Getting the Most out of your Car Lease
In today’s auto industry, leasing has become a huge part of that market. Where leases were once thought upon has complicated transactions, they are now considered the ideal purchase for many consumers. However, to make the right lease purchase, you should know a little about car leases work. That way, you can take advantage of the car lease option and drive away with the car of your dreams.
Down payment
Browsing the paper, you might see ads claiming “no down payment” for your new leased vehicle. Down payments for leased cars can be anywhere from $0 down to $5,000 or so. Just realize that the down payment amount has a reverse relationship to the monthly payment figure. In other words, the lower the down payment, the bigger the monthly payment will be. That’s because the higher monthly cost offsets the lower down payment. For example, if you want to pay $0 down, monthly payments might be as high as $500 per month. On the hand, if you want to pay $3,000 down, your monthly payments might decrease $125 per month ($3,000/24 month lease period), for a total of $375 per month payment.
Residual value
In auto ads, you’ll often see the words “residual value” in small print. Residual value means the remaining or residual value that the car has at the end of the lease. A car that retains its value longer, such as a BMW or a Mercedes, will have a higher residual value than the ubiquitous Chevrolet. A car with a higher residual value has a lower down payment since the car will still be worth a lot at the end of the lease. With this logic, it might actually be more affordable to lease a more luxurious car than the more standard vehicle.
Lease terms
Leases vary from 24 months all the way to 48 months (4 years). The longer the term, the lower the monthly payment will be. Just realize that a longer lease can bring with it additional maintenance costs if the lease is longer than the warranty period. Most leases, however, are two to three year leases. That ensures you that any repairs needed will more than likely be covered under the warranty, excluding the obvious maintenance issues (i.e. lube and oil and tires).
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