Features

Will insurance cover a new car automatically, and should you look for a new rate?

After purchasing a new car, the car insurance policy that people currently have for their old cars will cover their new vehicles. The problem is that this will only be temporary; these drivers will need to inform their auto insurance companies that they have a new vehicle or they can seek auto insurance from another company if it will be more advantageous for them to do that.

 

I have been asked “what is the easiest way to negotiate a lease”, and honestly, the best lease programs (money-factor and residuals) are usually offered by the factory. Keep in mind, it will only work if the model you selected has a sub-vented lease program.

Does a lease fit my needs?

Before we get into the "sub-vented leases", "money-factors" and "residuals", the first step is to determine whether or not a lease will fit your driving habits. Ask yourself this question: "do I drive more than 15,000 miles a year?” If you do, then a lease is probably not a great option unless you have a tax benefit (some can write-off a percentage of their lease payment as a business expense.)

If you drive less than 15,000 miles a year and like the idea of getting a new car every three or four years then leasing is a good way to get a new car at a low monthly payment. Also, for many vehilces it may be more difficult to get approved on a lease than a traditional car loan. On a leased vehilce the lender has more exposure to loss.

Is leasing a car a good idea? Well the answer is very simple.  Just ask yourself a few questions and look at the lease that is being offered to you.

First, ask yourself these questions:

Do you trade in your vehicles every two to four years? 

You have to be honest with yourself on this one. I have been a car salesman for over fifteen years and many times when  I ask this question, my customers will say “I have in the past… but I’m probably going to keep this one”.  Then three years later they are looking to trade it in.

If you truly keep your car for six to ten years, leasing will be an inconvenience for you.  Not to mention the longer you keep your car the less it cost.  For example, let’s say you pay $30,000 for your new car and trade it in four years later.  That car has cost you $625 every month of ownership ($30,000 / 48 months= $625).  If you keep the car for 10 years the car now cost you $360 every month of ownership.

Of course, as a car gets older there is a chance that it might require some repairs.  That risk of extra repair cost will have to be factored in to your calculation. That’s brings to another question. 

Most consumers are not aware that they may be able to lease a used car. By far, the most common way to purchase a pre-owned vehicle is to financing through with a traditional car loan.

Often, leasing a used car will not make financial sense. However, in certain cases it could be a viable solution.

First let me refresh you with the basics concept of an automotive lease. A lease is an agreement between the Lessee (customer) and the Lessor (leasing company). The Lessor sets a value for the vehicle at the end of the lease. This value is called the residual.

For example, after three years from the purchase date the leasing company might set the residual value of a $30,000 car at $15,000. Today, most leases are "closed-end" leases. This means the Lessor (leasing company) will own that vehicle for $15,000 at the end of the lease or the customer could purchase the car for that amount.

Should you purchase an extended warranty on a used car?

Everyone who has purchased a used car at a dealership has probably experienced the following scenario: You feel somewhat relieved to have made it through the price haggling process only to be presented with more extras to buy when you are signing the paperwork.

Having seen this play out thousands of times through my car selling career, I can tell you that there are some customers that absolutely will not spend another penny on extras, some that will be in a state of Zen and buy everything and then there are the majority of people that will agonize over the decision to buy an extended warranty.

Back to Top