If you are looking to get a new car, you should consider a lease. This is becoming an increasingly popular option, and for many good reasons. The monthly payments are lower for one thing, meaning that even people on a tight budget can often afford a new car that they could not purchase outright. This is a great way of getting into that car of your dreams.
Because most lease terms expire long before a repair is ever needed, the upkeep on the vehicle is also another cost savings advantage. There is also the fact the all leased cars remain under a manufacturer warranty for the duration of the contract, meaning that any repairs to do become necessary are typically covered in full.
What Does Leasing a Car Involve?
There are some factors to take into consideration when determining is a car lease is in your best interest. It is our intention to provide you some important information below that you will help you make your decision.
Your Payments Reflect the Car’s Value
A leased car with come with a monthly payment that you need to cover, and this amount is typically tied to the actual value of the car. If you are looking for the lowest possible monthly payment, you will want to stick to vehicles that do not cost as much to purchase outright.
Higher Residual Percent Saves You Money
Cars that have a residual value at the end of the lease will get you the lowest possible monthly payment. This is because the dealership will still retain a great deal of value that they can get for the car once you turn it back into them. So, for a lower monthly payment look for a car that has a high residual percentage.
Understand Your Set Miles
One thing to consider when leasing is a car is that it does not come with unlimited miles like most vehicle rentals do. You will be given an allowance of miles that you are allowed to drive during the term of the lease. If you go over that amount, you will need to per mile at a set fee as stipulated in the contract. Consider your driving habits before deciding on a lease with low miles.
Expect a Disposition Fee
Another way that leasing a car differs from a monthly rental is in the disposition fee that you will be asked to pay at the end of a lease term. This will often amount to between $300 and $500, and it typically non-negotiable. That is something will want to take into consideration.
Understand What Your Money Factor Means
You can think of a money factor with a lease as being similar to an ARP when you go to finance a new vehicle. This will be factored into your monthly payment, so look for lowest possible money factor in order to get that payment as low as possible.
Is it Better to Lease or Buy a Car?
This is always a good question, and it really comes down to your personal situation. There are pros and cons to both, so you will want to consider your need for a vehicle and what you are comfortable with before you actually sign the contract and drive the car off the lot.
You Won’t Own the Car
With a lease, you will not own the car. This means that you are not free to do with what you please. For some this might be a turn off, but for others it is liberating. The lower monthly payments make it all worth it in the end, and you will not have to worry about selling the car or trading it in at the end of the lease term.
Leasing Cuts Down Up-Front Costs
Speaking of buying a car, it can get quite expensive before you even go to make your first monthly finance payment. Most dealerships will expect you to pay a down payment, and there will be lender costs to factor in. You will also have the financing costs to consider as well. With a lease, you will just need to pay the first monthly payment. Beyond that, there will only be a few other taxes and fees to account for before driving off the lot.
No Need to Worry About Selling Car Leases
When you own a car, you are always thinking about the day when you need to sell it. How much can you get for it? People today are hesitant to pay too much for used cars, so you never seem to get what the car is actually worth. You do not need to worry about that with a lease, as you just hand it back to the dealership when you have made your last payment.
One thing to consider is that your last lease payment means that it is time to turn the car back in. This is different from your last loan payment when you buy a car, as you will then be given the title in your own name.