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Why Tennesseans should consider leasing their next car

MEMPHIS, Tenn. --  "It fascinates me that more and more people aren't involved in leasing in the state of Tennessee."

Principle Toyota's Todd Lochner will be happy to sell you a new or used car, but he said leasing is the best kept secret in his business, especially in Tennessee.

According to the Greater Memphis Automobile Dealer Association, average lease rates in other cities have skyrocketed to an all time high of 30 percent.

In the Memphis area, it's more like six to eight percent.

"You can save a lot of money leasing a vehicle in the state of Tennessee. It's very consumer friendly."

Here's why.

Lochner said Tennessee is one of the few states in the country that doesn't tax you on the full value of the car when you lease and the sales tax you do pay is based on your monthly payment.

That can be a savings of thousands of dollars.

Another concern most people have about leasing a car is the miles.

But these days instead of limiting you to 12 or 15,000 miles a year, most carmakers will now go as high as 17, 18, even 20,000 miles for only a slight increase in your monthly payment.

"You're basically renting the portion of the car that you use is what you're doing."

That's the simply way to look at it.

For example, say you want to buy a $25,000 car.

If you take out a loan and buy it, you're financing the entire cost. The car is yours, but your payments will be higher.

But if you lease, the carmaker estimates what the car will be worth at the end, known as the residual value.

You can only finance the difference, saving you substantially per month.

At the end of the lease, if the car is not worth what's estimated that's on the dealer.

However, if the car didn't depreciate by as much and is worth more at the end, that's money in your pocket.

Dealers admitted they like leasing because it gets you back in the showroom much sooner than if you buy.

"It gets you back into the fold more frequently and for the consumer, you don't have to worry about any of the negative impacts.""

Something else to consider: the car's warranty is in effect most if not all of the lease, and you're much less likely to have expensive repair bills with a newer car.

Giving leasing some serious thought?

Here's what experts say you should do:

  • Negotiate a sale price on the car before you even start talking to the dealer about leasing
  • Don't put any money down if you can, but never more than $2,000
  • Know how many miles you typically drive in a year
  • Keep your lease to no more than three years
  • Know what's expected of you at the end when you turn in the vehicle.