With new cars becoming more expensive by the year, leases are becoming a popular option for many people today. This especially includes those wanting to get into a new car while shopping on a tight budget. The monthly payments for a leased vehicle are much lower than when purchasing one outright, so this is a great way to get that car you have long had your eyes on.
Most leases will expire long before a major repair on the car is ever needed, so this is yet another area of savings. In fact, since all leased cars remain under the manufacturer’s warranty for the duration, the cost of any needed would repair would be covered anyway.
What Does Leasing a Car Involve?
You will want to consider several different factors when deciding if a lease is for you. As such, the subsequent sections will cover some important principles that will help you choose whether to lease or purchase you next new car.
Your Payments Reflect the Car’s Value
When you lease a car, there will be a monthly payment that is indicative of the car’s actual value. So, the way to get your payment even lower is to choose a vehicle that has a lower overall value than others on the lot.
Higher Residual Percent Saves You Money
The lower the residual value, the higher your monthly payment under a lease will likely be. The residual value is how much the car is valued to be at the end of the lease, meaning the dealership will still be able to get that much money out of it when you turn the car back in. To get the lowest monthly payment you can, look for a car that has a high residual value.
Understand Your Set Miles
While a car rental typically comes with unlimited mileage, the same is not true with a car lease. You cannot just drive it to the moon and back, as there will be a mileage allowance assigned to your lease. Make sure that you do not go over that amount or you will be charged a set rate per mile over the limit when you go to hand the car back over.
Expect a Disposition Fee
You will also want to budget for a disposition fee in the range of $300 to $500 that is to be paid at the end of the lease. This fee cannot generally be avoided, and it is another way that leases differ from a monthly car rental.
Understand What Your Money Factor
You are probably already aware of what an APR is when financing a vehicle. You think of your money factor as a similar component of a lease. This factor will be taken into account when determining your monthly payment, so you will want to get the lowest available money factor if you want to get an even lower monthly payment.
Is it Better to Lease of Buy a Car?
You are the only one that can answer this question. You will want to consider all of the advantages associated with leasing a car, and those associated with purchasing the vehicle, and decide which meets you personal situation the best. It is important to feel comfortable with the terms of a lease before with sign the contract.
You Won’t Own the Car
It is true that will not own the car that you lease. You cannot do just anything you want with the vehicle, so keep that in mind. You will need to turn it back at the end of the lease in a similar condition to that which was given to you.
Leasing Cuts Down Up-Front Costs
You will not find many expenses to be paid prior to leasing a car. You will just need to cover the first month of your lease, along with a security deposit and some miscellaneous taxes and fees. This is different than when you actually purchase a car, as then you would need to come up with a hefty down payment, along with various financing related fees.
No Need to Worry About Selling Car Leases
When you lease a car, you do not need to worry about finding a buyer for you car. With more and more people not wanting to pay much for a used car, this is an added bonus. You can just hand the car back in at the end of the lease, and then get another new one if you are ready.
When you go to make your final lease payment, that means that it is time to hand your car back over to the car dealership that owns the title. This is different than the end payment for a car loan, at which point you will be given a title that is in your name. The exception, of course, is if you choose to pay the residual value of your vehicle at the end of the lease, at which point you would become the owner.