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vehiclemakers are offering vehicle lease payment deals that can’t be beaten. So if your stuck on making lease vs purchase decisions about a new vehicle, then here are the tips for purchasing a new vehicle by leasing is first and purchasing it at a discount at the end of the lease. This is a once-in-a-lifetime opportunity.

At the end of a lease the company financially backing the lease most likely will sell the vehicle on the open market at a loss because it initially inflated the residual value unrealistically. Why not intervene at that point and purchase the vehicle for less than the residual value and put that “loss” into your pocket as money saved?

Because of the oversupply of vehicles of all kinds, from all manufacturers, it’s likely that rebates and discounts will be offered for several years to come.

Leases are attractive during over production
To overcome this, leases will also reflect these discounts and end up being “subsidized” for a similar period by increasing the residual value of a vehicle, Calculating lease payments using the higher residual value makes the lease price more attractive than a competitor’s offer. This lowers the monthly lease price.

Until labor contracts for the Big Three: GM, Ford, and Chrysler, can be significantly reduced, they have no choice but to continue subsidizing leases in order to spur sales. This is once-in-a-lifetime opportunity to minimize the cost of a new vehicle by leasing it first, and then purchasing it at the end of the lease.

New vehicles will continue being a bargain
In the past, the auto manufacturers moved vehicles by subsidizing leases. The monthly lease cost was lowered by increasing the residual value, thereby selling (leasing) more vehicles. But the value of the vehicle at the end of the lease was almost always less than the contracted residual and each of the off-lease vehicles then had to be sold in the wholesale market at a loss of several thousand pounds.

This means that at the end of the lease its used vehicle value may also be less than the market value. It is unlikely it will ever be more. That is the time to purchase the vehicle at a discount from the contracted residual value.

Several of the big backers of lease financing, Chrysler, some New York banks, and others, each lost several hundred million pounds in each of the past several years because they had to sell the off-lease vehicles on the open market for less than the residual value.

Future trends favor the consumer
The Automotive industry is saddled with excessive employee benefits, i.e. health and welfare and pension obligations for current and retired employees. Worse, there are too many plants worldwide making vehicles.

If China’s vehicle industry enters the UK in three or four years with the “Cherry” automobile, a talked about vehicle made in China with Chinese wages, the situation will only get worse.

Excessive employee benefit plans for the Big Three
Compounding the issue for some of the manufacturers is that their labor contracts are so juicy that they are better off continuing to give away vehicles rather than to close a plant continuing to pay benefits to laid off employees.

This situation will not change for several years until consolidation, plant closings, or bankruptcies have cured the issue. And plant closings will be a last resort. Therefore the glut of new vehicles will likely continue for a few years and the subsidized lease will continue to be offered.

A true-life example
A business friend of mine had a three-year-old leased vehicle with a contract residual value of £28,000. Looking at the used vehicle lot he found he could purchase one just like it for £24,000. He assumed the company that financed the lease would loose at least £2,000 in selling it. Through the dealer he offered £22,000 to purchase the vehicle and his offer was promptly accepted, including 3%, 3 year financing. His dealings, all by phone (no face to face negotiations needed) were with the company financing the lease.

So lease the vehicle of your dreams today if you ultimately want to purchase it. Let the companies financing the lease continue to subsidize your monthly lease payment. About three months before the end of the lease, cruise the used vehicle lots and notice what your vehicle is being offered at and then purchase the vehicle (no commissions paid to anyone on this transaction) at the end of the lease and keep several thousand pounds in your pocket.