For consumers who are unable to afford the cost of a new car but still want or need one, leasing is often an agreeable option for them. Leasing a car is similar to leasing or renting a property in the respect that monthly payments are made and it must be returned at the end of a lease period, which is normally 3 years.
Consumers who choose to lease will enjoy a lower down-payment than they normally would have paid for buying a new car. In addition to a lower down payment, people who choose to lease instead of buy will have a lower monthly payment. Those who purchase a car are paying 100% of the car’s value in their monthly payments, while a lessee is only paying for 50% of the car’s value, making the monthly payments significantly less.
One of the disadvantages that may reduce the total amount of money saved at the end of the lease is insurance premiums. Most lease companies will require several additional types of insurance in addition to comprehensive, collision and liability. Depending on each individual’s driving record, age and various other factors, the monthly car insurance for a leased vehicle may be fairly costly.
There are two types of leases that are offered: an open-end lease and a closed-end lease. Closed-end leases are the ones consumers should seek. This type of lease will allow the driver to return the car at the end of the period and be able to walk away or choose to lease a different newer car. On the other hand, an open-end lease will require the lessee to pay the difference of the car’s market value and residual value upon turning it in. Because this type of lease is better for commercial businesses, consumers should avoid these types of terms.
Leasing a car is not quite as simple as leasing a property. There are several requirements and penalties consumers should be aware of before signing lease papers, especially without reading all of the terms and fine print. Most leases have specific terms regarding the amount of mileage a person is allowed to put on the car.
Because most companies want to keep the value of the car as high as possible, any lessees exceeding the mileage limit will owe a balance due at the end of the term. Consumers should be certain they understand the terms of the lease regarding damage before signing. Companies will require regular scheduled maintenance and some may require documentation thereof; others will require repair records and that the car be returned in excellent condition with no visible damage. For example, if a person returned the leased vehicle with a broken window they would likely be charged for it.
To figure the amount of a monthly lease payment, companies deduct the residual value from the original cap cost to yield the monthly depreciation amount. In addition to the monthly depreciation amount, the monthly finance charge is added, creating the total payment.
Leasing a car is often the best choice for those who want a nicer car than they can afford to buy. Those who have a good driving record, do not need to commute far distances daily and are able to maintain the car well will benefit from leasing. While shopping for cars, consumers should remember that the lease finance company is often separate from the car dealer. Even those who lease a car from a trusted car manufacturer may fall victim to leasing scams. Manufacturers and dealers normally have nothing to do with the financing end, so consumers should protect themselves by understanding what kinds of scams are threatening them. For a guide to avoid scams, consumers should visit Lease Tips: Leasing Scams before shopping for a car.
- How Does Leasing a Car Work?
- How to Lease a New Car?
- How Much Does It Cost to Lease a Car?
- How Does a Car Lease Work?
- How Do You Lease a Car?
