Negotiating a Good Lease
A lease-purchase agreement (LEA) is an arrangement in which a person rents a property for a specified period of time and pays a lease fee, called the lease expense, to the lessee. A lease cost covers the expenses an individual incurs when renting the property. The term leased is the time period over which the property is rented; the cost of the lease is usually a percentage of the total value of the property. This means that a lease cost is the sum of all lease expenses, not just the initial lease cost.
Leasing companies calculate lease costs based on three factors: the period of the lease, the number of years it takes to buy the property under the lease, and the residual value of the property. Each of these factors is expressed as a residual amortization, where each year the value of the property remains constant. A residual amortization is different from a simple amortization because, in a residual amortization, the annual value of the property does not change; it remains at the same rate throughout the lease period.
One of the most important factors considered by lease companies is the vehicle you choose to lease under the plan. Most leasing companies ask potential customers about the make and model of their vehicle when they apply. This is because some cars depreciate faster than others and leasing companies prefer vehicles with higher depreciation rates. The vehicle you choose will affect the cost of your lease, as well as the rate you will pay.
Another factor considered by lease rate experts in the location of the property. The cost of renting in an area higher or lower than the property’s location affects the lease rate to a significant degree. For instance, a warehouse located near a highway will cost more to lease than one located on a quiet residential street. To determine this, multiply the square footage of your space multiplied by the average cost per square foot in your chosen area. Leasing dealers offer a wide range of financing options to help you obtain low lease rates. These options include banks, credit unions, the Small Business Administration (SBA), and nontraditional lenders such as the World Wide Web. You can contact a reputable dealer to discuss financing options. Although nontraditional lending may seem like a hassle, your options may be better than the alternative.
There are two factors, however, that influence the interest rate you will be offered by a leasing company. The first factor is the dealer’s reputation. A reputable dealer has likely received favorable reviews from previous leaseholders. Word-of-mouth referrals are one of the best ways to evaluate a dealer’s performance. Be sure to check the Better Business Bureau (BBB) website for any reports of consumer complaints against a lender.
The second factor that affects your lease is the type of vehicle you are interested in leasing. The more popular vehicles are usually offered at better prices by major national, regional, or local companies. If your dream is a late model Mercedes, chances are the dealership will have good prices on these cars. However, most people are looking for a used car, so the dealership may not have an available inventory of recent model cars. In this case, contact a local, regional, or national company that specializes in leasing vehicles.
Before you choose a dealership to help you lease a car, be sure to take your time to visit the facility and speak with a leasing agent who can answer all of your questions. Ask about financing options, lease term lengths, monthly payments, and any special deals the dealership may have for new and used vehicles. Once you have decided on a vehicle and a payment amount, you can begin the leasing process.