Leasing a Car: Your Questions Answered
When you’re looking for a new car, if you don’t have the cash to buy it outright, the usual option is to take out a bank loan to finance the purchase. However, if you like the idea of having a new car every two or three years, you could consider leasing. It’s an important decision, and you need to understand what’s involved. Here are the answers to a few of your questions.
What Are the Advantages of Vehicle Leasing?
Leasing a vehicle gives you the opportunity to drive a new car at lower monthly payments than getting a loan to buy a car. You can also get a more expensive car than you could otherwise afford. You’ll pay little to nothing in repairs during your lease term, and you’ll be covered by the manufacturer’s warranty. At the end of your lease, you can drop the car off and choose your next vehicle.
Are There Disadvantages?
The main disadvantage of leasing a car is that you don’t own it at the end of the contract. Your options are to hand it back and walk away, lease another new car, or consider buying your lease vehicle. You’ll need to make a plan for your next car before the lease expires.
You might face some heavy fees when your lease ends. If you’ve exceeded the agreed annual mileage, you’ll be penalized. If the car is damaged beyond the wear and tear agreed at the start of the lease, you’ll face another penalty.
What Are the Upfront Costs?
You’ll usually have to pay an acquisition or financing fee, a delivery charge, licensing and registration fees, a down payment, your first monthly payment, and taxes. You need to be aware of other smaller fees that may be added on and be prepared to negotiate.
What Terminology Do I Need to Know?
- Capitalized cost is the price of the vehicle which you should negotiate.
- Money factor or lease factor is the finance rate for your loan, but you need to multiply this figure by 2,400 to convert to an annual percentage rate (APR).
- Residual value is the predicted worth of the car at the end of the lease.
- Depreciation rating or lease rating shows you which cars hold their value better. You can use this to ensure that the residual value is reasonable.
What Maintenance Costs Do I Pay?
The vehicle warranty should cover major faults for the entire period of the lease. However, you’re responsible for the general maintenance of the car the same as if you owned it. You should get any minor damage repaired, as it might be cheaper than the penalties you’ll be charged for excess wear and tear at the end of the lease.
Should I Consider Leasing?
If you’re hard on cars, cover a lot of miles, or often drive in poor conditions, you probably shouldn’t consider leasing. But, if you want to drive a shiny new car, you can afford the payments, and you’re prepared to walk away with nothing at the end, leasing is an option for you.
If you do look into leasing, the most important things to remember are to read the small print, make sure you know all the fees involved, and negotiate to get the best deal. Autoflex Leasing can answer all your questions and help you in your search for a new car.