds analysts took the total value of the car and divided it by the total amount spent on a lease over the term of the contract. This produced a percentage for each car analyzed. The lower the percentage, the better the lease.
To demonstrate how it works, consider the example of a $30,000 car. If that car can be leased for a total of $10,000 for three years, that is 33 percent of the total value.
Another way to look at this same example is that you can use the best three years of a $30,000 car for only $10,000 — $277 a month.
Before we present the winners in each category, a little fine print: The following leases are only from manufacturers that offer national lease specials. Also, tax and DMV fees are not included in Edmunds' calculations. However, mileage was factored into the calculation, which conveniently evens the playing field for cars offering differing amounts of mileage allowed under the programs. Mileage levels varied between 10,000 and 15,000 miles per year.
First, we compiled a list of details of all available national special lease deals. Then we added the cap cost reduction (down payment) to the total amount spent on monthly payments over the course of the lease (not including tax or fees) to give us a "total lease expense" number. We then compared the total lease expense to the national Edmunds.com True Market Value® (TMV®) (including destination) to arrive at a percentage of TMV spent over the course of the lease, at the same time accounting for differences in allowed mileage and term length.
"What we ended up with is an objective, data-driven calculation that allows us to evaluate the True Market Value of a special lease to consumers," Rosten said.
The following are the best lease deals currently on the market:
- 2007 Audi A4, 2.0T Quattro sedan, 24 months, $379/month, 30,000 total miles
- 2006 Mazda, Mazdaspeed 6, Sport, 24 months, $269/month, 24,000 total miles
- 2007 Saab, 9-7X, 4.2i SUV AWD, 27 months, $429/month, 27,000 total miles
- 2007 Mercedes-Benz, CLK-Class, CLK350 3.5-liter V6 coupe, 27 months, $449/month, 22,500 total miles
- 2007 Subaru, Outback, 3.0 L.L. Bean Edition AWD, 24 months, $299/month, 20,000 total miles
The above leases do not include DMV fees and sales tax. In some cases, lower deals could possibly be negotiated.
Leasing popularity grows
Edmunds' best leasing deals are announced as leasing continues to rise. Currently, leasing is nearly 17 percent of all automotive transactions, which accounts for 18-20 percent of finance contracts that dealers write. Manufacturers are offering more money to subsidize leasing for an average of nearly $4,565 in November 2006, up from $4,178 a year earlier. Jaguar had the most lease money ($9,229), along with Jeep ($8,813) and Buick ($7,879).
The popularity of leasing stems from several factors:
- Interest rates have risen, driving monthly finance payments higher to purchase a car.
- Leasing provides affordable monthly payments to consumers as well as lower "drive-off" fees to start the lease.
- Residual value forecasting (what the car will be worth at the end of the lease) has improved, giving lenders more accurate residual values to base leases on.
- Leases are becoming more popular among volume brands, not just luxury.
Additionally, manufacturers are shifting their incentive spending and using it to subsidize leasing because it makes payments more affordable to consumers. Not only that, but when a customer leases a car, they return two to three years later to re-lease or buy another car. Finally, returned leased cars provide dealers with a steady supply of inventory for their certified used cars.
Lease tips for lease deals
- Consumers should be wary of unrealistically low advertised monthly lease payments since these offers usually include a large-cap cost reduction, low mileage and/or a long term.
- The best deals offer minimum drive-off and low payments over a short term (24-30 months).
- Consumers should be reluctant to lease cars beyond the factory warranty coverage. If they do, purchasing an extended warranty for a few months is recommended and is very affordable.
For this, and other buying and leasing strategies, pick up a copy of Strategies for Smart Car Buyers, by the editors at Edmunds.com.
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