If you have found that cars are getting too expensive for your budget and that it’s tough for you to afford the car that you really want, one good option that you may want to look into is leasing. For many drivers, it’s the perfect option.
Not only can you enjoy lower monthly payments by opting to lease instead of buying, but you can save money in other ways, such as on repairs. Your lease should be over with before you ever have to worry about the car needing serious repairs. If something does pop up, however, the car will generally still be under a manufacturer’s warranty that will pay for it. Along with saving you money on repairs, this can save you a lot of aggravation and can allow you to drive a car that you know is reliable and safe.
What Does Leasing a Car Involve?
The process of leasing a vehicle involves a few different aspects. Here, we have listed some of the main things that we think you need to know before you choose to lease a car:
Your Payments Reflect the Car’s Value
Even though a leased vehicle is almost always going to carry a lower monthly payment than an auto loan payment for an equivalent car, prices do vary. Because the monthly payments are based off of how much the vehicle is worth, one good way to keep costs reasonable is to choose a reasonably priced vehicle.
Higher Residual Percent Saves You Money
When calculating monthly loan payments, the cost of the depreciation of the car during the lease term is usually a factor. This is charged in the form of a residual value percent. If you can opt for a higher residual percentage, then you can enjoy lower monthly payments.
Understand Your Set Miles
As a part of your contract, you will be given a set number of miles that you aren’t supposed to go over each month. When you turn your vehicle back in at the end of your lease, you can expect to be charged for each mile that you went over, if applicable. To avoid a nasty surprise at the end of your lease, make sure that you know what your allotment is and how much you’ll be charged if you find yourself unable to stay below this number.
Expect a Disposition Fee
When your lease term comes to an end and you return your car, you’ll usually be required to pay a disposition fee. This may be something that you’ll want to budget for ahead of time, since the cost will typically be somewhere in the $300 to $500 range.
Understand What Money Factor Means
Similar to APR, you will be charged interest throughout your lease. This is known as a money factor or lease factor. Striving to get the lowest lease factor that you can will save you money.
Is it Better to Lease or Buy a Car?
If you’re on this page, it’s probably because you have been doing your research about buying or leasing a car. Either one can seem like an attractive option, especially if you are looking to get into a vehicle right away. You may find that leasing a car is a much better option for you, your budget and your needs, but before you do anything, you should definitely make sure that you are aware of the ins and outs of choosing this option.
You Won’t Own the Car
The good thing about buying a car is that it’s yours to do what you want with, even though you do have to make payments on it each month, and you can eventually sell it or mortgage it if you want to. This is not going to be the case if you choose to lease, since the payments that you will be making each month aren’t going toward buying the car; instead, they are being paid in order for you to have permission to drive the car.
Leasing Cuts Down Up-Front Costs
If you want to get into a nice car with minimal up-front costs, you may find that leasing is the perfect option for you. This is because you do not have to worry about a down payment requirement like you generally do when financing a car to purchase. Instead, you’ll be able to keep up-front costs low, since you’ll only be expected to pay for things like the acquisition fee and a security deposit. If you do have a larger sum of cash that you can put down in the beginning, however, you should know that this is an effective way of making your monthly payments lower.
No Need to Worry About Selling Car Leases
If you have ever sold a car, you probably know how much of a hassle it can be. In so many cases, buyers don’t want to pay top dollar for used cars because they figure that they could buy a new car instead. You may also be asked for maintenance records, and if you have not stuck to a strict maintenance schedule, you might find that it’s even harder to find a buyer. You do not have to worry about any of these hassles with a leased car, though.
When buying a car, paying your last payment will mean that your title will be sent to you and that your car is now yours and yours alone. When leasing a car, making that last lease payment means that it’s time to turn in the vehicle. However, you may have the option to buy the car if that is something that you are interested in.