After last week’s article about home loans some readers have asked for a similar exercise for car leasing. Here are our tips for getting a better deal:
- Compare apples with apples. Sometimes a dealer will provide a quote that includes free or capped price servicing of the vehicle and other benefits (like guaranteed buyout of the vehicle at the end of the lease or an extended warranty) – sometimes these extras may only be provided if you take out a lease with them. These extras will be included at a much higher rate. Our advice on such deals has usually been to go with the dealer.
- A higher interest rate of say 1% will make minimal difference to a car lease. It’s the other factors that can tremendously influence your monthly repayments – these are:a. any up-front payments made by you,b. residual (or balloon) payments due to be made at the end of the lease, andc. the term of the lease.
- If you want to keep your monthly payments to a minimum, a good but unfashionable way of doing that is making an up-front payment. You may use your trade-in vehicle to do this or pay it from your savings.
- To avoid cash-flow shocks at the end of the lease make sure your residual is realistic. Get some quotes for current models of your car using Glass’s guide or get an expert to opine on what the value may be.
- A longer term will reduce your monthly repayments but may extend beyond the warranty period of the car. A shorter term may increase your monthly repayments but fall within the warranty period. Which risk appeals to you more? Be realistic.
- Don’t make an emotional decision. Like whilst standing in the dealership stroking your desired vehicle while the in-house broker runs the numbers. See or call an independent broker.
- A car dealership often has a single lender that they go to. A broker will have many and can provide an instant quote from all of them. They can then narrow this down for you to show you the best price and/or conditions that suit your requirements.
- Make sure that you select the right lease product – for instance do you require a novated lease, a hire purchase agreement or some other type of financing. Again, a good broker – like Thyme Financial Group – can help you here.
- Avoid credit rejections on your credit record – this can reduce your borrowing capability and lead to rejection should you be a habitual loan applicant. See a broker to get an idea first.
- Get professional financial (tax) and legal advice if you are unsure.