How Good Financial Management Can Lower Car Lease Payments

Most businesses acquire their fleet of vehicles on lease contracts simply because the monthly payments required to be made are lower than outright purchase. However, finance managers are always on the lookout for ways of further streamlining the process so that the monthly outgoes can be minimized.

Start With Selecting Vehicles with Higher Residual Values

The maximum portion of the monthly lease payment is set off against the depreciation of the car. As almost everybody knows the minute you dive a new car off the dealer’s lot, it loses quite a lot of value, and typically half the vehicle’s value is lost in just three years. From the point of view of the leasing company, the car that has been rented out is only worth half its value after it is returned at the end of three years. This value is termed as the residual value and the lease rentals take care of the remaining value of the car.

When two cars that cost more or less the same but have different residual values, the one with more value will typically have a lesser monthly lease rental. Hence it makes financial sense to only lease cars that have a more substantial residual value. Usually European and Japanese cars have a reputation of holding their value better than American cars. Your lease rentals are thus likely to be lower if you pick models from manufacturers like Audi, BMW, Mercedes-Benz, Mini, Honda, Toyota, Infiniti, Mazda, Nissan, etc. Also sports cars and luxury vehicles from these stables are seen to be retaining their values better.

Keep Your Eyes Peeled for Special Offers

It helps to not to rush into leasing a car immediately after a need has arisen. Take a little time out to scout around and see which of the manufacturers are offering special deals for leases. This helps substantially as generally you will not be able to get any better deals in the market because manufactures have the ability to offer incentives that really can’t be matched by others. Typically they will arrange to lower the monthly lease rental by incorporating a residual value at an artificially-high level, or a substantial price reduction of the car or even a rate of interest that’s lower than the one prevailing in the market. If the manufacturer has been feeling the heat, it may offer a combination of all three to raise its market share. Because it is usual for manufacturers to incentivize only a few model variants, you may not be able to select form the entire catalog and get the special benefits.

Take a Lease with Low Mileage Limits

One of the major cost components in a vehicle lease is the mileage allowance, because the value of the car depends a lot on the number of miles that will be clocked up on it. If the car is being bought for an employee who is not expected to travel too much, then it may be a very good strategy to ask for a lease contract with a low mileage limit. With a little persuasion, you will be able to negotiate a car lease with a mileage cap of as low as 7,500 per year. However, you need to have your mileage projections correct as if more mileage is clocked up, all the savings will be offset by the additional penalties imposed by the leasing company.

Making the Entire Lease Payment Upfront

The advantage of leasing vehicles is that the lease payments are known beforehand. If the company is cash rich, the finance manager can offer to pay all the lease payments for the three years upfront and get a substantial reduction in the interest rate applicable. This strategy works very well if the company has the cash up-front and also does not have any immediate profitable use for it.

Author bio: Kevin Macarthur is a customer sales consultant at one of the most established vehicle lease companies. Passionate about retail and company vehicle leasing, he has written a number of articles for http://leasequit.com/

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