If you are in the market to get a new car, you have two options. You can purchase a car or you can lease it. Both of these options have their pros and cons. purchasing a new car can put a serious dent in your wallet, but it has the benefit of knowing what you paid for. Once you buy a new car, you will have complete ownership of it and you can choose to sell it or trade it at any time. Leasing may seem like a more attractive and affordable option, but there are a few things you should consider before signing any agreements.
One of the main benefits of leasing a car is that the monthly payment will cost you less than if you purchased a car. However, you will have to pay a few thousand dollars upon signing the lease for your new car, depending on the model of the car. The monthly payments are calculated based on the market value of the car once your lease expires. So, if you want to lease a car make sure that it has good resale value to ensure you get a good deal. If a car has a bad resale value, your monthly lease payment will be much higher. Your best bet is to lease a popular car model that can easily be resold once you terminate your lease. This automatically eliminates flashy sports cars and convertibles from the equation, as they often have a poor resale value.
The biggest downside of leasing a car is that you have to cover all the costs of maintenance even though you don’t have ownership of the car. You’ll have to pay for oil changes, tire replacements, car insurance and everything else. It’s a huge responsibility given that you are only renting the car from the leasing company for a limited time. You’ll need to get a good insurance policy in case you have an accident otherwise the leasing company will likely make you pay a fortune for the repair costs.
The smartest thing you can do before investing in a car lease is research all available leasing options and carefully read the fine print. Many companies offer similar deals, but slight details separate good deals from great ones. Leases often have some details that can catch you off guard.
For example, most leasing agreements have a mileage cap. The most common mileage cap on a leased car is twelve thousand miles in one year. So, if you sign a five-year lease your car can’t have more than sixty thousand miles on it. You do get some benefits if the mileage on your car is below the limit, but you will also have to pay an extra fee if you exceed the limit. Some companies charge as much as 30 cents for every mile over the limit.
This means that a few thousand miles can cost you a pretty penny. Let’s use our example and say that you returned your leased car with sixty-five thousand miles instead of sixty. This means you will have to pay an additional $1500 once your lease expires.
Most companies also charge you a hefty fee if you terminate your lease agreement ahead of schedule. The only option for early termination of a lease agreement without paying a fee is if you sign a new lease with the same company, but for a different car.
Once you’ve shopped around and decided that you want to lease a car, you’ll need to get your credit score in order. Having a good credit score is the most important factor in getting a good deal on your lease. Visit your bank and check if there are any errors in your credit report. These errors can easily be corrected and they will play a big part in what kind of car you can lease.
Finally, once you get to the car dealership and they offer you a deal remember to thoughtfully read the agreement before you sign it. Don’t get mesmerized by a fancy new car and a sleek salesman. As the old saying goes there’s no such thing as a free lunch. Remember to look out for things like annual mileage caps, early termination fees, and resale value. If you are a smooth negotiator, you can also try to haggle with the salesman and lower the cost of your monthly lease payment. Remember, you are effectively renting a car from the leasing company and you have no equity in the vehicle you leased.