How To Lease a Car in College

Hi, I’m a fourth year college student in southern california (SB area) and I’m interested in leasing a car for no more than 2 years. My housing for this coming school year will be far from my school and I don’t have the energy to bike to class or fight to get a bus space to get to where I need to be. Thus, I need a car. Now, I know that many of you might think that this might be an on-the-whim college student desire like buying a 20-piece set of fancy tupperware I never use. However, I have been salivating getting a car for the last 4 years. My parents have a car. All my 3 other siblings have a car. Now, I really want to stop with the public transportation and relying on other people to drive me and do it myself.

The thing is that I have absolutely no idea how to lease a car. Is there a specific step-by-step guide on how to do this? What were your experiences in leasing a car? I can spend around $200 a month for lease payment. What brands are the best? My relatives’ cars were all inherited or bought, but I don’t want to buy a car at this moment in my life because I plan to be overseas post-graduation for a very long time. I don’t want to be scammed and I need a cheap, reliable, and easy-to-use car to get me to school, work, and back.

You will generally need a substantial down payment. I’ve only seen leases for four years so you might have to commit for a long term. There are penalties for turning it in before the lease is up. The payments will be affected by your credit rating. You will have to show an income or get a parent to cosign. Generally leasing is not a good financial deal because you have nothing at the end. It would be better to take that substantial down payment of $2500 or more and purchase a small used Honda or Toyota. Even financing a used $8,000 Toyota or Honda would be a better deal in the long run. I mention those two brands because they have the highest ratings for reliability and resale value.

Whether you lease or own you will need car insurance. Before you sign any papers to buy or lease you should call around and get rates. There are many young people paying $300/month for car insurance. It depends on your location, driving record and the model of car you will be driving. For example a 4 cylinder economy car is cheaper to insure than a large motor Corvette.

You should continue to research a little on the internet. If you walk into a car dealer they do not have your best interests at heart. IMO you should drive something cheap until you are established in a career.

Normally, leasing really isn’t a good deal, but with your circumstances it makes some sense.

With your price, you can lease a decent but not super fancy car: Something like a Honda Accord. Just go to a dealer, sign the papers, make a down payment, etc.

Go to edmunds.com, and read up on the differences between leasing and buying new or used cars.

I have a lot of thoughts on this because I did some research on leasing and buying when I was deciding last summer what to do (I ended up buying, but my circumstances were very different). The best resource for information on this is Edmunds.com, but an Internet search will bring all sorts of good information about leasing vs. buying. (Kelley Blue Book, or KBB.com, is also an invaluable resource).

However, in the interest of space, I’m going to limit my comments to simply saying that while I think leasing is a great and viable alternative to purchasing, a lease might not be the best choice for you.

-You can definitely get leases for less than 4 years; in fact, most leases I saw being offered by dealers were actually 2-3 years long.

That said, if you are a senior this year and you don’t know what you’re going to do in 9 months’ time, leasing is probably not the best choice for you - you are probably going to have to make a commitment for at least 2 years. However, you could look into a lease assumption. Think about a lease assumption like taking over someone’s apartment lease - basically, what happens is someone else has leased a car for X number of months and now decided that they can’t fulfill that lease, so they are looking for someone else to assume the lease until it’s done. [url=http://www.leaseguide.com/articles/short-term-lease/]Here[/url] is a website with a summary and instructions how to find those.

-Just like buying, when you lease, your credit score is important. If you’re a traditional-aged college senior without a credit history, leasing may be difficult. You may not be able to find something for less than a $200/month payment. Remember those $149/month lease deals with no down are for people with near-perfect credit. You’ll also need a down payment - probably around $2,000.

