When looking to get a car, there are two major options to choose from; leasing or buying. For many people, leasing the car is a great option because car leases are normally far less expensive than actually buying the car. Because of this, it is possible to enjoy all of the amenities of a new car while only spending a small portion of the total car costs.
Beyond the initial cost compared to buying a car, leasing a car can also be more affordable due to lower upkeep costs. First of all, newer cars are far less likely to need major repairs than used cars. Second, leased cars often come with free service plans that include free maintenance during the term of your lease.
If you are planning on leasing a car, there are several factors that need to be considered. The most important factors to consider are outlined below.
The Monthly Payments Are Related to Car Value
When you are considering the payment that you can afford, you need to consider the purchase price of the car. In general, more expensive cars will have higher lease amounts.
Find Cars with Higher Residual Value
If you are looking to save the most amount of money on your lease payment, you should find a car with a higher residual value. The residual value is the estimated value of the car after the lease term ends. In general, you will pay the amount that the car depreciates, so cars with higher residual values will result in lower payments.
Understand the Mileage Plans
When you are looking to get a new lease deal, you also need to consider the miles that you are permitted to drive. Most leases provide you with an annual allotment ranging from 10,000 to 15,000 miles per year. If you drive more than this, you will be hit with a fee. These fees can be as much as 25 cents per mile above the total allotment.
Remember the Lease Fees
When leasing a car, there are a variety of fees that will need to be paid upfront. However, many people also forget about the disposition fee that is due when you return the car. While there are situations where this can be waived, the disposition fee is often over $300.
Money Factor Impact
When leasing a car, your credit score and market interest rates will still have an impact on your payment. Car leases use a term called Money Factor, which will directly impact your payment.
Should I Lease a Car or Buy It?
Since you are currently in the market for a car, it is important to first determine whether it would be better for you to lease the car or just buy it outright. While getting a car lease can come with a lot of different advantages, it is advisable that you fully understand all of the quirks of leasing to ensure it is the right choice for you.
You are Only Renting
When you buy a car outright, you will be the full owner and will have the right to do whatever you want with it. If you lease a car, you are only technically renting it from the car dealership. Because of this, you may be required to follow a certain set of guidelines to ensure the car stays in good shape. Further, leasing as a permanent solution could mean that you always have payments.
Less UpFront Costs
When you buy a car, you will need to finance it through a bank. Because of this, you will have a lot of upfront fees including your down payment, loan application, deposit for the car, acquisition fees, and full sales taxes. When you lease a car, you will not be required to put forth a down payment. Further, all of the associated taxes and fees are much cheaper.
No Stress with Selling
When you own a car, you will ultimately have to sell it. You can either use it as a trade in for a future car, which can come with a low offer, or try to sell it on the open market, which is very stressful. When you choose to lease a car, you will be able to avoid this whole process.
Final Payment and Ownership
The key advantage of owning a car is that it will ultimately be yours completely. If you have owned the car for a few years and have paid the car loan off, you will own it 100% and will be able to take clean claim to the title. While there are advantages of leasing a car, you will never truly own it.