Things to Know When Leasing a Vehicle

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Leasing a vehicle is a financing option car buyers can choose as an alternative to taking out an automobile loan. This financing option can lower monthly payments for drivers and eliminate some maintenance issues on the vehicle. Before deciding on a lease for your next vehicle, you should evaluate the terms of the lease to determine if it is the best option for financing the car.

Lower Payments

The vehicle’s depreciation over time, not the full value of the vehicle, determines a vehicle lease. Cars that have a lower depreciation rate and are worth more at the end of the lease will result in lower monthly car payments for the driver. The monthly payments are based on the value of the vehicle at the end of the term.

Financial Institutions

Car dealers do not lease vehicles, but they do deal with finance companies and banks to connect the car buyer with an appropriate financing plan. Leasing a vehicle through the car dealership is not the only option car buyers have when searching for the best financing deal. Car buyers can search for leasing deals from banks, credit unions and independent leasing companies. Independent leasing companies can search for the best terms for the customer.

Type of Lease

Not all vehicle leases are the same and consumers will have the option to choose the type of lease agreement they enter into when financing a car. A closed-end lease allows the driver to turn the vehicle in at the end of the lease with no further financial obligation. The driver has the option to purchase the vehicle or simply walk away. Consumers are not responsible if the value of the vehicle is less than the stated value in the lease terms. Drivers are held responsible for additional mileage driven outside the terms of the lease.

An open-ended lease charges the customer the difference between the actual value of the vehicle and the stated value in the lease. Businesses and individuals who plan to put a high amount of miles on the vehicle may choose this lease option because it does not have restrictions on miles.

Single Payment leases allow the customer to save money by paying a single lump sum in advance to avoid interest charges. Customers should calculate the cost of the lump sum payment to be sure that the finance company or car dealer does not add interest charges to the payment.

Points for Negotiation

When entering into a lease agreement, consumers should negotiate the cost of the vehicle, the amount of initial payments, fees, the term of the lease and additional charges at the end of the lease agreement. Consumers should also understand the type of lease agreement and whether they have the option to purchase the vehicle at the end of the lease.

Mileage and Maintenance

Before executing a lease agreement, the consumer should determine the amount of miles allowed during the term of the lease and the charge for excess miles. Lease agreements also have maintenance requirements with which the driver must comply during the course of the agreement.