back to articles | December 31, 2018 | Greg Thibodeau

Categories: Leasing a Car

Car Leasing Companies

The difference between a Dealer and a Car Leasing Company

A car dealer provides the physical automobile. The leasing company provides the lease itself. Unless you choose to find your own leasing company you won't start to deal directly with the dealer's leasing company until you begin to make monthly payments. Once you sign the contract, your relationship is exclusively with the leasing company and not the dealer.

The Relationship between Car Dealers and Car Leasing Companies

The dealer is the person you will negotiate a purchase price with. Negotiate is the key term here. You can negotiate a lease just like you would when buying a new car. Don't let a car dealer tell you that since you are leasing, the car you want is leased at full sticker price.

A dealer acts as an agent for the car leasing company. He is a kind of middle man that helps everything go smoothly with the lease transaction. The dealer makes money from the lease by getting a commission from the leasing company and the profit he makes on the car you are leasing. When you agree on price with the dealer, the dealer then sells the car to the leasing company at that price. The leasing company will lease the car to you with their financing based on the price you negotiated with the dealer.

Captive Car Leasing Companies

Each dealer will have leasing companies he likes to do business with. Dealers often use leasing companies called "Captive" which means they are subsidiaries of the larger automakers. An example would be Ford Motor Credit. If the car you want is a popular car you should check out its captive leasing company your self before going to an independent dealer. The captive company might have a better leasing plan than the car dealer will offer.

Finding Your Own Leasing Company

You don't have to use the dealer's leasing company. In fact it is often more advantageous to find your own. There are many independent leasing companies who can get good deals on car leases. Some have special arrangements with dealers for purchasing fleet cars. When you don't use a dealer and just deal with the leasing company, the leasing process take a little bit longer. However, if you are ok with a longer leasing process you can usually save some money.

Leasing Companies and the Current Car Lease Market

Many of the options car dealers used to have for leasing companies have been eliminated. In the late 1990's so many car leases expired while car prices were falling that leasing companies started losing money. People who previously leased decided to buy a car instead of leasing or purchasing their lease. Cars at lease end were being returned to the dealers in droves.

The difference between the value of the car when leased and its value when turned in kept declining until it was difficult for the leasing companies to make a profit. Most of the larger "captive" leasing companies started scaling back their car leasing programs. The loss of captive leasing company options began to make the price of leases rise for lack of competition.

Enter hot competition from online car leasing companies and independents. One of the reasons leasing has gotten so popular is because of the competition between independent leasing companies for your business. When you decide to lease, get several quotes from different leasing companies and use them to get your best deal. Challenge each company to beat the other company's quotes and watch your lease price decline rapidly. Once the independents begin refusing your bids you will know you've reached a good lease price.