The Basics of Leasing a Car
Most people have an idea of how leasing a car works, but the vast majority don’t completely understand the process and there is a lot of misinformation floating around about leasing. Many people view the leasing process to be a scam and even more think of it to be the same as simply renting a car; neither of these are really true and leasing has a lot to offer consumers. Let’s take a closer look at what leasing actually is, and what it isn’t.
What Leasing Means to You
Leasing is actually a very popular practice with about 20% of all new vehicles being financed with a lease; in terms of luxury vehicles that number jumps to 75%. Generally speaking leases usually give drivers lower monthly payments than just buying the car, and it helps protect you from negative equity should your car depreciate to become worth less than you owe. Leasing is different from just renting a car. Contract lengths typically start at two years and you can’t just bring the car back whenever you want to. There is also typically mileage limits placed on leased vehicles. When you lease a car you still should negotiate the price, as this is what your payments will be based off of; don’t settle for sticker price, push them lower.
After you settle on a price, the dealer will calculate your monthly payments, factoring in the price, the period, the finance rate, and any down payment. When you actually sign a lease you are agreeing to make regular payments, maintain the vehicle, keep valid insurance, and pay any taxes or licensing fees. You are responsible for the vehicle just as if you owned it. At the end of the lease you have to return the vehicle to the dealer; if it shows signs of excess wear and tear or if you exceed agreed-upon mileage limits you may have to pay fees. Once your lease is over you have the option to purchase the vehicle for a guaranteed price, trade it in towards another new car or lease, or simply walk away altogether.
Dealerships often offer incentives for leases on specified vehicles and can offer some worthwhile savings. Don’t be afraid to lease, just know what you are agreeing to and make sure that the terms and conditions work well for you. Remember that leasing is not a scam; it can save you money and can actually protect you from the rapid depreciation of new cars.
October 4, 2012 by Jamie Rettig