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How Does the Car Leasing Work?

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Car leasing is another alternative to purchasing a car. Here, essentially you are just borrowing a car for a certain agreed period instead of directly buying it. Quite often you may also have the option to buy the car after the lease period ends.

Generally, you will have to make a certain amount of upfront payment, and small monthly payments, and then you are allowed to use the car for many years. After your lease period ends, you must return the car and need to decide whether you want to start another new lease or buy a car.

Lease A Car Direct is an auto broker near me who has sufficient experience in making a deal for car leasing and if your keep a broker like him on your side, then you can surely get a better deal for a car lease.

What you must consider before you lease a car

Few terms used for car lease agreement will be a bit confusing for a new person therefore you need to understand them first. 

  • Acquisition fee

Few leasing companies may charge a certain upfront fee to arrange the lease which is the acquisition fee. This is negotiable and can also be waived off by a few companies. 

  • Buyout price

You can end your lease any time by purchasing the car which may decrease based on its depreciation. 

  • Cap cost reductions

You can reduce the cap cost in many ways, like through negotiation of the price, by trading in your car, or by making a down payment, etc. 

  • Capitalized cost

This is your car’s initial price that you can negotiate as you do while buying a car. 

  • Disposition fee

This fee you will pay when your lease ends to cover the cost of the dealership to get the car to sell. You can negotiate and also buy the car at depreciated cost. 

  • Gap insurance

Insurance cost, which will cover the difference between the residual value of your car and what the auto insurance company will pay out if your car is totaled.

  • Lease term

The total length of your lease term, which is often 2 – 4 years.

  • Mileage allowance

The number of miles that you can drive each year without paying any per-mile penalty. Sometimes, you can also negotiate a little more mileage allowance, but then you may have to make an extra payment per month for this.

  • Money factor

This is also known as the lease factor, or a rent charge, which will decide the part of the monthly payment. Often the money factor is shown as a fraction, but you may convert it into your interest rate just by multiplying it by 2,400. 

  • Residual value

Your car’s value after the lease that may be decided by a 3rd party.

  • Purchase option agreement

Here it will be specified how much you will pay if you purchase the car after your lease period ends.

  • Security deposit

A certain amount of security deposit will be held by the lessor to cover damage or any extra mileage while returning the car. 

 

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