How Does Used Car Leasing Work?
Leasing a car and renting a car are two bipolar concepts and are entirely alien from each other. Used-car leasing works on a principle that you need to pay out a monthly depreciation factor that eventually is the car’s initial pay amount to the residual amount at the end of the lease.
Thus, unlike rentals where you pay a fixed amount every month, leasing depends on the depreciation of the car and the amount divided by the total months of lease.
Why is residual income important?
Simple – because residual amount is what determines your monthly lease shell out. Consider two cars that both cost around $20,000 as initial pay out. But, say, within a year or two, one car depreciates to around $15,000 and the other depreciates to around $12,000. The one that depreciates the least is the best buy because you get to pay lesser lease per month. If your car is an already leased car, that is even better. You get to pay only half or three-quarters of the lease amounts.
MSRP – What is this and how will this help you?
Manufacturer’s Suggested Retail Price or the MSRP is the total cost of the automobile you are willing to lease out. Usually the dealer discounts the sticker price of the vehicle but you must put up a strong bargain. There are many secrets a dealer will not tell you and this includes the actual retail price of the vehicle, which will actually be very less when compared to the MSRP. Hence, you must have the actual price of the vehicle well researched before you go and lease out a car.
Cap Cost of your Car
The discounted MSRP, which is mutually decided by you and the dealer, is the Capital Cost or the ‘Cap Cost’ as they sleekly put it. This will usually be very less when compared to the MSRP and rightly so. The Cap Cost is what will be used to calculate your monthly lease after the residual amount is cancelled from it. Hence, conduct a thorough research and bargain well to have the least Cap Cost you can afford to.
Residual Value after Depreciation
Residual value or more pertinently the resale value is the final cost of the vehicle after the least period, when the value is depreciated. This value is calculated using online car lease calculators and usually cannot be argued as it depends on various factors. However, the residual value is just an approximate and can increase or decrease when time passes.
Thus, car leasing is a cheap way of owning a nice car for yourself. What are you waiting for? Step out and indulge in used-car leasing with affordable monthly payments and zoom off!
