Leasing a vehicle, instead of buying it, is a preferred option for many people. They may not have the cash required for a down payment. Lower payments from leasing make owning a new car possible for those who may not want the higher payments associated with the actual purchase of the vehicle. This less costly alternative allows a cost-effective means of driving a preferred vehicle or one that may have been above a price range with a purchase.
Another point to consider is that major repairs can be avoided with leasing; the lease usually has expired before costly repairs are needed. Moreover, any costs incurred with repairs are covered under the manufacturer’s warranty while the lease is in effect.
What Does Leasing a Car in Involve?
There are many considerations to make before leasing a car. Be sure you are aware of the many aspects of leasing a car rather than of buying it.
Your Payments Reflect the Car’s Value
Cars with a lower value will help you save money, as the sale price of the vehicle determines the monthly payment. A more expensively priced car will result in higher payments each month.
Higher Residual Percent Saves You Money
In order to cover the vehicle depreciation, a residual value percentage is factored into the monthly payment. Lower monthly payments are the result of finding a vehicle to lease that has a higher residual percentage.
Understand Your Set Miles
A factor to be aware of when leasing is that you will have a stipulated number of miles that can be driven over the term of the lease. Any mileage above these miles will result in a fee that is charged per mile over the limit. Be sure you understand what that mileage limit is as well as know what the fee may be for the overage.
Expect a Disposition Fee
At the end of the lease term, you will be expected to pay a fee that ranges from $300 to $500. This is the disposition fee and it is a requirement of leasing a vehicle. It is due when the car is returned to the lender.
Understand What Money Factor Means
The ARP is also called the money factor. Cars with a lower money factor or ARP will enable savings on your lease.
Is it Better to Lease or Buy a Car?
It is important to understand the differences between leasing and buying a vehicle; you are then able to make a decision of which option is right for your situation and budget. Do the research and then you will be more informed when signing the paperwork.
You Won’t Own the Car
A factor of which you should be aware of is that in leasing, you do not own the vehicle but are paying a monthly payment for the use of the vehicle; it is still owned by the lender. Therefore, a lower payment is the result. However, you may not sell the vehicle or use it to obtain a loan.
Leasing Cuts Down Up-Front Costs
Purchasing a vehicle requires a down payment or trade-in of your previous automobile. With leasing, a down payment is not necessary; you will be paying the payment for the first month plus a security deposit, acquisition fee and other fees and taxes. A larger up-front payment, if possible, will result in lower monthly payments throughout the lease term.
No Need to Worry About Selling Car Leases
Because you will be returning the car at the end of the lease period, you will not have the task of advertising, talking to potential buyers and selling the car. When leasing a car, the resale value is not a concern, as it is not a factor when returning the car to the lender. However, the interior and exterior of the vehicle should be in good condition when the automobile is returned at the expiration of the leasing agreement.
When you purchase a vehicle, the last payment means you will then own the car. You receive “title” and may then sell or keep the vehicle, according to your needs. With leasing, however, you will be returning the automobile to the lender. If you wish to purchase the car at the end of the lease, it is possible to do this through a separate contract with the lender.