The Basics Of Auto Leasing
If a low monthly car payment is your goal you will come across auto leasing offers. The payments are usually lower than auto financing rates because you generally do not pay off the entire purchase price.
When you lease a car you are renting it for the agreed period of time from the leasing company. They will purchase the car of your choice and then lease it back to you.
It is possible to calculate very attractive sounding monthly payments that can be adjusted up or down in many different ways. Generally, you will have to pay a big chunk up front. Then, the car’s residual (remaining) value at the end of the lease period is estimated. Since this value depends largely on the mileage, you will be limited to a certain amount of miles either per year or overall. Once you exceed this limit you will be charged either per mile or per 100 or 1000 miles.
If you are a commuter in one of the large metro areas chances are that the advertised mileage of 10 or 15k per year is not enough! If you know this beforehand you might want to consider negotiating a higher yearly or total mileage allowance.
The difference between purchase price, minus down payment and residual value is the portion that you will be paying off during the lease term. Together with a calculated “leasing fee” which includes interest and profit margin for the leasing company.
You should also be aware that the condition of our car will be assessed at the end of the lease. If there are any damages or excessive wear and tear you will most probably be charged for the repairs.
Make sure you will be disclosed what the residual value for your car will be, and if you have the option to purchase your car for this value at the end of the lease term. A fair leasing company will give you this option.
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Tags: Auto, Auto Financing, Auto Leasing, Basics, Car Payment, Chunk, Damages, Lease Period, Lease Term, Leasing, Leasing Company, Leasing Fee, Many Different Ways, Metro Areas, Mileage, Mileage Allowance, Period Of Time, Profit Margin, Renting, Residual Value, Wear And Tear