I just got this question:
What are the pros/cons of getting a 24/36 month lease?
I teach my clients to ALWAYS look for a 24-month lease – when the price is right that is.
Let me explain:
Most people lease a car (in my humble opinion) the wrong way.
They obsess about the low monthly advertised payment. But they forget to include the other costs. These other costs often double… sometimes triple the true monthly payment.
The big forgotten cost is the down payment. At a minimum, a down payment is at least $2,000.00. I have never seen a down payment requirement for less than $2,000.00 – never. Sometimes, down payment requirements are many thousands of dollars. I have seen some approaching $20,000. Thus, the low monthly payment is no longer so low.
Another hidden high cost is the “Rent Charge“. This is “lease speak” for the amount of interest the leasing company charges us to borrow money to lease a car. Usually, the Rent Charge is close to 10% of the Cap Cost of the car. This adds many more thousands to the cost of leasing.
And then there are the fees. We are charged advertising fees, destination fees and many other miscellaneous fees in between. Again, this adds many more thousands to the cost of leasing a car.
My clients are taught to run simple math to see if a 24-month lease is better (or worse) than a 36- or 39-month lease. We do this by calculating the total cost per mile. (It does not matter how many miles we choose… as long as we use the same mileage amount for both calculation scenarios).
For example, let’s say a new Toyota RAV4 is going cost us about 35-cents-a-mile for a 36-month lease. And the Toyota RAV4 calculates to 48-cents-a-mile for a 24-month lease. Clearly, the cheaper 36-month is the way to go.
But sometimes, a 24-month lease is almost the same cost per mile than a 36-month lease. It is rare, but it does happen. And when it does, I prefer to get into a 24-month lease.
Why? A few reasons: