Leasing isn’t a new concept in transportation, but there are far too many people who don’t understand what exactly it means to lease a car. Unfortunately, far too many people opt to buy a car, forgetting that there are terrific perks to leasing instead. There are far too many to cover all in one place, but it’s important to know a few specifics about car leasing so that you can determine if it’s the best option for you.
What Does Leasing a Car in Involve?
So what’s it mean to lease? It means a lot of value from the car you’re driving and much lower monthly payments. It means knowing that in a few years you can lease another car and add some variety to your auto life.
Your Payments Reflect the Car’s Value
The worth of the car is going to set your monthly payment. If you lease a cheaper car, your payments are going to be much lower. If you lease a more expensive car, the payments are obviously going to be higher. Try to lease a car within your monthly budget.
Higher Residual Percent Saves You Money
A residual value percentage goes into your payments. The significance of this number comes from the car’s depreciation over the years. If you want to have lower monthly payments, what you need is a car with a higher residual percent. Be sure to ask about this number and be sure of its meaning before committing to a lease.
Unlike new cars, leased cars have a set mileage that you can drive them annually. If you go over the set number of miles in a given year, you’re looking at some steep fees for every mile over. This is definitely something to be aware of and avoid if you plan to lease.
Disposition fee at end of lease
At the end of your lease, you’re going to have to pay a disposition fee. This fee covers a lot of post-lease things like cleaning up the car and re-leasing it. It ranges from $300 to $500 and is paid at the end of the lease, not the beginning.
If you’ve heard of APR, then you’re in good shape. This is your money factor and it has to do with the financing that is involved in a lease. You can save a huge amount of money by getting a lower money factor. This will determine your monthly payments, too, so it’s very important to research money factor and ask good, solid questions about it.
Is it Better to Lease or Buy a Car?
Here’s the million dollar question. We’ve covered some basics of leasing but there’s still the other option: Buying. Many factors will go into determining whether or not you should lease or buy. Buying a car involves a steeper down payment, a longer term commitment, and eventual ownership of the car, so there are pros and cons to buying, too. With leasing, it’s different than buying in a few key ways.
No ownership at the end of the lease
One of the biggest advantages of buying is that after you’ve made all of your payments, you own the car and then can keep it or re-sell it. Ownership is an important part of the American way and some folks insist upon it. For those rare people, leasing just won’t do. For others, leasing is still a viable option because of the money it can save.
Saving on up front charges
Buying a car can be very expensive up front. If it’s a very nice car, it can be unaffordable to the majority of people to buy it. If you’re on a budget, leasing is the far better option here because if you have a down payment at all, it will be significantly lower than the purchase down payment. You generally pay first month’s payment and some fees and taxes if you lease. There will be a security deposit but it will be much less than a down payment on a car.
Don’t have to sell the lease
At the end of the lease, you’re relieved of all obligations. This is a great feeling. You’ve gotten to drive a terrific, more expensive car than you might have been able to afford to buy, and on your final payment, your hands are clean. You don’t have to re-sell the lease or worry about what to do with the car. You either work out an agreement to buy or you return the car, no strings attached.
Once again, after you fulfill your lease and have made all payments and paid the disposition fee, you are free to go. You can lease another car or purchase the car you were leasing. This frees up many more possibilities. During the lease, you can save so much money that then you’re able to turn around and buy a new or used car or buy the car you’ve leased. With leasing, the sky is the limit.