Leasing a vehicle can provide a cost-efficient option when looking to get a new vehicle. Instead of needing to fork over your entire savings account or take out a new loan, a car lease allows you to drive the car of your dreams while sticking to your budget.
A car lease allows you to make smaller payments on a vehicle without having to worry about repairs, maintenance, or other expensive purchases. Because leased cars are typically under warranty, you don’t need to worry about paying out of pocket for most expenses.
What Does Leasing a Car Involve?
Leasing a car provides many benefits, but it’s important to understand exactly what leasing a car involves. Let’s take a look at a few of the car leasing basics you need to know.
Your Payments Reflect the Car’s Value
The car’s value is the major contributor to the monthly payments you will need to make. Throughout the duration of your lease, you will pay the same cost each month. This payment reflects the overall value of the vehicle, including how old the car is and how new the vehicle is.
You can save money by leasing a less expensive vehicle.
Higher Residual Percent Saves You Money
The residual value percentage of the vehicle helps you determine the car’s depreciation. The higher the value is, the lower your monthly payments will be. To further lower your monthly car payments, look for a vehicle with a high residual value percentage.
Understand your Set Miles
A car lease determines the amount of miles you can drive during that time period. Going over your set miles could mean you have extra fees to pay. Those fees are typically given on a per-mile basis.
Expect a Disposition Fee
A disposition fee is a price you must pay when the car lease ends. As you return the vehicle, you may be expected to pay a disposition fee, which typically costs between $300 and $500.
Understand What Money Factor Means
Your money factor is similar to your ARP. The lower your money factor is, the more money you can save on your monthly payments.
Is it Better to Lease or Buy a Car?
There are many benefits to leasing a vehicle, but it isn’t right for everyone. In some circumstances, buying makes more sense. Here are a few things to consider if you’re stuck between leasing or buying your next vehicle.
You Won’t Own the Car
While you’re making payments each month, you’re only paying to borrow the vehicle for that time period. Once the lease is over, you do not own any portion of the vehicle. Instead, you must give the car back to its rightful owner. This means that at the end of your lease, you won’t own the vehicle so you cannot sell it or take a loan out on it.
Leasing cuts Down Up-Front Costs
Because you’re not buying to own, you will have lower up-front costs to lease a new car. When purchasing a new car, you’re expected to pay a down payment, taxes and fees, and potentially get special financing to pay for the car. But when you lease, you do not need to go through special financing or make a down payment. While some people choose to make a down payment to reduce their monthly payment amounts, it is not necessary. Instead, you only need to pay a deposit and some fees and taxes.
No Need to Worry About Selling Los Angeles Lexus Car Leases
Selling a used vehicle can become a major headache. Trying to get a good price for an old car you’re trying to sell can be difficult. But when you lease the vehicle over purchasing it, you don’t need to worry about selling the car. Instead, you simply need to give it back to the owner and go on your way.
As you reach the end of your lease, you will eventually get to the point where you need to make your end payment. With a car loan, your end payment signifies that you’ve paid off the amount you owe and the car is now yours. However, a car lease is a bit different. As you make your end payment, the lease is now over and you must give the car back.
You may be able to purchase the vehicle at the end of your payments, if you wish to do so. This can be a great deal for those who get to the end of the lease and decide they would like to keep the car.