Auto leasing deals abound these days, with offers that often seem too good to be true.
How about a well-equipped Honda Accord for $250 a month with no down payment or any other drive-off fees? Or better yet, $199 a month for a Chevrolet Malibu?
So, what's the catch? There isn't any if you know what you're getting into.
There are always details. You need top-tier credit to qualify. You pay a penalty if you turn that Honda in with more than 36,000 miles. And the payment is not $250 a month because of that little matter of tax. It is more like $275, depending on where you live.
After driving into a ditch during the recession, auto leasing is back in a big way, with Toyota, Honda and others all battling for customers with enticing lease offerings.
But to get the best deal you need to learn the arcane art of the lease transaction. There's complicated lingo to understand and some basic steps to take.
Leasing can get you into a new car for less upfront money, but remember this: It is a long-term rental contract, not a purchase. At the end of the lease, you hand the keys back to the dealer and walk away, regardless of how much money you put into monthly payments and upkeep.
Before stepping into a showroom, get a good idea of how much you drive annually. Leases aren't for people who pile up the miles because they typically limit the use of a car to an average of 10,000 to 12,000 miles a year for the term of the contract. You will pay penalties if you turn in the car with more miles than allowed.
Now determine whether you are an auto flipper who yearns for the next hot vehicle about the time the new-car smell fades or you are the practical sort who puts 150,000 miles on a car even if the dashboard vinyl is cracked.
Beverly Rumfola of Whittier has leased her last three autos because "I like having a new car and I like having it always under warranty. Financially, it is better to buy a car and keep it for 10 years, but this works for us."
A customer service manager for a chemical company, Rumfola recently took advantage of Honda's specials to lease a new four-wheel-drive Accord Crosstour crossover vehicle to replace a Cadillac SRX that had reached the end of its lease term.
"It has room for the dogs and plenty of seating room," Rumfola said of her new ride. "It sits higher than a regular sedan. I really love it."
At the other end of the spectrum is Michael Pranivong, a computer programmer from Fort Worth, Texas, who recently decided against a lease after checking out deals for a new Lexus IS 250 sports sedan he was looking at to replace his 1999 BMW 328, which has 145,000 miles on the odometer.
With a lease, "you really have to watch your miles," Pranivong said. And he was concerned about charges he could incur if he put a lot of wear and tear on the car.
Next step for the prospective lessee: Decide what type of vehicle you want. Is it a luxury sports sedan like a BMW 5 series? A mid-size family vehicle such as the Ford Fusion? Or a practical, fuel-efficient transport and hauler such as the Honda Element?
Test-drive several vehicles in the class you are considering to determine what you like and how you would like it equipped. Read reviews at consumer-friendly publications and websites such as Consumer Reports, Edmunds.com and Kelley Blue Book to learn what the experts are saying.
Resist the urge to drive a car and immediately sign a contract. Patience and research can save you hundreds to thousands of dollars over the term of the lease.
Now that you have a target vehicle and its options, go to the manufacturer's website and see if there are any special deals on the vehicle. Don't waste time going back to the showroom.
From here there are two ways to go. The simplest is to use the advertised lease deal offered by the manufacturer and compare multiple dealers to see who might go lower. E-mail or call the Internet or fleet managers at four or five dealerships. They have more negotiating power than the typical salesperson and are used to dealing with buyers remotely.
For example, in the case of the Honda Accord, ask if they can do the deal for $250 a month, including taxes. That change would save you about $800 over the term of a three-year lease. And, if you talk down one dealer, take that offer and call or e-mail the others again to see if they'll beat it. Be sure your list includes some high-volume dealers.
When all but one drops out, you probably have a good deal.
"It is the last vestiges of horse trading," said Larry Katzke, an incentives manager at American Honda Motor Co.
When you compare bids make sure that the monthly payment, length of the lease, drive-off cost (if any) and number of miles allowed over the contract term are the same, said Philip Reed, senior consumer advice editor for Edmunds.com. Dealers should provide a worksheet with this information.
A change in any one of those variables means you are no longer comparing apples to apples, and that could cost you money, he said.