1.Understand the total cost of the vehicle. Even if you do not know the first thing about leasing, do some simple match and multiply the payment amount by the number of months, account for rebates and incentives, include your own payment (if any), and then add the value of the car at the end of the lease term (otherwise known as the “residual value”).

Here’s the formula:

Payment Amount *(term) + Rebates + Incentives + Down payment + Amount due at Lease end = The total cost of the vehicle.

Why should you do this?  It’s simple…this little bit of match allows you to the lease to a traditional car loan. Normally, the lease package should be close in terms of overall cost to a traditional loan. The lease terms and interest rate may vary a bit, but it remains a goog high-level indicator of a fair deal. If the dealer tells you that lease rates are higher because the bank is only offering low interest rates for loans, then perhaps you should not choose a lease. In practice, this shouldn’t happen often: If a bank can offer a low interest rate they can also offer a low lease rate.

2. Know the terms of a current traditional car loan! This is important for step 1. Calculate the cost of the car using interest rates from 1 to 7% and terms of 36 to 60 months. If you don’t know how to do this find an online loan amortization calculator. You just calculate the payment for typical current interest rates offered for new cars (in the range of 1 to 7 percent)  and remember to account for any rebates or buyer incentives and rebates, and also the down payment.

Now you should have two deals to compare. If the total cost of your lease in (step 1)  is reasonably close to the total cost of financing the car (step two, using a 6% rate), then you know you’re looking at a lease deal that’s similar to buying the car at a 6% interest rate. If, however, the dealer is offering something special on a purchase, like perhaps a 0% interest rate, then you know that the lease isn’t as a good a deal, and you have some negotiating to do.

3. Now that you ‘ve compared the total cost of your lease and found what the comparable interest rate loan is, how do you tell if it’s a good deal? This is the point where a lease becomes confusing for most people. The answer is “no” if your plans are to return the car at the end of the lease. Why is that? Leasing is basically taking out a loan to finance the depreciation on the vehicle. You’ve probably heard the saying “a car loses 20% of it’s value the minute you drive it off the lot”. This is very close to being true. The depreciation, or “loss in value” is what your lease payments are financing. That means that if you pay a higher amount than the actual depreciation, it’s not a great deal.

4. Do not make a large down payment!  Remember that the lease is paying off the estimated amount of depreciation on the vehicle. If you make a large down payment, the dealer can then allot that down payment to offset the residual value of the vehicle While this will allow for a low monthly payment, it almost forces you to keep the car at the end of the lease, because that’s what your down payment reduced…the residual value.

5. If you shouldn’t make a large down payment, how much should you pay up front? The best answer is $0…nothing. That said, not all vehicle, or all purchasers, will qualify for a zero down payment. Calculate the following: payments*term + down payment + rebates and incentives. Look at that number and then ask yourself is this how much the car is going to loss value in over the term I am looking at? For example, if you do this math on a 30K car that you want to lease for 36 months and the value equals 20K, then something is wrong. Either you payment is to high, you down payment is to high, or they did not give you the rebates. Warning, when doing this compare keep in mind that you pay interest in the lease based on the lease factor so your numbers may be off a little depending on the lease factor they gave you. If you did step one and two, then you know you approximate equivalent interest rate and you should be able to determine a reasonable amount to factor in.

6. Leasing is financing the depreciation of the car! I know this has been said before, but it is so important to understand this. There is no need to have a residual value at the end of the lease that is below what you think the value of the car is going to be at the end of the term. Your payment should be the lowest you can get while keeping the residual value high or above the estimated value of the car at the end of the lease. This seems the opposite of what you would thing, right? Well, if your residual value is higher than the car is worth at the end of the lease, then you are in effect renting the car for less while you are driving it which is the object of a lease (very important: remember all you checks in step 1 and 2, it is you check that they have applied all amounts).

7. In most cars, 36-month leases are optimal. Why? It has to do with depreciation. Any longer and your paying for a steeper rate of decline and it does not make sense to do that.

8. Never do off – term loans (i.e. 39-months, 52-months, etc)! These are designed to build in better profit margins while looking better to the consumer. I have never seen one in that is better then a traditional term loan. They might be out there, but if you go down that path be sure you know how to fully calculate everything on the loan because if you don’t you are probably better off pulling all your cash out of your wallet, handing it to the dealer, and then leaving.

Before you lease always know at least how to do the tips above and please do more homework. Leases are very easy for dealers to make incentives and down payments disappear. I firmly believe, that with out leasing the car dealers would be in far worse condition profit wise today.

Be wise, do you homework and happy leasing! Send questions out to the public in the comments!

Unless the dealer is taking you on a ride with the price of the car you’re purchasing, I highly, highly doubt you’re going to get KBB trade in value pricing for your car. There has been times I’ve purchased cars at dealer only wholesale auctions for well under trade in value and have sold the car for trade in value and sometimes I do have to pay trade in value, but at a car dealer they are thinking about maximizing profit. They think in terms of front end and back end profit. How much profit can they make off the car ? How cheap can they get your car so they can make a profit on that ? How much interest can they charge you ? Basically how much can they stick it to you
So now you’re wondering whats the easiest way to sell your car. Well the old school way of putting up a for sale sign generally is still a good way, but since Al Gore invented the internet it’s probably the best place to sell your car and find porn, but thats another story.

