For many, leasing a car is a great option. Car leases tend to be much less expensive than the alternative of purchasing a car, which allows an individual to have the experience of a new car at a significantly lowered price. The retail cost of vehicles has and will continue to rise, making leasing one of the only ways to obtain a new vehicle without completely ruining your budget.
Generally, a car lease is over before the vehicle reaches the stage of major repairs and servicing, saving you money and time. Additionally, due to a leased car always being under the warranty of the manufacturer, any repairs necessary will not cost you any money.
What Does Leasing a Car in Involve?
Leasing a car can be quite involved, and as with any large purchase, it is imperative that you are well-informed as to what can be involved. Listed below are several important leasing factors that are beneficial to understand before leasing.
Your Payments Reflect the Car’s Value.
The monthly payment on a leased vehicle is determined by the sale price of said vehicle. In order to save money when leasing, it is best to choose a vehicle that has a lower value.
Higher Residual Percent Saves You Money.
A leased car will also have a residual value percent factored into the monthly payments. This cost is used to help cover the depreciation of the vehicle. When you choose a higher residual percentage, your payments will be further lowered.
Understand Your Set Miles.
The term set miles refers to the number of miles that you are going to be allowed to drive the car in a month. Driving beyond the set miles will result in a fee based on how far the miles were exceeded. Because of this, it is in your best interest to know exactly how many miles you are allowed, as well as what the fee is for overages.
Expect a Disposition Fee.
A payment of between $300 and $500 will usually be required upon returning your leased vehicle, which is known as a disposition fee.
Understand What Money Factor Means.
Obtaining a low money factor, which is the same as an ARP, will ensure that you are saving the most money possible.
Is it Better to Lease or Buy a Car?
If you are still reading this page, it is likely that you are on the quest for your next vehicle. Before you make a decision, ensure that you thoroughly understand the differences between buying and leasing so that you are making an informed decision. Leasing a car can be the best option for many, but it is wise to thoroughly understand exactly what leasing will mean before any permanent decisions are made.
You Won’t Own the Car
When you purchase a vehicle, it is your property, and you are allowed to make any decisions you like regarding the vehicle, even during the period of making payments. Alternatively, a leased car will not belong to you. Leasing means you are paying a monthly fee to a lender for the ability to use the car. The payments are lower with a leased vehicle. However, it is not yours to sell or mortgage.
Leasing Cuts Down Up-Front Costs
When vehicles are financed, it is best practice that a down payment is made, or another vehicle is presented as a trade in. Should you opt for a leased vehicle, no such down payment or trade is required. With a lease, you will want to be prepared to pay the first month’s payment, a security deposit, an acquisition fee, and other various fees and taxes. If you have “extra” money and wish to apply it to the lease, you will further lower your monthly payments, but it is not a requirement.
No Need to Worry About Selling Car Leases
Leasing a car removes the stress of how to get rid of it when you are done with it. Because the car does not ever belong to you, you will not be faced with the challenges of getting what you think it is worth from a sale or the hassle of connecting with potential buyers.
With a financed vehicle, the end payment refers to the payment that makes the vehicle officially your property. The end payment comes with a “title,” as opposed to a lease which means it is time to return the car to the lender. While you will often have the ability to then purchase the vehicle, the end of a lease does not signify ownership of the vehicle.