Car Leasing: Basic Tips
Leasing a car has some big advantages over owning one- the biggest is the chance to trade the car in when the lease is up. However, it is very easy to end up with a lease that is more expensive than buying a car. To keep from being ripped off, follow these car leasing basic tips.
*Always shop around. As is the case when you're buying a car, comparison shopping is essential. Take the same care you would if you were buying the car outright, because most car leases last for anywhere from 2-5 years. Consider things like gas mileage, engine size, and passenger and cargo room. Don't forget to consider maintenance costs- some cars cost more to keep up than others do. Unlike buying a car, longevity isn't as big of a consideration because you will only have the car for, at most, five years.
The most important number when leasing your car is its capitalized cost, which is equivalent to the sticker price. You should also consider the car's residual value- what it would cost to buy it when the lease expires. When you lease, there is an agreement between you and the lessee as to the car's depreciation. By leasing, you are paying the cost only while you have the car (the capitalized cost minus the depreciated amount). You should also pay attention to the money factor- which works much like interest does.
When you lease a car, you can turn it in at the end and get another car. You don't have to concern yourself with the car's long term performance, or with being stuck with a vehicle you hate. If you like the car you are leasing, you can usually buy it at lease end. Leasing is much like renting- if you don't buy the car at lease end, you don't have any equity to show for what you've spent.
Leasing can cost more than buying if you go over your mileage limit. Most car leases only allow for ten to twelve thousand miles per year, and a lot of us can easily exceed that. Before you lease a car, get a handle on your driving habits so that you have a rough idea of your mileage. If you need more miles, negotiate for a higher mileage rate. You will pay more per month, but won't get socked with mileage overage fees.
As with any other car deal, pay attention to fine print and be sure that all fees are disclosed up front. When you are leasing a car, most dealers add acquisition, early termination, wear and tear, mileage and upgrade fees. If any of these don't sound right to you, mention it to the car dealer. If they don't provide you with a reason why they are charging the fee, walk away. There are other dealers- don't get stuck with one that won't give you a fair deal.