If you’re tight on cash or looking for a cheaper option to purchase your dream car, leasing a vehicle may be the right option for you. As a way to spread out your car payments, a car lease allows you to drive the vehicle you want without draining your bank account.
There are many benefits to leasing your vehicle over purchasing it outright. Not only does it give you an opportunity to save some cash, but it also allows you to protect your car under the manufacturer warranty. This can save you some additional money if you need any repairs or maintenance while the car is still under lease.
Let’s take a look at some more of the basics surrounding a car lease.
Car Leasing Basics:
Here are a few of the basics you need to know about leasing a vehicle.
When you lease your vehicle, you will be required to make payments each and every month. These monthly payments will typically be agreed upon beforehand and will depend on the vehicle you’re leasing and how long you’d like to lease it for. Longer contracts may mean smaller monthly payments.
The more expensive or short your lease term is, the more expensive your monthly payments will be.
Your monthly payments will also depend on the residual value percent of the vehicle. This cost covers the depreciation of the vehicle. The higher the residual value percent, the lower your monthly payments.
With a leased vehicle, you are required to return it to the dealership after your lease ends. At this point, you will typically need to pay something called a Disposition Fee. The Disposition Fee is typically a couple hundred dollars, but will depend on the particular business you leased the car from.
You may also have additional charges if you’ve gone above your set miles. When you lease a vehicle, you agree to only drive a pre-determined number of miles. If you go above this number, you may be required to pay an additional fee. This is typically charged on a per-mile basis.
Is Car Leasing Right for Me?
The conversation between leasing a vehicle versus buying a vehicle is a bit like renting a house versus buying a house. While both have their benefits, they don’t fit everyone’s unique situations. Some benefit more from leasing while others benefit more from buying.
There are some drawbacks to leasing a vehicle. However, the positives may outweigh the negatives, depending on your needs and circumstances. Before you make a decision, let’s take a look at some of the upsides and downsides to leasing your next car.
You Won’t Own the Vehicle
When you’re leasing a vehicle, you’re essentially paying to rent the car. When the terms of the lease are complete, you won’t own the vehicle. You simply return it to the dealer or owner and go on your way.
For some, this short-term commitment is a benefit. Because you won’t own the vehicle, you don’t need to worry about selling it or swapping it in if you want to make a new vehicle purchase. You also don’t need to worry about the depreciation of the car, which can be quite high.
However, others feel that renting a vehicle is wasted money because you’re not paying to own something. If you want your money to go to something you’ll eventually own, leasing a vehicle may not be right for you.
Smaller Up-Front Costs
Leasing means you don’t need to make a down payment or get special financing to drive the vehicle you want. While you may need to make some kind of deposit and pay for certain fees and taxes, the up-front costs of leasing a vehicle is much smaller than the up-front costs of buying a vehicle.
This can be a great option if you don’t have the funds for your dream car saved up. If you’d like to put more money into the vehicle lease up-front, this could mean you can pay smaller monthly payments. However, it is not necessary to make a down payment when leasing a vehicle.
Whether you’re buying or leasing a vehicle, it is a big decision to make. If you’re looking for a cheaper alternative to buying a car or if you’re not interested in getting special financing, leasing a vehicle can be a great option. Leasing is also beneficial for those looking for a short-term commitment while still having a car they can call their own.
Take each of these accounts into consideration when making your decision. With a full understanding of what leasing a vehicle means, you can make the best decision for you.