If you are someone who is looking to get a car of your own, you may want to consider a lease. Leasing a car is much less expensive than buying a new car, so this option lets you enjoy the benefits of driving a new vehicle without making a major expenditure. And since the cost of new cars is already astronomical and is still on the rise, a lease may well be the only way you can get your dream vehicle and still have enough to pay rent.
One other bonus of the car lease is the fact that most leases are over before the car develops major issues. Even if your leased vehicle has a problem, since all leased vehicles are under a manufacturer warranty, you will not have to pay out of pocket for necessary repairs.
What Does Leasing a Car Involve?
There are many different facets to leasing a car. Below, we will look at some of the things you should know if you are planning on leasing a car or thinking about doing so:
Your Payments Reflect the Car’s Value.
When you lease a vehicle, your monthly payment will be higher for vehicles of high value. If you want to save money, choosing a less expensive vehicle will result in more manageable payments.
Higher Residual Percent Saves You Money.
Because leased cars depreciate as all vehicles do, a leased vehicle has what is called a “residual value percentage,” or extra cost factored into your lease. If you choose a higher residual percentage, your payments will be lower.
Understand Your Set Miles.
When you lease a car, the lease agreement specifies a maximum amount of miles you may drive each month. If you go over, you will need to pay an additional premium per mile. To ensure you don’t accidentally get overcharged, be sure you understand your mile limit and the fee you will be charged if you exceed that limit.
Expect a Disposition Fee.
This fee refers to the amount of money that you need to pay upon the return of the vehicle. This amount is usually between $300 and $500, so make sure that you have budgeted enough for the fee.
Understand What Money Factor Means.
In terms of leasing a car, the “money factor” is approximately the same thing as your APR. If you want to save on your lease, choosing an option with a low money factor may be helpful.
Is it Better to Lease or Buy a Car?
Chances are that you are looking for a car. Before you choose a vehicle, it is important to understand the difference between leasing a vehicle and purchasing one. Leases are great options that can save you money, but you should fully understand the terms of your specific lease and how leases in general work before you sign anything.
You Won’t Own the Car
While purchasing a car has the benefit of allowing you to do what you want with it, even while you are still making payments. When you are leasing a car, you are not making payments toward ownership; you are just paying to use a car that the lender owns. Leases usually involve lower payments, but you cannot sell a vehicle that you lease.
Leasing Cuts Down Up-Front Costs
When you buy a vehicle, you have monthly payments, but you also need to provide a down payment or trade-in. In many leases, you do not have a down payment, but you typically must pay your first lease payment, acquisition fee, and security deposit, and possibly a few miscellaneous taxes and fees. However, if you would prefer to lower your monthly payment, you may offer a down payment.
No Need to Worry About Selling Car Leases
If you own a vehicle and want a new one, you will need to sell the vehicle. This is a real challenge, as cars depreciate, and buyers may not want to pay full market value. When you lease, you won’t have to worry about preparing the vehicle for eventual sale, because you simply return the vehicle at the end of the term.
If you are making payments on a car you purchased, the final payment means the title is transferred to you, and you officially own the vehicle. When you lease a vehicle, you may have purchase option after the lease, but this would be a separate agreement. You do not automatically own the vehicle once the lease has ended.
Best NYC Toyota Car Leases
Those who have heard of car leasing probably know they have to return the car or that there is a monthly mile allowance, which does feel limiting. Owning a car may seem like a better choice because it is yours. You can do what you please, but there is more to the story. There are a number of benefits to leasing a vehicle to consider, so keep an open mind because car buying may not be the best choice.
There are two ways to purchase a vehicle: You can pay cash for a car or finance it. One thing to consider is that financing a car does not mean you truly own it. The truth is that the lender owns the car and is allowing you to used it until you pay it off, which is when you get your car. Yes, you can do anything you want to the car, but the lender holds the title, meaning it can be taken away when you go through financial issues.
Affordable Monthly Payments
Another thing to think about is your monthly payments. A car payment for a new car could be astronomical, and this payment will be due every month. You already have a lot on your plate, and now you are going to be adding a pretty big payment that you are going to have to keep up with if you want to keep your car. Those who decide to lease will be happy to learn that you are going to be paying up to 60 percent less for the same car. This is because the value of your payments is calculated based on the depreciation value during the lease term.
Down Payment is not Necessary
The idea of a down payment not being required may sound like music to your ears, and it should. The down payment is a big chunk of money. Some people take out loans to pay a down payment, which adds to your debt. Some liquidate their entire savings to get over that initial hurdle when you purchase a car. This is something you can skip if you lease a car. Now, you can pay a large sum, but it will be on your terms, which reduces your monthly payments. The only thing you are required to pay are taxes, fees, and the first month’s rent, which is less compared to what you would have to come up with if you needed to pay a down payment.
New Cars Galore
Your have probably noticed that those who lease a car are driving a new car every few years. This is because you can easily lease a new model after the lease term is over, which is usually two to four years. This means you are going to be driving a new car for a few years and get to drive another when you are done. You should remember that this also means that you are going to be enjoying all the new technology that comes out. Cars can warn you if you are leaning into another lane, so imagine what cars will be able to do in just a few more years.
Finding a good mechanic can be difficult. This is such a common issue that it is likely that you have seen one or two jokes about it when watching television. You do not have to worry about that if you are leasing a car because the lease term ends before the warranty does. The dealership is going to deal with repairs because they are covered by the warranty. Some companies offer free routine checks, too, during the lease term.
Leasing Might Offer Tax Benefits
Those who are leasing a car may want to know that you are going to get a few tax perks if you lease. For one, depending on the state you live in, you will not have to pay the sales tax on the entire value of the car; it will based on the assessed depreciation value. This means you are going to be saving some cash, and those who have to drive for work may be be able to deduct maintenance expenses and car lease payments.
There are many other benefits to leasing a car that surpass buying a car, but hopefully these benefits make it easy for you to know what to do next. Those who want to save more money should also consider leasing a car that costs less, which helps reduce your monthly payments even more.