When you drive a new car away from the dealership, about 10 percent of its value disappears, according to Carfax. Another 10 percent of your investment will be lost within a year.
Unless you signed a lease, that is.
Leasing a car is becoming a more popular option. Leases, which are effectively three-year rentals, accounted for 31 percent of new car transactions in the first half of 2017, reported Edmunds.
If you’re wondering about the best cars to lease, consider first when it makes sense to lease or buy a car.
Considering whether to lease or buy a car
When you lease a car, you’re only paying for depreciation that occurs while you’re behind the wheel. The dealer uses the car’s residual (or resale) value to figure your monthly payments.
Say you lease a $25,000 car. If its resale value is projected to be $15,000, you’ll make about $10,000 in payments, plus fees, between the lease’s start and end.
By leasing, your monthly payment could be as much as 30 to 60 percent lower than your loan payment for a new car purchase. You’re only paying to own it during its highest-performing years.
But you’ll have nothing to show for it when the lease ends.
If you can live with that, also ensure you’re OK with typical lease terms:
- 36-month term length (but could be shorter or longer)
- Annual mileage limits of 12,000 miles on average
- Thousands of dollars in initial fees (including a down payment)
If you’ve wondered whether to lease or buy a car, you should have a clearer answer by now.
How to find a good lease deal
Using online calculators like Edmunds’ can help you separate good lease offers from the bad. You pour in three key factors that the dealer uses to estimate your monthly payment:
- Residual value: The more your car will be worth at the end of your lease, the lower your monthly payments will be.
- Money factor: The APR-like lease fee is used to calculate your monthly payment.
- Acquisition fee: These charges, typically between $600 and $900, are for initiating your lease application.
You’re most likely to find the best combination of these factors — a high residual value, a low money factor, and a low acquisition fee — by employing a few different strategies.
With these deals, watch out for higher amounts due at signing. If you lease a 2017 Acura ILX for the promotional price of $199 a month, you would pay closer to $278 per month when the $2,499 down payment and $350 disposition fee are included.
Other more personal factors can help you score a better quote. Having a good credit score qualifies you for lower rates, for example, whether you lease or buy a car. It gives you more leverage at the negotiating table.
If you prefer to avoid haggling, you might consider the nonprofit organization Consumers’ Checkbook. For $250, its CarBargains service collects at least five dealer quotes, which can be more clear-cut than the advertising language you might see or hear elsewhere.
3 best cars to lease for under $200 per month
It should come as no surprise that car lease offers aren’t what they appear to be. There might not be mention of an acquisition fee, for example, until you sit down to discuss the lease details.
Without oversimplifying, you pay more per month than the advertised price. Sales tax, for instance, isn’t included in the red- or yellow-font “$199 per month” listing you might see online or in the newspaper.
Despite the lack of clarity over pricing, here are three types of sub-$200-per-month cars and situations where leasing might trump buying.
1. A hatchback before you move out of the city
If you’ve lived in or near a downtown area, you know it can be a hassle to park your car. You also know how handy it can be to have wheels for weekend escapes.
For drivers living out their youth in a metropolis, a three-year lease with limited mileage could be a solid solution. You might not need to drive it much during the week, opting instead for public transportation. But if you go on enough road trips, it could be worth your while.
If you’re not sure you’ll stay in the city for a full three years, you might be fearful of early-termination fees on car leases. One alternative is fee-based websites like Swapalease.com or LeaseTraders.com. You could assume responsibility for another driver’s in-progress lease without having to fork over a down payment.
Hatchback for under $150:
|Car||Advertised monthly payment||Total lease cost||MSRP|
|2017 Honda Fit LX||$139||$7,753||$16,865|
2. A compact for commuting between home and school or work
If you’re in the stage of life where it’s wiser to keep bigger expenses temporary, this mindset might also work for your wheels.
Say you’re driving to and from an apartment that you rent and a remote or contract job that won’t last forever. Or maybe you’re a freshman with three years left in college and no other way to feasibly travel from home to campus every day.
Leasing a commuter car gives you some flexibility the way that renting your apartment gives you more options than buying a home.
But before committing, you’ll want to make sure that you can get by on 10,000 to 15,000 miles per year. The average American driver logs 13,476 miles per year, according to 2016 data from the Federal Highway Administration.
If you have a longer commute, you might consider buying or negotiating more miles into your lease agreement. Going over your allotted mileage for the year would force you to spend as much as 25 cents per additional mile — which could really add up.
A compact for under $150:
|Car||Advertised monthly payment||Total lease cost||MSRP|
|2017 Nissan Sentra S||$149||$7,758||$19,435|
3. A station wagon until your kids get their licenses
If you’re further on in life, you might find yourself needing a stopgap solution. Say your children aren’t quite ready to drive themselves, and you’re not quite ready to buy a car outright. Maybe you’re enjoying the savings of being a one-car family and are hesitant to double up.
Leasing a new and safety-oriented station wagon for three to five years could be a good decision. You’d likely have the option of purchasing the car at its residual or resale price once your lease runs out.
This might be especially enticing if you have kept up on the car’s maintenance. It could either stay with you or go off to college with your son or daughter.
A roomier five-seater for under $200:
|Car||Advertised monthly payment||Total lease cost||MSRP|
|2017 Subaru Crosstrek||$189||$9,083||$24,370|
Knowing when to lease or buy a car
There are a wide variety of other situations where leasing is better than buying. But there are also some situations where you would want to avoid a lease.
You could convince your employer to lease a company car, for example, and claim the potential business tax deduction. On the other hand, you wouldn’t want to lease a truck for your home-building project because most dealers will penalize you for any scratch beyond normal wear and tear.
More obviously, leasing luxury cars you couldn’t otherwise afford to buy might seem appealing. You could test out a first-generation electric car without being responsible for the likely technological mishaps. And you wouldn’t have to worry about negotiating to buy used cars. Trade-ins won’t even be up for conversation the next time you want to trade up.
But remember that every lease comes with a hefty monthly payment. It might be lower than the monthly dues when you’re buying a car, but you should ask yourself whether the savings make up for the lack of ownership.
And if adding another monthly payment sounds like a worst-case scenario, consider the rewards of living a car-free life instead.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|