Because the term of a lease usually expires before a vehicle will need to undergo any extreme repair or service, this is another area of savings. Leased vehicles come with a manufacturer’s warranty that lasts for the duration, so any costs of a major repair would typically be covered.
What Does Lease a Car Involve?
There are various components involved in leasing a car. The subsequent sections will cover the most critical aspects of this process that you will want to know before entering into a lease.
Your Payments Reflect the Car’s Value
The actual sales price of the vehicle will typically reflect in the monthly payment that will make on a leased car. The most significant savings will be seen when you select a car that has a lower overall value.
Higher Residual Percent Saves Your Money
There are residual value reflected in every leased car, and this is taken into consideration when your monthly payment is calculated. This money is used to pay for the depreciation of the car over time. If you want the lowest possible monthly payment, you will want to select a car with the highest possible residual percentage.
Understand Your Set Miles
A lease will cap the number of miles that you are able to drive each year before being charged a penalty. If you go over the total number of miles allowed for the term of your lease, you will likely be charged a flat rate per mile you went over the limit. You will want to know the miles permitted on any lease that you are considering and make sure that your driving habits will enable you fall within that limit.
Expect a Disposition Fee
Leasing a car is actually similar to renting a car by the month, with the difference being that you will be asked to pay a disposition fee at the end of the lease term. This expense is usually in the range of $300 to $500 and is usually compulsory.
Understand What Your Money Factor Means
The money factor is considered the same as an ARP if you were to purchase the vehicle with financing. You will want to obtain the lease possible money factor in order to realize the biggest savings.
Is it Better to Lease or Buy a Car?
You are obviously in search for a new vehicle if you are reading this page, but before you get to far ahead of yourself it is important to weigh of the factor before deciding whether to lease or buy. We believe that a car lease is a great option for most people, but it is important that shoppers understand what they are getting themselves into before signing on the dotted line.
You Won’t Own the Car
It is worth mentioning that a lease does not give you ownership of the car. You are not free to do with the vehicle what you want, as you would be if you purchased it outright. A lease just gives you permission to drive the car for the term of the lease, but the lender retains ownership. While you will enjoy lower monthly payments with a lease, you will not be able to sell the car.
Leasing Cuts Down Up-Front Cost
If you need to finance a purchased vehicle, you will incur many up front expenses. To begin, you will need to either cover a down payment or, at minimum, trade in a previously owned car or truck. When you go with a lease, no such down payment will be expected. You will just be asked to cover the first lease payment, provide a security deposit, pay the acquisition fee, and cover the taxes and fees. You can also put in some extra money if you have it in order to lower your monthly lease payments, but this is certainly not a requirement.
No Need to Worry About Selling Car Leases
It can be difficult to sell a used vehicle, particularly if you are trying to get a certain amount of money out of it. People just are not willing to pay a high price for a car or truck that someone else has been driving. If you do want to sell your vehicle, you will have to make sure it is always properly maintained. When you enter in to a lease, you don’t have to worry about resale value of the vehicle, as you will just be turning it back in at the end of the term.
At the end of a loan term, the final payment means that you own the car free and clear. The title will be given to you in your name at that point. While leases do provide an option to purchase at the end of the term, most people just opt to return them, but you will not have ownership when that last payment is made.