Leasing a Car
When you are looking for a new car, unless you can pay cash, you will need a way to finance your purchase.
$0 down, or low down payment and lower monthly payments for a newer car seems enticing. Is leasing a car the best option for you?
How leasing a car works
When you lease a car you are making payments within a certain time frame for the time you use the car and returning the car or buying it after that set time.
How long can you lease a car?
Typically, a lease contract on a car ranges from two to four years. However, some leases can be longer.
Should I lease or buy a car?
The answer depends on each individual lifestyle. How you use the car, how much you drive in a year, how long you plan to have the car. There can be advantages and disadvantages to each.
Leasing vs Buying a Car
Monthly payments are generally lower when you lease compared to loan payments because the price is based on the car’s depreciation over the period of time you’re driving it, instead of a purchase price. However, remember, unless you choose to buy the car at the end of the lease your likely to lease again and payments will not end like they would when you finance a car with an auto loan.
Car repairs are guaranteed expenses when you drive a car over a long period of time. When you lease a car the terms will usually be between 2-4 years, although some contracts can be shorter or longer. The basic warranty on cars is the same, meaning you won’t have to pay out of pocket expenses for the repairs like you would when your warranty runs out on the car you bought.
Mileage restrictions will be in almost every lease contract. The typical terms will be limited between 10,000 and 15,000 per year. If you go beyond the agreed upon mileage you will be paying $.10 to $.25 for every mile you exceed. You may purchase extra miles when you lease the car, if you know you will go over the standard limit.
A car’s value depreciates when you drive off the lot and continues over the length of ownership. When you buy a car you are left with a depreciated asset when you are finished with the car. When you lease a car you have the opportunity to return the car after the contracted time and drive off with a new one.
A leased car belongs to the company you leased it from. You are required to return the car, after the terms in the same condition you received it in. If you have excess wear and tear on the vehicle you will be charged fees.
Your credit will need to be in very good to excellent shape to have the opportunity to lease a car. The typical credit score for approval is 620. If you are approved, the higher your credit score will always get you the best options. When you finance a car through a loan the same applies, but you can still be approved for the loan even with less than stellar credit. If you need to improve your credit score learn how here: https://www.fundhungry.com/diy-credit-repair/.
When to lease a car?
If you have good credit, don’t plan on racking up mileage and desire a new car every few years, leasing a car could be the right option for you. If you lease a car for business use, you can deduct expenses for the lease, making the lease option desirable for tax savings.
Is leasing a car worth it?
Depending on your use of the car and the terms negotiated within the contract, a lease could be worth it for you. Always understand the terms of the contract, the fees and penalties associated with early termination of the lease and the fees and penalties for mileage and wear and tear on the vehicle you are leasing.