Leasing a Car
If you lease a vehicle, you can have the incredible benefits of driving around a brand new vehicle from the leasing company without being on the hook for the full price of the car or having to take out an auto loan. When you lease a car, the lease terms will dictate your interest rate (depending on your credit score) and monthly payment. These vehicles will come with a lease agreement that includes mileage limits, and will not include excessive wear and tear if they are present when you return the car. This month to month leasing arrangement and lease payment plan can be much cheaper than the purchase price if you just buy the car. Yet you will still be on the hook for car insurance (and the gap insurance typical on leased vehicles, which is car insurance for the price between the amount you owe when you lease a vehicle and the actual vehicle cost). And of course, because you are under a lease agreement you do not actually own the vehicle and can not sell the car in the future – you will have to return the car at the end of the term, but some lease deals will offer you the ability to buy the car at the end of your lease payment term,
The Benefits when you Lease a Car
Leasing companies and car dealerships tend to offer great lease deals on new vehicles, with a low interest rate if you qualify with a good credit score. You have the peace of mind that your new vehicle will not have excessive wear and tear, and you can put those miles on yourself so you know the condition and reliability of the vehicle if you decide to buy the car at the end of your lease agreement. This arrangement will also give you the accurate numbers for lifetime car insurance costs for the vehicle. As an added benefit, your monthly payment when you lease a vehicle (your lease payment) will gradually increase your credit score over time. The lease payment terms are likely to be more favorable than an auto loan, because you are not taking out a loan for the full purchase price of the vehicle. An added benefit that may or may not be in your lease terms is the ability to return the car early and switch it out with another vehicle, though this will depend on the value (purchase price) of the type of vehicles you lease and will also be subject to mileage limits.
Did you know: Most car rental companies get their vehicles from a leasing company, using these great lease deals and mileage limits on the car to limit depreciation from excessive wear and tear, and after about a year in use they will give the vehicle back to the leasing company who can then sell the car (knowing it has been well maintained). That’s how car rental services can keep brand new cars on the lot each year without losing massive amounts of money ever time they buy the car, rent it out for months, and then sell the car!
Downsides to when you lease a vehicle
Lease deals are not without their downsides, and it depends upon your own situation whether you try to lease a vehicle or if you need to take out an auto loan to buy a car brand new or used. A major downside of month to month leasing is that you will have a mileage limit. If you have a long commute or travel around very often, this mileage limit can be hit quickly and you may even have a penalty in your lease agreement for passing beyond those limits. The lease terms and the interest rate that you pay for your monthly payment will also vary depending on how much you intend to drive the car / how many miles you will put onto it, because a largely city commute or a very long highway commute will translate to excessive wear and tear that can make it difficult for the leasing company to sell the car after you return the car. Of course, these long drives will also factor into your car insurance, but oddly enough can decrease your gap insurance as the difference between the purchase price of the vehicle and the amount that you will owe on it will decrease as the mileage continues to drag down the overall price of the vehicle.
How to get started when trying to lease a car
After you have decided that you would rather lease than buy the car, you can talk to the leasing company about the terms of the lease agreement. This leasing company is most likely going to be the car dealership itself, or a local financial company or bank who they have brought in house to carry out this sort of financial work (lease agreement and car loans). If you are coming in with your own vehicle that you would like to trade in, you can either do a direct trade with the car dealership or (more recommended) try to sell the car as close to purchase price as possible on your own time.
The terms of your lease agreement will depend on your credit rating, how high your mileage limit has been arranged to be, what agreed to monthly payment is, and the purchase price of the car. Essentially all these will factor into the interest rate that you are offered, the cost that you are paying to lease a vehicle and make month to month leasing payments rather than if you had enough cash on hand to take the car home at full purchase price. Make sure to shop around for lease deals from multiple dealerships, because you are looking for a new vehicle you are likely to find many in supply across your local area. In fact the leasing company (often the manufacturer of the vehicle) has a great incentive to make sure that dealerships sell the car when it is new, and that is why you can find low interest rate lease deals offered at so many locations.
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