Leasing a car is an attractive option when you want a new car with low monthly payments and don’t have a lot of money to put down. To make sure you get the best deal, review all the contract details and costs. Check out these five things you need to know about leasing a vehicle.
What Leasing Vs. Buying Means
Leasing a car means you never own the vehicle. You get to drive it for a few years and then return it. You can’t sell it or trade it in without paying off the lease. Upsides include low maintenance costs and getting a new car every few years. A lease payment is usually lower than a car loan payment, too.
Length and Terms of Lease
Before signing a lease, check the duration of the contract. Leases usually run for 18 to 36 months. Make sure you’ll want to keep the car for the entire term. Ask about early termination fees. If you return the car early, you could still be on the hook for the entire amount due for the lease.
If your situation changes and you want to end your lease early, you may be able to transfer it to someone else. Not all leases allow transfers. Be sure check your contract before you commit to a long-term lease.
How Many Miles You Drive Each Year
A significant lease detail is the mileage cap. Most contracts include 10,000 or 15,000 miles each year. Will that cover how much you drive? If you go over the total mileage allowed, you’ll pay more when you return the car. Costs are generally between 10 cents and 30 cents per mile. If you have a short commute, a lease is an excellent option.
Costs and Financial Lingo
To check if your lease is a good value, you need to know more than just your monthly payment. Calculate how much you’ll pay for the life of the contract.
Costs will depend on the Money Factor, an interest value used instead of APR. Multiply the Money Factor by 2,400 to get a comparable APR.The vehicle’s Residual Value also affects the payments. When you return the car, this is how much the dealer can get for it. The higher this value, the lower your payment.
You need GAP insurance when you lease a car. When you drive a new car off the lot, it loses value. If the car is totaled or stolen, you could owe more than the car is worth. GAP insurance will cover the difference and pay it to the dealer.
You Must Return the Car in Resale Condition
The dealer will resell the car at the end of the lease. That means you need to return it in excellent condition. You must fix even small flaws like scratches and dings to avoid added charges. Keep in mind that the interior should be clean too.
Consider these five things before you lease a vehicle. You can determine if your lease payment fits your budget, and avoid any surprises when you return the car.
“Cadillac” by s4nt1 is licensed by CC BY-SA 2.0
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