Do not do this. Leasing has many of the same considerations as buying. The price of the car matters in your down payment and CAN be negotiated. The lower the agreed-upon price (called the capitalized cost), the lower your monthly payments. Your interest rate (called a “money factor” in leasing) will be determined by your credit; if you don’t shop around the dealer can offer you an inflated rate. The depreciation of the car matters a lot in your payment, too, because it determines how much the dealer can get back when they resell the car in a few years. So you want cars that don’t depreciate as much and hold their value. You should also shop around to see if any dealers are running lease specials or have discounts for college students and graduates (Honda does); these discount programs can save you hundreds or thousands of dollars.

When leasing you need to do research just like you would buying! Generally speaking, though, Hondas and Toyotas hold their resale value and are good cars to lease. (They also tend to be more expensive cars to lease, though. Nissans also have decent resale value and are pretty cheap to lease.)

Trust me, I understand “salivating” over getting a car and having the freedom to come and go as you please, without relying on others. I went to college in a car-centric city and I didn’t buy my first car until I was 28 years old. BUT, it was worth the wait, because 1) I knew I can afford the payments flying out of my bank account every month and 2) I knew that I was going to need a car for some longer period of time, so I didn’t have to worry about getting rid of it when I no longer needed it.

So, I would say consider whether it is possible to do what you are doing for 9-10 more months, until you have a job and more stability. It may not be convenient or your favorite option, but is it possible without unreasonable amounts of work? Comparing yourself to your parents and 3 other siblings is not a great idea, because your parents and any older siblings are at a point in their lives in which they can afford cars themselves and have the stability to need them without worrying about getting rid of them later.

Also, @OspreyCV22 makes a good point about car insurance. If you lease a new car, your car insurance will be more expensive because you will have to get comprehensive & collision insurance. With a cheaper used car that you have not financed, you only have to get liability, which is far cheaper, particularly if you are under 25.

Check out what rates you can finance a used car at from local credit unions. Don’t pay $4800 to lease a car for two years. Put that $4800 into a clean mid 2000s Honda or Toyota that you can sell for $3000 in two years or keep it for longer.

The problem is that if you lease a car over 2 years and spend $4800, you have the option to spend that $4800 a little over time. If you buy a “clean mid-2000s” car then you have to pony up $4800 in a lump sum at the front end.

That’s why people often do not buy cars in cash. It’s not that they want to make payments for 5 years; it’s that few people have several thousand dollars lying around.

In my post I suggested checking with the local credit unions to finance the car. The credit union will cut you a check for the $4800 and you’ll pay the bank a monthly payment for 3-5 years or whatever the terms are instead of the dealership for the car.

Whatever downpayment you were going to put on the lease you can pay that upfront and finance whatever is left from the purchase price.

Only downside is you don’t get to drive a new 2016 car with a nice warranty. It’s a much better financial decision to buy a reliable used car, though.

Leasing lets you pay less money now for a car, but with nothing to show for it in the long run. But sometimes that is okay if you have low monthly income. But do you have a job?

Also understand leasing…like the above poster says, understand what a “money factor” is.

Money factor is always expressed as a very small number, such as .00275. To convert to an equivalent annual interest percentage rate (APR), simply multiply by 2400. Therefore, in our example, .00275 multiplied by 2400 yields 6.6% as the equivalent interest APR.

The money factor in a car lease is always determined by a customer’s credit score. Do you have a credit score What is it?

You also have to know the residual value…that is, what the car will be worth after 2 years. The dealer will estimate what that will be.

So if you leased a new car ,you can negotiate the price, then subtract down payment, and subtract the residual value and that is the amount you have to finance.

To see more details, see http://www.edmunds.com/car-leasing/calculate-your-own-lease-payment.html

I would suggest looking at Consumer Reports (April issue) to see which Used cars have good reliable.

You also need to be aware that the dealer will ding you (CC won’t let me use a naughty word) for any little parking lot scrape. I’ve leased cars twice in my life. Both times, I ended up buying them at the end of the lease (and then reselling on my own) because of the turn-in charges. I do NOT recommend leasing. I’m with Magnum on this one.