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Leasing More Attractive Due to Higher Resale Values

December 2, 2010

Leasing a CarShorter leases, lower monthly payments, and higher residual values for used cars are luring consumers to leasing in growing numbers.

When you lease a car, you're essentially paying for the depreciation cost. Since residual values have been going up, leasing has become a more attractive option.

The average length of a lease dropped to 41 months, which is much shorter than the 64 months of the average car loan.

Leasing is especially popular with luxury-car shoppers.

More than 59 percent of shoppers who chose Mercedes-Benz decided to lease the vehicle. For BMW, the figure was 57 percent.

It's important for consumers to make an informed choice between buying and leasing.

If the monthly payment is the same for buying as it is for leasing, and if you can handle the longer contract term - typically five years for purchase versus three years for a lease - you're still better off buying.

You wind up owning the car at the end of five years. And at three years, you at least have equity in the car.

If you do lease, it's recommended that you stick to a maximum of 36 months so that the vehicle will always be under the included bumper-to-bumper factory warranty.

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My Recommendation for Car Shoppers

TrueCar No-Haggle, Edmunds Price Promise, and 1-800 Car Show are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.

California Residents - Important:

There is a new online car buying service called Roadster, available only to California residents, which I highly recommend you try - especially if you hate the stress of haggling with a car salesman. They provide an expert concierge who negotiates the price of the car and delivers it to your home with zero hassle - you never have to interact with a dealership. Here is my in-depth review of Roadster and why I recommend it.

- Gregg Fidan

Gregg Fidan

About: Gregg Fidan


Gregg Fidan + is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.

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