Categories: Leasing a Car
9 Things to Consider Before Leasing a New Car
Leasing a new car is an exciting venture for a person who prefers driving a new car after a few months without necessarily taking up the full responsibility of owning a car.
Leasing a new car is an exciting venture for a person who prefers driving a new car after a few months without necessarily taking up the full responsibility of owning a car. However, leasing is not a walk in the park, especially where the important factors are ignored during the leasing agreement process. Here are a few things you should consider to help you avoid chaos while leasing a new car.
1. Decide whether to buy or lease
Many people need clarification on leasing a new car with getting an auto loan which are two different things. You need to note the differences between the two. Buying means that one makes payments monthly to acquire full ownership of the car in the end. On the other hand, leasing does not create a build-up in equity, and new payments must be made if the lease continues.
Leasing a new car takes more work than it may sound. When purchasing a car, you can drive stress free with the assurance that there will be full ownership after payment. Leasing allows you to drive a car when not financially stable. It also gives millennials the privilege of getting a new car after every few months. This makes it crucial for a person to weigh the pros and cons of leasing and buying a new car and pick the plan they prefer most that suit their financial needs.
2. Evaluate the car model that you prefer
Before leasing a new car, it is important that you critically analyze your needs and look for a car that matches your exact needs. In this case, there are several factors to consider when looking for an appropriate car model. For example, you may choose to go for a comfortable or a luxurious car. Another important factor is the number of passengers the car can accommodate. This depends on whether the car is for personal, family, or corporate services. Lastly, the model of the car determines its consumption levels, which depend on how much you are willing to spend on gas and fuel. Therefore, it is important to pick a car model that suits your financial capability without being posed with a potential debt crisis.
3. Examine your credit history and score
In most countries, leasing a new car is ordinarily reserved for individuals with credit scores above the average. For any company to lease a car to any individual, it must be sure of your financial credibility and the ability to make lease payments monthly without defaulting. Leasing is fast for people with perfect credit history and scores. It may be a hard bargain for individuals with low credit scores, and many lenders refrain from leasing new cars to such people.
4. The down payment
The question of how much is required to get a new car from the leasing firm is an issue of concern to many individuals. The down payment may be half the amount or three-quarters of the lease payment, but this depends on the terms used by the company. Recently there is also the zero strategy, where an individual can lease a car without making any initial payment. However, this strategy requires that you make higher monthly payments than when an initial down payment is placed. You should ask the dealership to provide you with the lease quotes, one with the down payment and the other without. After this, you should compare the two options and evaluate the amount of money spent in the two scenarios. This helps in making leasing decision-making easier.
5. Total monthly payments
While leasing a new car may be preferred because of the lower monthly payments, you should consider the upfront costs you will face. For example, in many cases, you may be required to incur costs related to taxes, licenses, insurance, documentation, and title fees. Therefore, you need to be fully aware of the total monthly costs with taxes included to avoid getting quotes that may go beyond your monthly financial limits and put you in trouble. Awareness of the total monthly costs also helps you to plan the monthly payments to escape defaulting.
6. Consider the lease miles and duration
Typically, most car leasing companies give out a limit of 10,000 to 15,000 miles per year. If you go past the limits, you must pay extra costs for the extra mileage used before the leasing contract ends. Before leasing a new car, it is important to ensure that your driving habits are considered properly to ensure you get enough miles for the leasing period. If you are sure of getting past the mileage limit given by the firm, you could request a higher mileage that will increase your monthly payments.
It is also important to consider your flexibility with the lease to determine the duration you want to lease the car. If you are unsure of the car you will be leasing, hiring it for a short duration is advisable because exiting the lease earlier is expensive. You may also analyze if the dealership allows lease transfers if you want to opt-out before the contract ends.
7. Car resale value
It is important to consider the car's value at the end of the lease period. This determines the amount of money you would pay if you opt to purchase the car at the end of the lease. Cars with higher residual value are less depreciating, and thus they go for lower monthly payments compared to cars with lower residual value.
8. Consider how well you can take care of the car
Remember that leasing does not give you full ownership of the car. When returning a leased car, most firms advertise it for auction. This means the dealership wants to get this car in a perfect state to sell at a good price. Be ready to pay extra money for any damage caused, such as scratches, dents, and stains. It is thus cost-effective to fix the damages before returning the car to the dealership.
9. Requirements for ending the lease
Leasing a new car comes easy for most people until it is time to end the lease contract. Most people find themselves caught up in high disposition fees they had yet to foresee during the leasing. It is important to have information on the terms the dealership relies on upon ending the contract. This outlines the car's condition, what may lead to higher disposition fees, and the determinants of your getting another car from the firm.
The bottom line
Leasing a new car comes with several pros and cons and it is pivotal for you to understand whether the leasing will bring you benefits or disadvantages. If you are ready to lease a new car, make sure that you properly understand your driving habits and monthly budget. It is also important to analyze the value of the new car and its resale value. Moreover, if leasing is your go to scheme, ensure that you keep a clean credit score which will aid in maintaining low interest rates for you during the lease period.