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Lease To-Do List

Car Lease to do list

Next time you’re stopped at a red light looking at the traffic around you, count five random cars.  One of them is probably a leased vehicle.

There are a number of reasons why someone would choose to lease a car, instead of buy it.  Lease payments are generally lower than loan payments.  Sales tax is also lower when you lease.  And after you’re finished using the car, you don’t have to worry about offloading a used vehicle.  

If you have a good credit rating, leasing could potentially be right for you because you can get low-interest payments.  Leasing also makes sense for those who don’t do more than a normal amount of driving, usually 10-15K miles per year.  Overlimit per-mile fees are charged, and this can get expensive!  If you lease, you also can be subject to fees for any damage the car sustains above and beyond normal wear and tear.  Finally, you need to stay in the lease for a set period of time, anywhere from two to five years.  Getting out of the contract before it’s up will also cost you extra money.  

Despite all this good behavior, after the lease is done you don’t get to keep the car.  This bother some people, as they seem to have paid a lot of money over time for the use of a car that isn’t even theirs.  For others, it makes sense because cars are not good investments:  they depreciate.  And instead of having a higher payment for a loan, the driver enjoys the lower payment of a lease.

When you see a car you like at a dealership and want to lease it, the dealer sells that car to a leasing provider.  That’s right:  you don’t lease the car from the dealer.  The dealer is just the middleman.  Examples of leasing providers include Ford Credit and Toyota Financial Services.  But, you don’t have to use the dealer’s chosen lease provider.  You can select your bank, credit union, or an independent company with whom to contract the lease, and the dealer sells the car to that company.

Then, you pay the provider a monthly fee for the privilege of using the car.  

Before you select the car, it is advisable to find the best (lowest) price for the car you want.  In the world of leasing, this price is known as the capital cost, or cap cost.  You can reduce the cap cost if you have a car to trade in, if you’ve been able to find any rebates or discounts, or if you make a substantial down payment.  Any applicable fees, plus sales tax, are added to the cap cost.  This amount helps determine your monthly payment:  the lower the cap cost, the lower your payment.  Also, try to find the best interest rate you can from your leasing provider.  The better your credit score, the lower rate you’ll be able to secure.

When you lease the car, you also might have to pay a security deposit, to protect the lease provider from any undue damage to the car.  Despite this, you do have to get car insurance for the vehicle as well.

Keep in mind there are often two fees associated with leasing:  the acquisition fee when you acquire the lease, and the disposition fee when the lease ends.  Like the lease payments, you take care of these fees in exchange for the privilege of driving the car.  If you decide to buy the vehicle after the lease is up, make sure you negotiate out of the disposition fee.

If the steps to leasing a car aren’t too much for you to handle, you have good credit rating, and you’re eager to enjoy lower payments for more car but don’t mind giving it up after a few years, consider a lease!

 

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