In simple words, leasing a car is a long-term rental agreement. You are paying to drive a vehicle that belongs to someone else. You never own it. The lower monthly payments make auto leasing an attractive alternative.
However, lease a car does have its share of drawbacks. It includes –
- When the lease expires, you don’t become a car owner. Generally, you are renting a car and not buying it. You will not have any equity that can be used to buy another car.
- Over time, the overall costs of leasing some cars will possibly go beyond the buying price of a used or new car.
- The lease accompanies some limitations. Some of the steep penalties you will need to incur are –
o If the number of miles increases then what was mentioned in the agreement.
o If you drive a car roughly, which wreaks the appearance and performance of the car?
o If you are unable to maintain the condition of the car’s interior and exterior.
o If you desire to return the leased car before a contract expires.
Increasing mileage limitation on lease terms can incur 10 – 15 cents per mile. The dealer inspects the car before lease expiry and you will be charged extra for the excessive wear & tear. For more information on lease and deals, you can call Lease a Car Direct professional.
Does lower monthly payment influence the auto leasing decision?
The monthly payments will be based on the
Cap cost [capitalized cost]
It is the MSRP [manufacturer’s suggested retail price] of the car. If the cap cost is less, your monthly premiums on the car leasing get reduced. You can negotiate for lower MSRP, so shop around. The MSRP gets increased because of taxes, insurance, contracts, extended warranties, registration fees, and service contracts. The cap cost can be reduced with dealer coupons or manufacturer’s rebate or trade-in equity. The written lease needs to mention all the credits associated with the cap cost.
It resembles the interest rate. It ranges from approximately 0.0021 to 0.0046. The monthly payment gets influenced by the money factor. The money factor will be put in writing, which you need to multiply by 2400 and you get the interest rate. If money factor is 0.002920 then the interest rate is 7.08% [0.002920 x 2400]. You can even negotiate the money factor.
What other things about car leasing are crucial to bear in mind……
- You need to have a copy of every signed document including all the crucial terms and details clearly.
- Review the disclosures of your lease agreement carefully to ensure that it includes everything you negotiated with the sales rep.
- Be vary of several things like –
o Car leasing on the first visit.
o Depending on verbal promises.
o Offering deposit before reading and understanding the lease contract.
o Paying extra for the extended service agreement, when the new leased car comes with a warranty of coverage for major lease term duration.
After signing the deal there is no way out, so before entering get familiar with every relevant detail.