Leasing a car has many more benefits than most people realize. It allows those who couldn’t otherwise afford a new car to drive away in the car they’ve always wanted. And it allows people who absolutely need a car for family or work to enjoy the confidence and reliability associated with driving a new car.
And just because you may save a lot of money buying used doesn’t mean that it is always better. High-mileage cars frequently break in unpredictable ways and at the worst times. A head gasket that goes bad can render a $7,000 used car completely worthless.
Things like this are completely avoided with leased cars. Leases often include free maintenance and leased cars are almost always covered under manufacturer warranty.
What Does Leasing a Car in Involve?
Leasing a car isn’t complicated, but there are some things you need to know. We’ve put together a guide for first time lessees to help guide you through the process and make the right choice regarding leasing or buying.
Your Payments Reflect the Car’s Value.
Almost always, more expensive cars will result in higher monthly lease payments. If you want the best possible bargain, go for a less expensive model on your lease.
Higher Residual Percent Saves You Money.
Residual percent is how much of the car’s original value the dealer expects the car to retain when the lease term expires. The higher the residual percent, the lower your monthly lease payments will be.
Understand Your Set Miles.
Knowing the maximum number of monthly miles allowed under the lease terms is extremely important. Most of the time, the miles allotted each month will be quite generous, easily enough to accommodate normal usage. But be careful. Taking a long road trip or unusually heavy driving in a given month can push you over. And the surcharges can start racking up fast.
Expect a Disposition Fee.
One of the small differences between leasing and renting a car is that you will be expected to pay a modest disposition fee upon the expiration of the lease. This will usually be between $300 and $500. But it’s not optional, so be aware of it.
Understand What Money Factor Means.
The money factor is a measurement that dealerships and leasing companies use to designate the credit risk that the lessee presents. You’re going for the lowest possible money factor, which will result in the lowest possible monthly payment.
Is it Better to Lease or Buy a Car?
That question can only be answered by the consumer, based on their unique circumstances.
But the decision of whether to lease or buy can become a lot clearer once you have all the relevant information at your disposal. The most important thing is making a rational, informed decision based on your own personal needs.
You Won’t Own the Car
Maybe the most obvious drawback of leasing is that you won’t actually own the car. While this may seem like a major detriment, it’s a lot less of a problem than many people envision.
Owning a car comes with both risks and costs. For example, people who buy cars using bank loans are taking on a significant risk that, should they default, the car will be repossessed and their equity will be wiped out. Those upfront costs that you save by leasing can become the worst kind of liability with car ownership. They can simply go down the drain.
Leasing Cuts Down Up-Front Costs
And those upfront costs can be huge, sometimes running into the tens of thousands of dollars. This can make leasing especially attractive to those consumers with worse credit or little cash on hand. Leasing can get you into a new, reliable and safe car that may be completely out of reach, should you have to rely on a bank loan.
Typically, drive-off costs when leasing include the first months payment, a small security deposit and a few small taxes and fees. This can be as little as a couple hundred dollars.
No Need to Worry About Selling Car Leases
One of the most underappreciated aspects of leasing is that it saves you the hassle of having to sell your car when you want or need a new one. This is no longer the 1960s, when shade-tree mechanics could fix anything that went wrong on their car. Modern dealerships employ highly trained technicians who use state-of-the art equipment, including highly sophisticated computer systems, to make sure cars are tip-top before they go out on the lot.
In short, selling your own car in today’s market can be a lot more than you bargained for. Buyers expect top-condition vehicles. If your’s doesn’t fit that bill, you’ll either need to give steep discounts or shell out thousands to get things up to snuff.
When the lease expires, it’s done. You are free to walk away clean and pursue other vehicles. This is much more than can be said for owners who wish to get rid of their current cars and buy another one.