Tips for Leasing a Car
Leasing a car can be a sustainable solution for driving a new and nicer car all year round with minimal costs and attractive options such as avoiding car depreciation. Most car leasing companies evaluate the cost of a leased car in residual value i.e. the difference between what the vehicle is worth before leasing and when it is returned after leasing. Interest and fees are also added to the final leasing amount and generally, this amount will depend on how best the car is forecast to hold its value.
The first step in leasing a car starts by researching on what type of car you would like to lease and its cost. You also need to contact your insurance company to get a price quote on the car that you intend to lease. If you are considering leasing a car, here are things you need to know before leasing a car.
1. To Lease or To Buy?
Most car users may be unable to decide immediately if leasing a car is cheaper or advantageous over buying a new car. If you like driving a new car every one or two years, leasing a car may be less expensive than buying a new car.
Leasing a car can lower car payment and provide lucrative opportunities to drive more expensive cars compared to the cost of buying such cars, for example, with leasing you can be able to drive a Lexus instead of an ordinary Toyota car.
The major down side of leasing a car is that you must decide what to do next, like buying a new car, once the lease is over since exceeding lease mileage may attract hefty fees. One thing to remember though is that car leasing is usually reserved for car users with good credit history and who may not qualify for car loan, probably due to tight budget or insufficient income.
2. Shop Around for a Car Lease
Leasing a car, just like any other high-priced buying, will need you to shop all over for the best deals and quotes. Try to visit a number of dealers, leasing agents or brokers to compare what they have to offer on different car makers.
You stand to gain more when you shop all over as you might find a dealer who is willing to reject the down payment and possibly lessen the monthly payment just to win your business. Take your time to compare costs for identical vehicles from different dealers.
You also need to do your calculations and find out the total lease cost at the end of lease term. You may find that a car lease with attractive low monthly payments and a heavy down payment might cost you more in the long term than higher monthly payments with light or no down payment.
3. Negotiate For The Best Deal
Most car leases are negotiable, so take advantage of such options to work out the best car lease deal that lowers your costs before leasing. Be aware of the commonly used terms in car leasing business as they can increase your negotiation and bargaining power.
Manufacturer’s Suggested Retail Price (MRSP) is the car cost set by the company and must be posted on the car window although the cost may vary depending on dealers. Capitalized cost is car price and the more you negotiate on lowering Capitalized cost, the more you will end up with lower monthly installments.
Be persistent and ask the dealer to let you know the Lease factor or the money factor. This is a factor that is usually used to calculate the lease interest rate so, negotiate to lower it is a much as you can. Keep in mind that the lower the total car price the more you are likely to lower your lease payments.
Choose a car model that has a likelihood of a higher resale value, find out from used-car pricing guide or by consulting a leasing company or the loan department of you bank of how well a car model has held up historically on residual value.
4. Avoid Hefty Fees By Observing Mileage Limits
Generally, automobiles leases have annual mileage limits that can to a great extent affect the resale value of a vehicle if exceeded. Suppliers usually charge hefty fees if this mileage limit is surpasses by the end of the lease them, so be sure to ask the dealer about the mileage limit and cost per-mile penalty for exceeding the limit. If your required mileage is far high than the average recommended by the dealer, you may consider buying the car instead of leasing.
5. Understand Your Lease Option
Leasing a car can provide you with flexibility and a number of options which add value than buying a car. For example, if the car is damaged and repaired in the course of lease term, you are under no obligation to keep the car. You have the option to return the car to the dealer which would not be the case if the car was yours.
Unforeseen circumstances such as fuel increase may deter you from using the car regularly and especially if it is a gas guzzler such as big SUVs. With leasing, you can terminate the lease agreement to acquire or lease a more fuel-efficient vehicle without worrying about lower resale or trade value.
6. Read The Fine Print Of A Car Lease Agreement
Do not be in speed up to sign the car lease contract before reading and understanding what it have. Seek information on what you are entitled to before signing the lease. Some countries have laws that require certain car lease facts and figures such as up-front fees, capitalized cost, interest rate, taxes, etc. to be disclosed on lease agreements.
Read to know if the car lease includes a purchase-option fee which can allow you to buy the car for predetermined price at the end of the lease. Other fees that may be included in the lease and which you need to be aware of includes; acquisition fee and disposition fee.