Leasing a car carries the same responsibilities as owning one – you’re accountable for insurance, registration, inspections, and legal liabilities. However, the crucial difference is you don’t hold the title; the leasing company or bank does. While this might not suit everyone, leasing offers distinct advantages over purchasing a new vehicle, especially for senior drivers. The primary allure is often lower monthly payments. Furthermore, and particularly appealing to older adults, leasing allows you to upgrade to the latest technology and safety features every few years. Typically, a lease agreement spans 36 months or 36,000 miles, aligning with most car warranties, which can protect you from unexpected repair expenses.
boomers shopping for a new car with salesman in a dealership
Image alt text: Senior couple in discussion with car dealership salesperson about car leasing options, focusing on benefits for older adults.
And there’s an added bonus, especially for first-time lessees: you can often trade in your current used car as part of the lease deal, further reducing your monthly payments. It’s important to remember though, this trade-in advantage is a one-time benefit when initiating the lease.
The attractiveness of lower payments is evident in leasing trends. Nearly one-third (31.3 percent) of new car transactions were leases in the first half of 2018, a significant jump from 25.7 percent in the same period of 2013, according to data from Edmunds.com, a leading automotive research and shopping website.
To illustrate the financial appeal of leasing, consider this simplified example based on data from carpaymentcalculator.net.
Imagine you’re interested in a 2018 Honda CR-V, a popular SUV in the US, priced at $33,500 (or $35,000 including taxes and fees). You have a trade-in valued at $10,000 and find a lease deal requiring no upfront payment. If you were to finance this purchase with a three-year car loan at 5 percent interest (roughly the average at the time, according to Bankrate.com), your monthly payment would be a substantial $749. In contrast, a three-year lease could bring your monthly payment down to just $287.
This dramatic difference highlights why leasing can be so appealing. To achieve a loan payment close to the lease amount, you’d need an extended eight-year loan. While you would own the car after paying off the loan, the question becomes: how long would you realistically want to keep that vehicle?
Here are key considerations to navigate car leasing, especially for those exploring options like Aarp Car Leasing Programs. While AARP itself doesn’t directly offer car leasing programs, understanding these principles will help seniors make informed decisions and potentially leverage AARP member benefits for car-related services.
1. Select a Car with Strong Resale Value.
In a lease, you essentially pay for the vehicle’s depreciation over the lease term. Therefore, choosing a car that retains its value well can significantly lower your lease payments. While this might narrow your choices, brands like Toyota are known for holding their value. For example, in Kelley Blue Book’s 2018 awards for best resale value, the Toyota Tacoma, Tundra, and 4Runner topped the list, retaining approximately 65% to 70% of their original value after three years.
Kelley Blue Book provides data segmented by vehicle type, allowing you to identify top performers within categories like sedans, minivans, or SUVs. (The CR-V example mentioned earlier incorporates depreciation forecasts from kbb.com.) Following the top three Toyotas, the Jeep Wrangler and several pickup trucks also demonstrate strong resale value. The Subaru WRX, a performance sedan, ranks tenth overall among cars.
According to Ronald Montoya, a senior consumer advice editor at Edmunds.com, vehicles with popularity and high resale value, particularly SUVs and Toyotas, are financially sound choices for leasing.
2. Thoroughly Understand the Lease Agreement.
Car leases are complex and involve numerous variables, as Montoya aptly points out.
Negotiating the price is the first crucial step. Similar to buying a car, expect some negotiation resistance from dealerships. Resources like Truecar.com, kbb.com, and Edmunds.com can provide insights into market prices for comparable new models in your area. Obtaining a purchase quote from the dealership’s internet department before visiting the showroom can also give you a strong starting point for negotiation. It can be challenging for a salesperson to argue against a pre-negotiated internet quote.
The agreed-upon price, along with applicable fees (such as sales tax and dealer documentation or transaction fees), minus the car’s projected value at the end of the lease term, forms the basis of your lease repayment. This is known as the capitalized cost, or “cap cost” in leasing terminology. Understanding this figure is fundamental to evaluating the overall lease deal and ensuring you’re getting a fair agreement, especially when considering options that may be presented as “AARP car leasing programs” – always verify if these are genuine AARP-endorsed programs or simply marketing tactics.
