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How to get the best lease

Last updated: February 2013

Leases typically are arranged through the dealership. Like a loan, a lease can come from the automaker or a third-party lender. You also may be able to arrange a lease yourself through an independent bank or finance company.

Whether you’re comparing leases or evaluating a single offer, pay particular attention to the lease interest rate, called the “money factor.” (To convert the money factor to a comparable loan rate, multiply it by 2,400. Thus, a money factor of .00333333 multiplied by 2,400 is an 8 percent APR.)

The best lease rates generally are a tad higher than the rates for an equivalent loan. That’s because leasing—which is based on estimated residual values—is more risky for the lender, as recent events have shown. If the lease rate you’re being offered is significantly higher than current loan rates, you might consider trying another leasing company. Keep in mind that lease rates, like those for loans, depend on your credit score.

Auto dealerships may work with several leasing companies, and terms can vary significantly among them. Generally, the manufacturer’s finance subsidiary—Ford Motor Credit, for example—likely will provide the most attractive terms. This option is worth asking about first, but don’t stop there.

A few banks and credit unions offer leases. Or you may be able to arrange a lease or compare lease offers through sources such as autoleaseDirect, LeaseCompare.com, or Credit Union Leasing of America. Consumer Reports has not evaluated any of these organizations.

Keep an eye on the automotive section of your local paper for special leases that are offered by auto manufacturers through their subsidiary finance arm (they will be labeled as such in the fine print).

These so-called subvented leases are subsidized by automakers and are often used to push models that are in low demand or to help clear dealer inventories. One way automakers make these leases more attractive is to offer low lease rates. Another way is by using an artificially high vehicle residual value, thus lowering the depreciation and, as a result, the monthly payment. Such deals, however, may only be available to customers with top credit scores.

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