If you are like many drivers, you might find that leasing a vehicle is actually a better option for you than buying. Since a car lease is a more affordable option than financing a car, you’ll find that you can drive a newer and nicer vehicle for a lower monthly payment. Since cars have gotten so expensive over the past few years, a lot of drivers are finding that leasing is the only way that they can actually truly afford to drive the car that they want to drive.
Another perks is the fact that vehicle leases typically end when the car is only a couple of years old, meaning that you should not have to worry about any major breakdowns and related repairs. This can help you drive a nice, reliable vehicle and avoid the aggravation and cost that goes along with dealing with frequent repairs. Plus, since the car will more than likely be covered by a manufacturer’s warranty throughout your lease term, the costs of any repairs that are needed should be covered anyway.
What Does Leasing a Car in Involve?
There are a few different things involved in leasing a car that you should know about. These are some of the basics:
Your Payments Reflect the Car’s Value
The retail price of the vehicle impacts the amount that you will pay each month. This means that obviously, if you want your payments to be cheaper, you should opt for a more affordable car.
Higher Residual Percent Saves You Money
Every leased vehicle has a residual value percent. This number is factored into your monthly payments as a means of covering the cost of the car’s depreciation. If you find a lease option with a higher residual percentage, you can save money on your monthly payments.
Understand Your Set Miles
With a car lease, you can’t just put as many miles on the vehicle as you want to like you can when you buy. Instead, you will be restricted to driving a certain number of miles each month. If you go over this number, you will be hit with a per-mile fee. Make sure that you inquire about how many miles you’re allotted in your contract as well as the per-mile fee that you will be charged if you do happen to go over.
Expect a Disposition Fee
The cost of leasing a vehicle is little more than what you would pay for a rental by the month. However, you should know that in many cases, drivers are charged a disposition fee when they turn the vehicle back in. You can usually expect for this typically required fee to range between $300 and $500.
Understand What Money Factor Means
Similar to your ARP, you will be charged a money factor. If you shoot for the lowest possible money factor, you’re going to save a lot of money.
Is it Better to Lease or Buy a Car?
You probably came across this page because you are on the hunt for a vehicle to drive. Before you make a decision, it’s important to understand the advantages and disadvantages that go along with both buying and leasing. Then, you can weigh out the pros and cons and choose the option that is best for your situation.
You Won’t Own the Car
If you choose to purchase a car, you’ll eventually own the car free and clear and will be able to do what you want to with it, even though you might have to make monthly payments for a few years. With leasing, this is not the case. Instead, you’ll simply be making monthly payments in exchange for being able to use the car. You won’t have the freedom or ability to sell the vehicle or mortgage it.
Leasing Cuts Down Up-Front Costs
One of the primary advantages of leasing a car is the fact that there are minimal up-front costs. When you finance a car that you are buying, you generally have to make a down payment before you can get approved. With a lease, you don’t have to worry about a down payment at all, although you can put more down in the beginning if you are looking for a way to minimize your monthly cost. Instead, you’ll just have to cover the security deposit and a few other assorted fees, such as the acquisition fee.
No Need to Worry About Selling Car Leases
When you’re ready to buy another car, selling your existing vehicle can be a pain. A lot of buyers are looking for rock-bottom prices because they don’t want to have to pay a lot for a used car. If you lease, you do not have to worry about having to sell the vehicle later; instead, you can just turn it in when your lease term runs out.
The difference between your final loan payment on a financed car versus the final lease payment is significant. When you make your last loan payment on a car that you have purchased, you’ll have a free and clear title and can then either keep the car or sell it. At the end of your leasing contract, however, you will have to turn the car back in. You will often have the option to purchase the car at the end of the lease if you want to, but it does not happen automatically.