When most people hear of car leasing, they assume that it’s a poor financial undertaking. This is probably because of the high fees charged by scammer dealers. The truth of the matter is that car leasing is ideal for a specific group of people. If you plan to use a car for a specific period (like 1-4 years) or are used to drive less than 15,000 miles a year, a car lease is a good deal for you. The other important thing is an excellent credit repute. However, you need to enter the market wisely and understand the basics. To help you get started, here is a car leasing guide to use.
What You Are Paying For
A car lease is not similar to renting a car. No. It’s simply another way of financing a car. During the leasing period, you pay the depreciation value of using the car plus taxes and interests (money factor). When leasing the car, you get into business with a specific finance company and not the car dealer. The company buys the car from the dealer at the price you negotiate and later leases it.
How to Calculate the Car Lease
The terminologies used in car leases are indeed confusing, but this should not be a reason for making a poor financial decision. You can determine if a given lease deal is a good bargain. To calculate the amount, you need to establish the monthly costs of about $10,000 worth of the car. If the vehicle’s monthly costs are not more than $135, the deal is a good one. In most cases, fair deals have monthly costs that circle the $100 mark.
Understanding the Extra Costs
Leasing a car normally involves several fees and taxes. Some of these costs are not incurred when purchasing a car. The dealer may use the term “no money down,” but this does not mean that you can drive the car away without making an initial payment. In fact, the initial deposit that you make makes up a small fraction of what you’ll pay before the lease expires. The deposit ranges between $250 and $1000 depending on the value of the car. This is followed by a deposition amount ($200-$400). Sometimes, you may be required to pay a refundable security cash deposit—it depends on the dealer. Other fees to pay include:
- Dealer documentation fees
- License and title fees
- Insurance costs
- Tag Fees
The Leasing Strategies
For you to enjoy the best car lease deal, you should have the best strategies. Here are two tactics to employ:
- Negotiate Your Price: Many people don’t know that the lease price (capitalized cost) is not fixed. The fee influences how much you’ll pay for the lease cumulatively. So, it would help if you tried to bring it down. You should ensure that you pay a figure that you are comfortable with.
- Go for Higher Resale Value: When using a leased car, you majorly pay for its usage. Nonetheless, at the end of the contract, you are required to pay the depreciation cost. If the car has a low resale value, it means that you’ll pay more as depreciation costs. To minimize the costs, you should opt for a car with a higher resale value. The usage costs may be high, but the depreciation costs are lower.
Pros and Cons of a Car Lease
The positive thing about a car lease deal is that you can drive a new car model for a while. When the contract expires, you can return the car and apply for a new lease. The other pros are:
- There are no repair costs.
- No struggle of reselling the car
- Monthly payments are low, thus comfortable.
On a negative note, though, the costs of leasing a car are expensive in the long run. You’ll need to pay expensively for the insurance and watch out for the miles you travel a year. You shouldn’t exceed 15,000 miles.
Hopefully, this brief car leasing guide will help you make the right choice and avoid scammers and greedy car dealers. Provided that you fit the criteria for a car lease candidate, you should be able to sign a good deal and enjoy a brand-new car.