Study: Cheap cars don't always make great lease deals

September 20, 2017

If you’re looking for a great lease deal on a new car, you might want to avoid the bottom tier of the market. That’s CarsDirect's conclusion after analyzing over 560 leases to see which ones stood out as supremely bad deals.

While at face value, logic would seem to dictate that cheap cars translate to cheap leases, the reality is very different. That’s because in the complex world of auto finance, it’s not the cost of the car that matters, so much as the difference between the cost of the car, and the anticipated residual value after the lease expires.

Put simply, if a car has incredible resale value, the chances are good that it can be leased for relatively little money. Conversely, if it has horrendous value, the monthly payment on a lease is likely to make it an unattractive option. That’s because a lease is, at its core, a loan that finances the anticipated depreciation of a vehicle.

In CarsDirect’s analysis, a 2017 Chevrolet Cruze LT with a list price starting at $22,325 can be leased at an advertised rate of $179 per month, for 24 months, with 10,000 miles allowed per year. While that price might sound appealing at first, to get to that price requires a hefty payment up front, to the tune of $3,419. Spread out over the term of the lease, CarsDirect estimates the true monthly payment to equate to $324.

As a point of reference, CarsDirect points out that the $36,025 Ford Flex SEL has a comparable lease rate, after accounting for the down payment and higher residual value.

While the examples may be a far cry from the advertised rate, CarsDirect’s analysis doesn’t even tell the whole story. End-of-lease fees—on the Cruze, the disposition fee is $395—and state sales tax, title and licensing fees, not to mention miscellaneous dealer fees, must all either be paid up front or rolled into the lease. All told, that can equate to more than seven percent of the manufacturer's suggested retail price.

For the Cruze example above, simply adding the end-of-lease fee and the state sales tax and fees (we used California’s Orange County as an example) brings the effective monthly cost to a staggering $421.

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