Buying a new car is a luxury few buyers can afford. New cars, even economy cars, can be far too expensive for the average person to buy. You need a down payment, plus you need to sign a long-term agreement that can span decades in paying for the car. This is a commitment that some people simply aren’t willing to enter into and that others can’t afford to enter into. That’s where the miracle of leasing comes in. You’re able to get a much better car without the long-term commitment and money up front.
When you lease a car, you have the benefit of making the deposit and first month’s payment without having to enter into a buying agreement that spans over a decade. The length of the term can vary but the best thing is, you’re not committing to something for a long period of time and you therefore can afford to drive a much better car in the short-term. Best of all is that when you lease a new car, you’re leasing something that is generally under warranty by the manufacturer. This perk means you’re going to pay less for car repairs.
What Does Leasing a Car in Involve?
Leasing a car is different than buying a car. There are certain variables you’ll want to know about before signing on the dotted line. Unlike buying a new car, you won’t own the car when the lease expires. You’ll simply give it back to the person or dealership you leased it from and be free of any contractual obligations once the lease is up. There are other things to be careful in researching before you lease a car.
Your Payments Reflect the Car’s Value.
The more the car is valued at, the more your lease payments will be. An economy car will have much lighter payments than a Mercedes Benz fresh off the car room floor. If you’re working with a tight budget, go for the cheaper cars. They’ll be less to lease.
Higher Residual Percent Saves You Money.
Residual percent is another term you need to be familiar with. As a car depreciates in value, you get your residual percent cutting into the payment. A higher residual percent means lower lease payments. That’s good news for you.
Understand Your Set Miles.
Dealerships and individual leasers will have a set number of miles that you will be able to drive your leased car without penalty. Unlike a new car that you can drive as much as you want because there’s always the promise of ownership at the end of the bargain, a leased car is not really yours and probably never will be. Because of this, you’ll have set miles to drive it per month. If you go over this set number of miles, expect to shell out some cash in the form of fees.
Expect a Disposition Fee.
A disposition fee is paid at the end of your leasing term. It’s generally between $300 and $500. This is required in order to lease a car. The great news is that you don’t have to pay it until the lease is up, though.
Understand What Money Factor Means.
Money Factor and ARP are interchangeable terms. If you want to save more money, go for a car with a lower Money Factor. Dealerships do a good job explaining this number to prospective customers because it’s very important when budgeting out your lease payment.
Is it Better to Lease or Buy a Car?
This is the great debate. To buy or lease? The answer to that question will inevitably come down to what your budget is. If you have the money to buy a car that you love, then great, do it. If you don’t, then it is still within the realm of possibility to end up driving a car you love, even if it’s on the high end of pricing. Leasing gives you the opportunity to get a great car, under manufacturer’s warranty, without having to break the piggy bank over a long period of time. You lease. You love your car. You give it back when the lease is up and perhaps look to buy or lease again. Money situations are always changing. By the time the lease is up, you may even be able to afford to buy the car.
You Won’t Own the Car
If you decide to lease, keep in mind that you won’t own the car when the lease is up. There might be an option to buy, but that’s a whole new contract and a whole new set of terms. Like buying a car, when the payments on a lease are over, you still don’t own the car.
Leasing Cuts Down Up-Front Costs
Leasing costs less up front than buying a car. You’ll pay first month’s payment, deposit, and then perhaps some taxes and a few fees. Other than that, you can drive off in a beautiful new leased car for much less than the down payment on a new car.
No Need to Worry About Selling Car Leases
When the lease is up, you won’t need to sell your car or worry about the title. It all goes back to the dealership.
The final payment on a lease is a rewarding one to make. You can then negotiate to buy or perhaps lease another car that is more suited to your present tastes.