Whereas many people go straight to buying a car when they need a new vehicle, leasing can actually be a better option. You can lease a brand-new car for a fraction of the cost of purchasing the same vehicle, making a lease one of the best ways for you to get the vehicle that you desire without breaking the bank.
In addition to the lower up-front costs, car leases are typically short enough that you will not need to invest in major and expensive repairs. Even better, most leased cars fall under a warranty provided by the manufacturers, saving you even more money when there are unexpected repairs needed.
What Does Leasing a Car Involve?
If leasing a vehicle sounds like the right option for you, consider some of these important aspects before you sign on the dotted line:
Your Payments Reflect the Car’s Value
Just like with purchasing a vehicle, your monthly payment will be based on the car’s current value on the sales market. If you want to save money on your lease, look for a car that has a lower sales price to keep your monthly payments manageable.
Higher Residual Percent Saves You Money
In addition to the sales value of your leased car, your monthly payment will involve a residual value percent that covers the regular depreciation of your vehicle. While you are driving it, the car is slowly losing its value, and that worth cannot be replaced. To cover this loss, the residual percent is part of your payments. You can lower your monthly costs if you choose a higher residual percentage.
Understand Your Set Miles
Part of your lease agreement includes a set number of miles that you are allowed to put on your vehicle each month in order to maintain the quality of the car. Your contract will also include a fee that will be assessed for each mile you drive past the agreed-upon limit. Make sure that you read and understand the mile limit and the fee schedule before you take possession of your leased vehicle.
Expect a Disposition Fee
Remember that when you return the car at the end of your lease, you will be charged a disposition fee. This is a required payment that will also be stipulated in your lease agreement, and it typically costs between $300 and $500.
Understand What Money Factor Means
If you have heard of the ARP, then you understand the money factor. Look for the lowest money factor possible so that you can save the most money on your lease.
Is it Better to Lease or Buy a Car?
If you are reading this explanation of the merits of leasing a car, you are probably in the market for a new vehicle. Even with these reasons in favor of leasing, you may still wonder if it is the best option for you. Leasing a car rather than purchasing one can be a great choice, but you should fully understand the differences between the two methods before you sign any contracts.
You Won’t Own the Car
The main advantage of buying a car is that the vehicle is yours to do with as you want, even if you have several years of making car payments before the ownership paperwork is in your hands. However, when you lease a vehicle, you still make payments, but they are not leading to your eventual ownership. Instead, you are paying to use the car, and you cannot transfer or sell it at any time.
Leasing Cuts Down Up-Front Costs
When you finance a new car purchase, there is some sort of down payment or trade-in necessary to complete the transaction. However, when you lease a car, you do not need a full down payment. Provide the first month’s payment to use the car, a security deposit, and the money to cover the taxes and other necessary fees, and you can drive the car off the lot. Any down payment or additional funds you can add to your contract up front will lower your monthly payments, but such deposits are not required to lease a car.
No Need to Worry about Selling Car Leases
Selling a used vehicle can be very difficult. You have to maintain a good maintenance schedule and careful records to entice interest in your car. However, when you lease a car, it is not your job to sell the car at the conclusion of your lease, so you do not have to worry about resale value or pleasing possible buyers.
The final payment on a purchased car leads to the vehicle’s title and your free reign to do whatever you want with the car. Many leases end with the option for you to fully purchase the car, but your final payment does not automatically make the car yours, and you are expected to give it back on time unless you decide to buy it.