Some of us think of leasing a vehicle as a process that is left for those driving luxury vehicles, but any new car can be enjoyed with a lease. A lease is not a bad way to go, although it sometimes comes with negative stigmas, but you do need to know the details of the lease and what is expected of you. The straightforwardness of buying a vehicle is trumped by the lease with several agreements you need to make and possible financial charges if you don’t adhere to the agreement provided, but leasing can be a great way to drive a luxury vehicle and have a new one to drive every three years. Here are five things you need to know before you sign the lease for your new vehicle.
Advertising vs. Actual Inventory – Most leases require you to select a car that is part of the dealer stock. When you see an advertised lease price, typically this is a price from the manufacturer that is air nationally and applies only to a specific model of the car. More than likely you are going to pay a bit more and have to select from the dealer inventory, but you can still have an excellent car at a good rate as long as you understand the limitations.
Selling Price and Residual Value – The residual value of a car is the amount the dealer expects the car to be worth after the lease is over. This is assuming the condition and mileage of the car are at the agreed upon level. The higher the residual value of the car is expected to be the lower the monthly payment will be for a leased vehicle making the lease much more affordable for you when you find a car with a high expected residual value.
The Money Factor – The money factor is part of the equation of leasing a vehicle and helps you set the actual price you will pay for the vehicle overall. These numbers are transcribed to five decimals but can be a huge factor in the overall cost. This number is set between the dealer and their bank, which is who you will pay for the privilege of driving a bank-owned vehicle for the entire time of the lease. Pay attention to these numbers to make sure you have the best deal possible for your leased vehicle.
Lease vs. Loan – With a loan its typically a good idea to have an outside bank write you a quote that the dealer needs to try and match or beat but with a lease this is not the case. The dealer does hold all the strings when it comes to a lease and can upsell the lease by increasing the money factor over what the bank offers, making it important for you to be able to take advantage of manufacturer lease offers and not just dealer lease offers, because the money factor is not increased at the dealer for these deals. Yes, all this is perfectly legal so make sure you have the right deal for you.
Fees – The term “read the fine print” is never so important as it is with a leased vehicle. You need to read through the contract and understand each and every fee you could be responsible for with your new leased vehicle. Some states also require different taxes to be collected based upon the price of the vehicle and not with regards to the estimated price after the lease. Be aware of what you may be responsible for at the end of your lease so you don’t end up bogged down by fees.
Leasing a vehicle is a great option for those who know they want to change vehicles every three years and don’t mind entering into a lease. This can protect against the depreciation a vehicle experiences over the same amount of time, but can also be filled with fees and fine print. Make sure you educate yourself regarding the lease you plan to enter into so you pay what you agree to and aren’t saddled with expenses that should not be included in your contract for your new leased vehicle.