For many people who are looking for a car, leasing can be a very attractive option. Since the monthly payments on a lease are typically much more affordable than the monthly payments on a purchased car, it’s one good option for driving a nicer vehicle for a lower cost. For many, it’s actually the only way to make driving a nice car affordable, since costs have gone up recently on new cars.
Another way that leasing can save you money is by helping you avoid having to pay for expensive car repairs. No longer will you have to worry about your car frequently breaking down on you or about spending a ton of time at the mechanic’s shop. Since the car will usually be turned back in before any major problems ever start, this shouldn’t be a concern. In the off chance that the car does need to be repaired, it should be covered by the manufacturer’s warranty, so you won’t be the one who is on the hook to pay for it.
What Does Leasing a Car Involve?
There are various aspects of leasing a car that you will need to know about. These are the things that you’ll want to know before you get involved in this type of contract:
Your Payments Reflect the Car’s Value
The value of the car is the main thing that affects the monthly payments. Therefore, if the cost of your monthly payment is a big concern for you, you’re probably going to want to look at lower-valued vehicles. Even if you do choose a more expensive car, however, you can generally expect for your lease payments to be substantially lower than what your loan payments would be on an equivalent vehicle.
Higher Residual Percent Saves You Money
Since the car that you lease will depreciate in value throughout the term of the lease, you can expect to be charged for this in the form of a residual value percent. This will be charged as a part of your monthly payment. If you are able to lease a car with a higher residual percentage, you’ll be able to save a lot of money on your monthly payments.
Understand Your Set Miles
When you lease a car, you will typically be restricted in regards to how many miles you can drive the car each month. Your mileage allotment should be in your contract, along with the per-mile fee that you will be charged if you do happen to go over that allotment. Make sure that you are aware of these things beforehand if you want to avoid any unpleasant surprises when it comes time to turn the car back in.
Expect a Disposition Fee
One fee that you should not forget about is the disposition fee. Drivers are typically required to pay this fee when they return the car. Even though the price does vary, it’s usually in the range of $300 to $500.
Understand What Money Factor Means
The money factor or lease factor is the equivalent of APR. These interest payments are included in your monthly lease payment, and if you’re able to get a lower lease factor, you’ll see a reduction in the amount of your monthly payment.
Is it Better to Lease or Buy a Car?
Chances are good that if you made your way to this page, it’s because you are in the market for a car. Whether you have been planning on buying or if you’ve been interested in leasing all along, it’s wise to look at your options. Overall, leasing can be a very attractive option for many people, but you will want to ensure that you know what you are getting yourself into before you actually sign the contract.
You Won’t Own the Car
The most important thing that you need to understand when choosing to lease a vehicle is that you will not own the car. Instead, you’re just making payments throughout the lease term in exchange for being able to use the car in the meantime. You will not have the option to sell the vehicle or get a lien on the title for borrowing purposes.
Leasing Cuts Down Up-Front Costs
In most cases, car buyers are expected to put a down payment on the car that they are buying before they are able to get approved for a loan and before they can drive the car off of the lot. Those who choose to lease instead do not have to worry about this initial down payment; instead, they can simply pay the security deposit and acquisition fee, along with other modest fees that might be required. However, if you are looking for a way to make your monthly lease payment more affordable and if you’re financially able to, you can put up more money in the beginning of your lease if you want to. This is not required, though.
No Need to Worry About Selling Car Leases
One great benefit of leasing a car is that you never have to worry about finding a buyer for the vehicle later on, when the car has depreciated in value and when it might be tough to find someone who will buy it. Once your lease term is over with, you can just turn the car in. Then, it’s not your problem anymore.
If you choose to finance and buy a car, the last monthly payment that you make will mean that the car is all yours. You’ll even be given the title. Then, you can do just about anything with the car that you want to do, including selling it. It’s not the same situation when you lease. After your contract ends, you’ll have to turn in the car. The good news, though, is that you might be given the option to purchase it, if that’s something that you want to do.