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Leasing a car has become more popular for Americans over the past decade.
In the second quarter of 2020, nearly 26% of new vehicles were leased, according to Experian’s State of the Automotive Finance Market Report.
Figuring out the best times to lease a car may be top of mind as you budget and try to save money on a deal.
Leasing is different from buying in many ways. But when it comes to timing a good deal, there are some similarities. Just as with buying a car, if you plan ahead, you may be able to take advantage of major model changes, end-of-month or -year sales and special holiday deals.
When is the best time to lease a car?
The best times to lease can vary. It can generally be when business is slow, whether that’s because it’s a certain time of year or because of lagging popularity of a particular car model. Dealers also sometimes offer special incentives at the end of the year or during model year changes.
Major model changes
If you don’t mind getting last year’s model, you may score a good lease deal around the time car manufacturers introduce new models into the market. During this time — often around late summer or early fall — car dealers may provide sales incentives and rebates to get rid of the older models and make space for the newer ones.
Car manufacturers typically refresh their models every four to six years with redesigns. Keep in mind that if you plan on leasing last year’s model when a new model arrives, you could be missing out on upgrades or new features.
But if these upgrades are minor or the new features aren’t make-or-break for you, buying an older model year could help you save while still driving off with a new car.
End of month or year
Many car dealerships have a monthly sales target to hit. When they reach that milestone, they typically receive a bonus. Near the end of the month, if a car dealership is approaching that sales goal, it may have an incentive to make the number before the month is over.
In other words, you might be able to negotiate a better price because an auto dealership may cut prices to get deals done and meet the monthly goal.
You also may save by waiting until the end of the year to lease. In addition to monthly targets, many car dealerships earn bonus payouts for hitting quarterly and yearly goals. If the dealership is just short of sales to reach the goal, you could potentially walk away with a deal.
You may have seen lease promotions around the holidays, like Memorial Day, the Fourth of July, Labor Day and Christmas. If you shop around during the holidays and dealers have these types of promotions, you may be able to take advantage of some steep discounts.
Be aware that there may be strings attached to advertised deals. For example, your lease contract may come with a lower mileage allowance than is typical or the deal may apply to only specific colors.
Tips for leasing a car
- Calculate the monthly payment you can afford. Conventional wisdom is to follow the 15% rule and pay no more than that amount of your monthly take-home pay for an auto loan or lease payment. Remember that amount doesn’t include fuel, insurance and maintenance that may be needed down the road.
- Decide if leasing is right for you. If you want to regularly drive a new vehicle, leasing may be the right option for you. But keep in mind that you won’t own your vehicle at the end of the lease (you’ll have to buy it if you want to keep it — an option not always available), and you may owe an extra amount for things like going over your mileage limit.
- Check your credit. Generally, leasing companies tend to offer lower interest rates to applicants with higher credit scores. In fact, Experian reports that leasing companies may look for FICO® scores of 700 or better. Checking your credit scores beforehand can help you understand your likelihood of approval for a lease.
- Understand important leasing terms. If you don’t speak the language of leasing, it’s easier to get confused when you’re negotiating your lease. Start by understanding residual value, which is the predicted value of what your vehicle’s value will be when you return it. A higher residual value can mean the dealer expects it to retain its value better. This is also the amount that the purchase-option price is based on if there is an option to purchase the vehicle at the end of the lease.
Try to shop around for the best possible lease for your circumstances. Leasing last year’s model during a major model change, waiting for better bargaining power at the end of a month or year, or shopping around during a holiday sale might save you some money.
In addition to good timing, make sure you calculate ahead of time what monthly payment range you’d be comfortable paying, check your credit and read up on leasing jargon. You’ll probably feel more confident when you begin shopping — and that may help you make more informed decisions.