Leasing a car is now the latest trend. Over the past few years, millennial car buyers have leasing more instead of buying since they can get their dream car at an affordable price. When hiring a vehicle, you have to cut a deal with an auto dealer. Instead of buying the whole vehicle, you pay for any depreciation and other costs the car incurs over the leasing period. If you are thinking of leasing a car, here are seven things you need to know.
1. Length and Terms of Lease. Standard lease periods last between two to four years. Nevertheless, every leasing contract has separate terms. So, you have to watch out for the specifics. Most importantly, look for the length and mileage cap. Most drivers find leasing contracts very confusing, especially when buying a car. Consider reviewing some standard contract terms to get an idea of what to expect.
2. Gross Capitalized Cost. A vehicle will have a price attached to it. However, like most things, this price is negotiable. Instead of paying the full amount, try to convince your auto dealer to give you a fair deal.
3. Residual Value. After the leasing period expires, the car dealer estimates its worth. This price is called the residual price. The higher the residual value, the lower depreciation, and the lower the amount of money you will have to pay.
4. Depreciation. You can think of this value as the rental cost of the vehicle. Depreciation is the amount of the car over the months and miles your vehicle will cover.
5. Money Factor. Make sure you consider the interest rate you will incur, but it is not an actual interest. Take the money factor and multiply it by 2400 to compare it with a real interest rate. This interest is also negotiable. The interest rate is often charged to the sum of residual value and adjusted capitalized cost. Here, you will be paying for both your car and the finance company.
6. Financing and Payment Options. When leasing a vehicle, there are several financing options for you. Ensure you have conducted adequate research about the financing options before making any deals. If you do not have good credit, it may be difficult to lease. If you cannot secure any financing terms, it is advisable to first work on improving your credit score. In case you have good credit, consider paying a large down payment to lower your monthly payment.
7. Risk. You have to remember that a leased car is similar to a rental. Make sure you follow the maintenance practices on time to avoid any penalties. You also need to practice careful driving since you will pay for any wear and tear or damage.
When leasing a vehicle, it is good to remember that you will never own the car. You only pay for its use. If you want to get out of your lease, you can talk to a car lease takeover.