There are literally thousands of people who lease vehicles every year, however, only a very small percentage of them may understand how leasing works in any detail. In fact, some people still have a negative impression of leasing, considering it to be a plan that works heavily in favour of car dealers.
Consumer leasing for automobiles only really became popular after the 1970's. As the price of purchasing an automobile rises as will the interest for leasing a vehicle because it offers people the alternative of driving a car they could not otherwise afford for a less expensive price a month.
Car leasing is the perfect way to affordably finance your desired vehicle over an agreed period of time. You can expect to pay for two main aspects:
a) the anticipated depreciation of the value of your vehicle over the time of your lease, which will be based upon the amount of miles you expect to drive per annum.
(b) You can expect to pay the finance charges which are the amount of interest on the lease company's purchase price of the vehicle. In effect you are being lent the money which they have tied up in purchasing the vehicle.
In some ways car leasing is similar to taking out an interest only mortgage on your home, an option that has risen in popularity during recent years, where you only pay the lender for the use of their money.
Leasing may not be the right choice for everyone. So it may be a good thing to follow a few steps.
Car Leasing Guide
1. Don't lease on a dealer's recommendation or on impulse. It is easy to see the bargain payments you could be making monthly on your dream vehicle but other factors need taking into account.
2. Only sign a leasing contract when you know exactly what determines the contractual monthly payments. Car sales people are not the best people to provide objective advice and some may often not really understand all the aspects of your proposed leasing contract so seek advice from informative and objective websites.
3. If you have a tendency to drive over 15,000 miles a year, leasing may not be the best option for you. Leasing is based on the concept of you paying only for your average annual mileage usage which is why lease payments are always lower than car loan payments on the same car. If you drive over 15,000 miles a year you may find that buying will be a better option for you financially.
4. Check the length of your vehicle's general warranty; you don't want to be paying for repairs on the vehicle if it is no longer under warranty whilst you are leasing it. Many automobile manufacturers offer 36 months under a general warranties guarantee, others may offer 48 months warranty and a few still offer 60 month warranties.
5. If you are leasing you need to properly maintain and care for the car. Your leasing company will require you contractually to follow certain maintenance schedules and repair damages that are considered beyond reasonable wear and tear. Failure to maintain the vehicle to a good enough standard upon its return to the leasing company, will, in some cases, incur hefty charges.
6. If you want to customize your car in any specific way you should not lease. Contractually you will find that you are not legally allowed to make any modifications to the vehicle.
7. If you foresee any short term changes that could mean you cannot honour the full leasing contract such as e.g. pregnancy, job loss, ill health, marriage break up etc, do not lease. It is very difficult to end a lease early and they do not make provisions for ill health or death.