There are tons and tons of sites out there to post your car, so which is the best you ask, well it’s not an easy answer. It all depends on what kind of car you have, what area you’re in and how much you’re looking to spend. Here are three of my favorite sites to use:

1) Ebay.Com

2) Cars.Com

3) Autotrader.Com

If you don’t know which site to use or how much to price your car, feel free to e-mail is at so@isitagooddeal.com. So next time you’re thinking about trading your car, stop, sell it yourself and get the most money out of your car.

Buying cars online can be easy and worry free if you know what you’re doing and know what to look out for. Whenever you’re browsing cars online and see a price that just sounds too good to be true, it probably is. Some of those cars might have salvage/rebuilt titles, some may be a scam and some may even be an advertisement just to attract you to that particular dealer.

Here are a few tips I suggest to anyone looking online for their next car:

1) Determine the make and model of the car you’ll be shopping for (Edmunds.com might help you with consumer reviews)

2) Look up estimated market value/private party value and look up trade in value at both KBB.com and Edmunds.com, under True Market Value

3) If you need your own financing I highly suggest you try getting a loan yourself from your local bank or your credit union.

4) Try to buy any used car for as close as trade in value as possible. I’m a dealer myself and have sold many cars online for under trade in value. Sometimes I find myself paying around trade in value for cars myself and sometimes I am able to buy well under trade in value. Its hard to say if you can actually buy your next car at trade in value, because some specific car models are very hard to purchase for trade in value, yet some are very easy. If you need some help with how much you should pay for a car feel free to e-mail me at the Free Advice link above.

5) When shopping online really important to get the VIN(vehicle identification) number for the cars. Most people automatically say run a Carfax on them, but as you might have read I prefer Autocheck. If you really want to be sure, I’d say run both.

6) For the very overly cautious folks buying a car from another state I suggest having a vehicle inspection service check the car out for you, that can range from $99-299 depending on the location and how complete of a check you want.

Again if you need any help or advice feel free to e-mail me at the Free Advice link at the top of the page

Things To Consider

The main things that you need to think about when selling your car include how much you will sell for, what documents you need and where abouts you will advertise your car. Generally you have two main options as to where you can place an advertisement.
Firstly you have local newspapers and car trade magazines. These are usually the best option as they are browsed by thousands of local people. Your other option is to sell online. As time has gone on, more and more people have realized the benefits of selling through auctions websites such as EBay. I’d also recommend listing your car on Autotrader.com. As well as these two options, you can also place a “For Sale” sign in your car. You never know who might see your car out on the streets, never hurts to try.
The main problem that you will have when selling your car is who you sell to. What you may not realize is that there are many people out there who want to take advantage of you. Thieves in particular often target used cars. They pose as potential buyers and then they steal your car right from under your nose. To prevent this from occurring you should never leave the keys in the ignition and you should never leave potential buyers unsupervised with the car. Also do not accept checks or cashier’s checks whenever possible as they can bounce. If you do take a check, try to come to an agreement where the buyer does not get the car until the check has cleared.

As well as checking that you are selling to the right person, you yourself have to have certain documents to hand. You should have the title for the car to show the buyer. Without a title you might not even be able to sell the car. Also make sure any liens on your car have been removed before selling.

Overall selling a car can be hard work. However if you are careful and if you do plenty of research to determine how much to sell the car for then you should end up having a smooth transaction. Also if you need to sell really quickly and just want to get it off your hands two great options are a free listing on Craigslist.org or selling to Carmax. Remember selling to Carmax probably won’t give you as much as you’d like to get, but it’s a process that takes about 30-60 minutes to sell your car. If you have trouble selling your car, don’t know how much to sell for or where to list it for sale… always remember you can e-mail us at So@IsItaGoodDeal.com for free advice.

Interesting Carmax Photo

Carmax locations are popping up around the country, with about 74 locations in 35 markets Carmax is quickly becoming one of the biggest players in the US used car market.

As a car dealer myself I’m in total shock that they are reporting higher and higher profits every quarter. I’d say their are two main aspects of their business: buying and selling.

When we look at their purchasing of cars its one of the biggest rip offs in the business.  If you are trying to sell your car to them, the way they have you believe the process works is, you look up your cars Kelley Blue Book pricing and go into Carmax and walk out with a very similar amount. What happens nine times out of ten is you walk out with thousands less or get such a low ball offer you leave in astonishment.

Unfortunately there are lots of people in such desperate situations who have no other option then to take their offer. The way Carmax buys cars is as follows: they buy it from you so cheaply that they can mark it up a huge amount and sell the car themselves, or even take it to a wholesale “dealer only” auction and still make a profit on it. Either way, don’t expect Carmax to give you what you’re asking, or even something reasonably fair. This has nothing to do with the difference between private party and trade in pricing, this has to do with the difference of Carmax pricing and trade-in pricing.

The other aspect of their business is, of course, selling cars. Their business model here leaves me amazed beyond belief. They have the whole gimmick of “no hassle, no haggle pricing”.. it’s pure business genius. They are preying on people who hate dealing with car salesmen.  So, yes, no haggling, but what happens here is you get way over charged for a car worth hundreds, or in most cases, thousands less. Go to their site and do a simple search for a car and you’ll be amazed the prices they charge. For example, at the moment at our car dealer we have a 98 Civic…I found an almost identical car at Carmax. Carmax is asking $8995 for a 1998 model with over 100k miles !!! I’m selling the same car for $5995 and I’ll even throw in a year warranty.

Do a little car shopping people, Carmax is the biggest rip off in the used car market. I’m really not trying to make other dealers sound better, but my goal is to show the absurd prices and the effect of doing a little more homework before you buy your next car.

[Editor's Note: This is a guest posting...]