A car lease is a contract which basically means that a person is going to be renting a car for a specific period of time, usually a couple of years. However, unlike the usual car rental, the monthly installments being payed includes the interest rate and the depreciation of the value of the car being leased.
There are two kinds of leases, the closed-end and open-end lease. A closed-end lease means that a person has two options after the lease term is up – they may return a leased car at the end of the lease period and walk away after paying the end of lease charges, or they may purchase the car by paying off the residual value plus a processing fee. This type of lease is the most common. The other kind of lease is the open-end lease. This is more appropriate for commercial business leases because in this type of lease, the market value at the beginning of the contract is compared to the market value at the end of the lease term, and the difference between the two is the amount to be paid.
There are some advantages of leasing versus buying, and this includes lower monthly car payments and lower upfront costs. The monthly payments will be lower because the person leasing the car only needs to pay for the portion of the car’s value over the lease period. Down payments on leased cars are usually much lower as well.
For people interested in leasing a car, here is a quick guide that on how to lease a car.
1. Determine what kind of vehicle is needed, and make sure that it is within the budget. Costs can be minimized if factors such as a car’s gas mileage, high dependability and low insurance premiums are taken into consideration when selecting the car.
2. Take the car for a test drive just like when shopping for a new car. Check the car’s brakes, engine noise, responsiveness and safety features.
3. Discuss lease terms with the sales representative and make sure that everything is clear so as to avoid lease penalties later on. Lease terms include items such as number of miles allowed, acceptable interior and exterior condition, and steps to take when it becomes necessary to return the car before the contract expires.
4. Check the depreciation on the chosen car. Compare the costs of leasing to buying, taking into account the depreciation value of the car.
5. Negotiate the final price of the vehicle. After both parties have agreed to the terms of the contract, sign the lease agreement and write a check.
6. Get the vehicle insured.
- How to Lease a New Car?
- How Much is it to Lease a Car?
- Lease Vs Buy
- How to Lease a Vehicle?
- What is Car Leasing?
