After comparing the option to lease or buy a car, there are a lot of drivers who find that leasing a vehicle is the best way to go. One of the top benefits of leasing is that it can allow you to choose and drive a nicer vehicle without having to pay as much in the form of a monthly payment.
One other benefit of leasing is the fact that you don’t have to worry about spending a ton of time and money on repairs. Leased vehicles are typically new vehicles, and the car will only be a couple of years old when the lease term ends. This means that you probably won’t experience any major repair issues throughout the lease term at all. If there are repair problems, you can usually rely on the manufacturer’s warranty to cover the cost.
What Does Leasing a Car Involve?
There are a few different aspects that go along with leasing a vehicle. These are some of the main things that you’ll need to know before you sign any paperwork:
Your Payments Reflect the Car’s Value
Since the amount of your monthly payments will be based off of the sale price of the car that you’re leasing, you’ll probably want to choose a car with a lower value if you want to keep your monthly payments low.
Higher Residual Percent Saves You Money
Also included in your monthly payment will be payments that go toward the cost of the car’s depreciation throughout the lease term. This is called a residual percentage, and getting into a lease with a higher residual percentage will save you money on your payments.
Understand Your Set Miles
In your lease contract, you will typically find a mileage allotment. This means that you are only permitted to drive the car a certain number of miles per month. If you go over this amount, you can expect to be charged a fee for each extra mile. Make sure that you are aware of your mileage allotment before you sign the contract, and determine that you know how much you will be expected to pay per mile if you aren’t able to stay within the allotted miles.
Expect a Disposition Fee
Leasing a car costs little more than what you would pay to rent a car by the month, and it’s cheaper per month than making payments on a financed car. One thing that you will need to be prepared for, however, is the disposition fee that you will typically be required to pay at the end of the lease term. This amount will typically cost somewhere in the range of $300 to $500 a month.
Understand What Money Factor Means
Like an ARP, your money factor is included in your lease. Searching for a lease option with a lower money factor will allow you to save money.
Is it Better to Lease or Buy a Car?
Obviously, the reason why you are here right now is because you are looking for a car. It can be easy to make rushed decisions when you’re desperate for something to drive, but you don’t want to take the next step without doing some research. Leasing can be a great alternative to buying, but it’s definitely recommended that you understand the ins and outs of it before you sign any type of contract.
You Won’t Own the Car
When you buy a car, your monthly payments go toward the purchase price, and you can do what you want with your vehicle. When leasing, your car is owned by a lender. Your payments just give you the right to use the car for a specified length of time. You cannot, under any circumstances, sell or mortgage the car, since it’s not yours.
Leasing Cuts Down Up-Front Costs
When purchasing a vehicle, your lender will probably require you to put up a down payment toward the purchase price. This is not something that you will have to worry about if you choose to lease, so you can reduce your up-front costs. You will need to pay an acquisition fee and a security deposit, and there may be a few other taxes and fees that you will be expected to cover. This is generally going to be much cheaper than a down payment. However, some people do pay a larger amount up-front when leasing, since it can help you minimize your monthly payments.
No Need to Worry About Selling Car Leases
The process of finding a buyer and selling a car can be a big aggravation. It can often be difficult to find someone who is willing to pay a high price for a used car. Plus, you’ll need to keep immaculate maintenance records if you want to be able to find a buyer at all. None of these things will be an issue with a leased car, however, since you will not be the one who is responsible for selling it.
When you buy a car, the vehicle automatically becomes yours after you make your last payment, and the lender will typically send the title to you in the mail. If you lease, though, this is not the case. You may be able to buy the car after your lease contract ends, if that is something that you are interested in, but it won’t happen automatically.