Leasing luxury cars: what you should know

Are you considering leasing a luxury vehicle for personal or business use? If so, this article contains important information about what to expect when shopping for the best lease agreement.

Luxury car leasing is different

How is it different? It's not that luxury cars are more expensive, or that the leasing process is different, but because the consumer doing the leasing is typically different.

Luxury car consumer

High-end automotive consumers have different priorities, different values, bigger bank accounts, and prefer to transact business differently than people acquiring less expensive vehicles.

They have a tendency to lease rather than buy. "High-line" brands such as Mercedes, Porsche, Audi, Lexus, Acura, BMW, and Land Rover are leased at the rate of 50% - 70%, depending on brand, compared to only about 20% for non-luxury models, and even less for the least expensive models.

Luxury auto consumers tend to value time, efficiency, quality of service, and business relationship when dealing with financing. Spending a great deal of time shopping and haggling for bargain deals is less important that establishing a relationship with a company they can trust and depend on to genuinely look out for their interests.

High-end customers tend to be more loyal to a brand and a dealership over a long period of time.

Luxury cars make good leases

Luxury automobiles make the best lease values, dollar for dollar, due to high lease-end residual values relative to MSRP. In fact, luxury vehicles, as a category, are leased significantly more often than vehicles in any other category.

The best lease deals are for those vehicles, such as Lexus, Mercedes, Porsche, Land Rover, and BMW, with the highest future resale values, or residual values, relative to their original cost. A high residual value creates a low monthly lease payment.

In fact, a better lease deal can often be obtained by leasing a high-residual luxury car than by leasing a car with a lower residual value, even though the price of the luxury car is the same or greater. This is the reason smart automotive consumers tend to lease a luxury vehicle.

Being smart about money is a typical characteristic of high-end car leasers. High-line leasing consumers are not trying to save a few bucks — they have the money to buy the car they want. They simply know that it's not smart to put money into depreciating assets (automobiles) when that money could be used for more productive purposes.

Independent lease companies and luxury cars

More than 20% of luxury automobile consumers finance their loans and leases outside of car dealerships, according to a recent report by JD Power and Associates.

Independent lease companies such as Primelease can, in most cases, beat luxury car dealers on prices and lease rates because high-end manufacturers don't subsidize deals and offer incentives nearly to the extent that low-mid-range vehicle manufacturers do. Furthermore, luxury car dealers don't like to be viewed as "discounters."

Finance companies who lease luxury cars typically require their clients to have "prime" credit ratings. This means a high FICO® credit score of 700 or greater. Lower credit scores can mean higher lease rates, large down payments, and security deposits — and possibly higher insurance rates.

For high-line vehicle leases an independent lease company can be more flexible and responsive to customers' needs than dealers, who are restrained by car manufacturers' rules. For example, when new models come out and are limited in dealers' inventories, independent lease companies can search the entire country for the exact car you want.

Benefits of leasing luxury cars

People who lease high-line cars like the convenience of a quick easy business transaction, like having a new style car every two or three years, like avoiding maintenance and repair headaches, and like avoiding disposing of used cars. They also like the option of minimizing cash outlay.