Car leases are turning into popular options for people looking for a new car. A lease is much less expensive in comparison to purchasing a vehicle outright, making it a way to afford you a new car even when on a tight budget. The price of new cars and trucks continues to go up every year, so this is a viable way of getting into the car of your dreams.
A lease will often expire before you ever have to repair the car. This is a significant savings in the long run. Add to that the reality that leased cars are always under a manufacturer’s warranty that will cover virtually any major repair that does become necessary and it is easy to see why the option is becoming so popular today.
What Does Leasing a Car Involve?
If are considering a car lease, it would be helpful to first understand a few core principles. Those covered below in the following sections and will help you make a more conscientious decision.
Your Payments Reflect the Car’s Value
When you go to lease a car, you will be given a monthly payment for the term of the lease that is reflective of the actual value of the car. If you want to save the most money, you will want to select a car with overall lowest value.
Higher Residual Percent Saves You Money
Leasing a car also involves a residual value. This value is factored into your monthly payment, and it is basically designed to cover the depreciation of the car. Again, if you want the lowest possible monthly payment, you will want to look for a car that has a high residual percentage attached to it.
Understand Your Set Miles
Leases will cap the number of miles you are supposed to drive the vehicle every year. You will need stay within this allotted number of miles in order to avoid a set fee per mile that exceed your allowance. If you are considering a lease, take into account your driving habits when choosing a car based on how many miles you anticipate driving during the term of the lease.
Expect a Disposition Fee
Leasing in a bit different than renting a car by the month in that you typically be expected to pay a disposition fee at the end of the lease. This will usually cost you around $300 to $500, so you will want to plan for that in your budget.
Understand What Your Money Factor Means
The money factor on a lease is similar to the ARP when you finance a new or used vehicle. It is equated to an interest rate over the term of the lease, so look for lowest available money factor when shopping for your lease in order to gain the biggest savings.
Is it Better to Lease or Buy a Car?
It is helpful to weigh the advantages and disadvantages of a lease in comparison to buying a car outright. This will depend on your personal family situation, so take time to consider your needs and make sure that a lease is right for you before signing the contract.
You Won’t the Car
This is an important principle to keep in mind. While you can make any modifications you want to a vehicle that you buy, you are not afforded the same privilege with a leased car. You will need to leave it ‘as is’, as you are only given permission to drive the car for the duration of the lease. The benefit of a lease, remember, is lower monthly payments. You will be expected, however, to turn back in the car at the end of lease term.
Leasing Cuts Down Up-Front Costs
There are many expenses that you will be expected to cover up front before ever driving off the lot with a car that you buy. This includes a down payment and other financing related costs. These are not a factor when leasing a car. You will just be asked to pay for the first month of lease as well as a security deposits a few other tax and fee related expenses.
No Need to Worry About Selling Car Leases
It is not that easy to sell a used vehicle. You will not have any such concerns when entering into a car lease. You can drive the car as you please for the duration of the lease, resting easy in the fact that you will just have to turn it back in without paying anything at end of the contract. It is as easy as that.
Keep in mind that you will not own the car when that final payment is made. You will need to give the car back to the dealership, unless you decide that you love the car so much that you pay for the remaining value of the car at the end of the lease. That is different than the end payment for a car loan, after which you will be given the title free and clear.