Deciding whether to lease or buy a new vehicle is a significant financial consideration. Many people are drawn to leasing for its lower monthly payments and the ability to drive a new car more frequently. When exploring leasing, a key question arises: What Car Company Has The Best Lease Program? To answer this, we need to delve into the factors that make a lease program advantageous and which automakers consistently offer favorable terms.
Understanding the Lease vs. Buy Decision
Before pinpointing the best lease programs, it’s crucial to understand the fundamental economics of leasing and buying. As highlighted in discussions among car enthusiasts, the steepest depreciation of a vehicle occurs in the initial years. Whether you lease or buy, acquiring a new car means bearing this initial depreciation cost. The perceived “savings” often come from operating a vehicle for an extended period, mitigating the impact of that initial depreciation hit.
For instance, choosing to buy out your leased vehicle at the residual value after the lease term can be more economical than entering into a new lease immediately. Similarly, those who finance a car and keep it for several years beyond the loan term benefit financially compared to constantly cycling into new vehicles with new loans.
Leasing vs. Buying: The Money Factor and APR
The core decision between leasing and buying often boils down to comparing the money factor (MF) in a lease against the annual percentage rate (APR) of a loan. A subvented money factor, typically around 0.0015 or lower in favorable market conditions, can make leasing the more attractive option due to the lower implied interest rate compared to financing.
When the money factor and loan APR are comparable, leasing often remains a compelling choice. Leases typically entail lower monthly payments as you are not paying down the principal, unlike a loan. While financing builds “equity” in the vehicle, this equity is a depreciating asset, and the capital tied up has an opportunity cost – it could be used for investments or other purposes.
Leasing offers optionality. At the lease end, you can purchase the vehicle, effectively converting the lease into a financed product if the residual value is favorable. Conversely, you can return the vehicle if the residual is underwater, mitigating the risk of significant depreciation. This flexibility isn’t available with a loan, where you are always exposed to the full depreciation risk.
However, leasing isn’t universally advantageous. If the money factor is excessively high, leasing becomes financially unfavorable. Conversely, exceptionally low money factors strongly favor leasing.
Electric Vehicle (EV) Leasing Nuances
The landscape of leasing becomes more complex with electric vehicles. Government incentives, like the $7,500 federal tax credit in the US, can initially make leasing EVs seem appealing as these credits are often passed through to the lessee. However, automakers sometimes offset this benefit by inflating money factors in EV leases (as seen with some Mazda and Volvo programs). In such cases, a strategy of leasing initially to capture the credit and then buying out the lease with a loan can be optimal.
Furthermore, the rapid depreciation observed in some EVs significantly impacts leasing decisions. Vehicles like the Mercedes-Benz EQS have experienced substantial depreciation, making lease residuals a critical factor. Automakers sometimes subvent residuals on models facing high depreciation risks (e.g., EQS, Audi e-tron), making leasing a less risky option for consumers who want to avoid being exposed to rapid value decline.
Finding the Best Lease Program: Key Considerations
So, back to the original question: what car company has the best lease program? There isn’t a single definitive answer, as “best” depends on individual circumstances and current market conditions. However, some automakers are consistently recognized for offering competitive lease programs. These often include:
- Brands with strong residual values: Automakers whose vehicles hold their value well typically offer better lease terms because the predicted depreciation (and thus the residual value) is more favorable. Brands like Toyota, Honda, Subaru, and Lexus often perform well in residual value rankings.
- Manufacturers with subvented lease programs: Automakers sometimes offer special lease deals with lower money factors to incentivize leasing certain models or to manage inventory. These subvented programs can significantly reduce lease costs. Keep an eye on manufacturer websites and dealer promotions for these offers.
- Luxury brands with competitive lease deals: Luxury brands often have aggressive lease programs to maintain market share. Brands like BMW, Mercedes-Benz, and Audi frequently have lease offers that can be competitive, especially on certain models or during specific promotional periods.
To find the best lease program for you, consider these steps:
- Compare money factors and residuals: Obtain the money factor and residual value for the specific vehicle and lease term you are interested in. Compare these across different brands and models.
- Analyze lease incentives: Check for any lease cash, rebates, or other incentives offered by the manufacturer or dealer. These incentives can significantly lower your lease cost.
- Compare lease vs. buy: Use online calculators to compare the total cost of leasing versus buying, considering factors like monthly payments, down payments, and potential long-term ownership costs. Websites like Leasehackr offer tools and forums to help with these comparisons.
- Negotiate: Lease terms, including the vehicle price and any fees, are often negotiable. Negotiate the capitalized cost (the price you’re leasing the car at) and aim for the lowest possible money factor.
Conclusion
Determining what car company has the best lease program is an ongoing evaluation that depends on market dynamics, manufacturer incentives, and individual vehicle models. Instead of focusing on a single “best” company, concentrate on understanding the key lease terms – money factor, residual value, and available incentives. By comparing these factors across different brands and models and utilizing online resources, you can identify the lease program that best aligns with your financial goals and driving needs. Remember to always compare the lease terms and consider your personal financial situation to make an informed decision about leasing versus buying your next vehicle.
