Cheapest Cars to Lease

Which car is the cheapest to lease? Which cars have lowest lease payments?

As you probably already know, leasing provides much lower car payments than buying with a loan. However, unlike loan purchases, lease payments actually depend on the type of car and other factors. The cheapest lease may not be for the cheapest car. Let's explain.

What determines low lease payments?
First, let's look at how loan payments work. If we have two different cars (different makes and models) with the same price — say, a Ford and a Honda — and we have a loan for each, the monthly loan payments will be exactly the same, assuming same price, same loan terms, same buyer. The type or brand of car doesn't matter.

However, given the same two cars (Ford and Honda), same price on each, same buyer, lease payments will be different. In fact, lease payments for the Ford will be higher than for the Honda. Why is that, you might ask?

The reason is that one car's lease-end residual value will almost certainly be different that the other's. The car with the highest residual value will have the lowest monthly payment and be the cheapest to lease. In our example, Honda cars will generally have higher residuals (future resale values) than Fords, which makes Honda the cheapest to lease. See our Lease Kit for a table showing residual values for all car makes and models.

Sometimes car companies offer special promotional lease deals with artificially boosted residual values that make those vehicles great deals for the time of the promotion.

What is considered a cheap lease?
Based on emails we receive and other sources, it appears that most people consider a very reasonable monthly payment around $200 or less as being a relatively inexpensive lease payment. Some even look and hope for $100 deals but that is stretching things a bit.

As a point of comparison, let's look first at an average lease for a medium sized sedan such as the 2009 Honda Accord LX with automatic transmission priced at $21,555 with a 36 month lease, 12K miles per year, $11,450 residual value, .00299 money factor, and no down payment. All average parameters. With no special price discounts, no special residual value, no special money factor, the monthly lease payment for this Honda will be about $380 not including tax. Many people looking for low lease payment may not consider this a cheap lease, although it's much cheaper than buying the same car with a loan of the same term.

So, what do we need to do to get a cheaper lease?
First, look for promotional deals on the car you're interested in. At the time of this writing, Honda is offering a special lease deal on the 2010 Honda Accord LX Coupe of $219, not including tax. That's a great lease deal on this car. The deal is only for this particular model and it expires in 1 month. It also requires a down payment of approximately $2380, plus first month's payment and sales tax on the down payment. To get this kind of a low lease payment requires a built-in combination of price discount, boosted residual value, and reduced money factor. If you can't make the down payment amount, the monthly payment goes up a bit.

If you can't find a special manufacturer's promotional lease deal on the car you want, you must then look for the cars with the lowest prices, best discounts and rebates, and highest residual values. Low prices and high residuals, in combination, make the best leases.

In general, the car brands with the highest residuals are Japanese and European. There are exceptions of course. Some European models have lower than average residuals, and some American models have higher than average residuals. On the other hand, American brands tend to have the highest price discounts and rebates.

Exactly which vehicles make the cheapest leases?
The lowest cost cars, in general, make the lowest cost leases, assuming high residual value as well. Toyota and Honda, for example have low-cost models that also have high residuals — and they (as of this writing) are offering great rebates — a perfect combination for leasing.

Let's look at the 2010 Toyota Corolla, a small economical 2-door sedan, priced at about $16,000. At the time of this writing, Toyota is offering a special lease deal on this model (and many other models) of $149 a month, 36 months, 36,000 mile allowance. They base this on a highly discounted price, a high lease-end residual value, and a super-low money factor (equivalent to 0.5% APR interest). Even without the special deal, this car could be leased for about $200 or less, depending on the down payment, if any.

Other cars in this price range are the Nissan Versa (now the cheapest car in the U.S.), the Honda Fit, Kia Rio, and Hyundai Accent. All of these cars can produce lease payments in the $200 range. The Honda Fit has the highest residual value.

For a little more money each month, look at slightly larger cars such as the popular Honda Civic, Toyota Camry, and Nissan Sentra. These all have high residual values and often have promotional lease deals and rebate offers. Some have special rebates for college grads.

Manufacturers' special lease deals
Best Car Deals web site contains a list of current lease deals on many makes and models. The deals come from manufacturers who are placing special lease prices, high residuals, and low money factors on certain models. The deals are genuinely good deals but you should make sure you can live with the term (usually 36 monts), annual mileage limit (usually 10K miles per year), and the down payment, if any.

Another option for a cheap car lease
Here is a situation that might get you a low-cost lease that is even easier — a lease takeover. Suppose someone recently leased a car, got a good promotional lease deal, made a relatively large down payment, all of which resulted in a low monthly payment. Now, they need to get out of the lease (lost job, got divorced, don't need car any longer) and are offering it on Swapalease to anyone who wants to take it over.

If you like the car, you can take over the lease and get the benefit of an almost-new car with low monthly payments, with no down payment. The "seller" pays all the costs except a small application and transfer fee. He may also offer a cash incentive. What a deal!

The cheapest cars to lease are generally those that are lowest priced, have manufacturer incentives, and have the highest lease-end residual values.

For more, see LeaseGuide.com