At many car dealerships today, leases are the way that many customers obtain a new car. This is much different from several years ago when many customers financed the entire cost of the vehicle. A lease gives potential car owners another option in which they can obtain a vehicle. In most cases, getting a vehicle through a lease outweighs getting a vehicle through a loan. However, there are many things a person should know before deciding to lease a vehicle. The information below will help one understand the many factors of leasing.
Leasing affects your credit score just like a vehicle loan does. First, in order to get a lease, your credit must be checked, and this leads to a credit inquiry on your credit report. Second, a lease also increases your credit utilization, and this can impact your score. Most importantly, if you do not make on time payments, your credit score and credit rating will be negatively impacted. Therefore, it is important to always make the payments on time to keep from obtaining a low credit score.
You Can Purchase a Lease
At the end of your lease, you have the opportunity to simply return your vehicle and walk away. This is the option that many people choose when they are at the end of their lease. However, many people do not realize that you can purchase your vehicle at the end of your lease. In order to do this, you will have to pay the remaining value or get a loan to finance that portion. While most people do not choose to do this, it is an option. This is especially important if the car has special meaning to you or if you simply want to buy the car and be without a monthly payment after the loan is paid.
Lower Monthly Payment
One of the main reasons that people choose to get a lease is because their monthly payment will be lower. This is attractive for many car owners. Unlike when you finance a vehicle, you do not have to pay the entire amount for a lease. With a lease, you are only paying for the depreciation costs, and this is usually only a few thousand dollars. However, when you finance a vehicle, you are financing tens of thousands of dollars. A lower monthly payment is the only way that some people can afford a vehicle, and with a lease, this lower monthly payment is possible.
Shorter Loan Term
It is also important to know that your loan term is shorter with a lease. Most leases will only last for about three years. However, when financing a car, the loan term will usually last about six years, which is double the time for a lease. This is important for individuals who only need a vehicle for a short amount of time. A lease will allow them to keep the vehicles for a few years, and once the term is up, they are able to simply walk away from the lease.
Many people look at leases for the great warranty that they offer. With a lease, many of the vehicle’s regular maintenance responsibilities are under warranty. Also, any mechanical failures are also under warranty. Most car dealerships recognize that people will not keep leases for more than three years, so they wish to keep the vehicle in the best condition possible during this time. As a result, they offer great warranties to ensure that the person who is leasing the vehicle will bring it in for maintenance. By keeping it maintained properly, the car dealership will have a better chance of selling it to someone else once it is returned.
A final thing to keep in mind about a lease is that you have an opportunity to get a new car every few years. Since a lease will only be in effect for a few years, you can get a new vehicle at the end of your lease. In many cases, the monthly payment of the new vehicle will be approximately the same as the vehicle that is being returned. If you are a person who wishes to always have a new vehicle, a lease will be the best option for you.
Deciding to get a lease is an important financial decision; therefore, you must make the decision wisely. While a lease is great for a majority of people, there are some instances in which a person may wish to finance the entire vehicle. However, if you are a person who wants a lower monthly vehicle payment, a new car every few years, a shorter loan term, and a car with a great warranty, then you will definitely want to consider a lease when you are looking to get your next vehicle.