Car Leasing Tips
Leasing a car can be a bit confusing if you're unfamiliar with the process involved. Here are some tips designed to help you get the best lease deal possible.
Shop as if You're Buying the Vehicle
A lease is a major financial commitment even if you don't plan on ever buying the car. Make sure you like the vehicle by taking a test drive and carefully examining the car for any defects that may be apparent. Do your research on how much the car is worth so that you can effectively negotiate the price. Bargaining for a lower sale price on the car will reduce your monthly lease payments.
Understand Lease-Specific Terms
Just as car loans have their own terms, leases have a specific set of vocabulary. It's important to learn these terms so you can understand what you're agreeing to. For example, the "capitalized cost" of the car is the total amount you have to pay, including interest and fees. The "capitalized cost reduction," on the other hand, is the industry term for a down payment.
"Closed-end" leases describe a lease where the value of the car at the end of the lease term is preset. At the end of the lease, you may have to pay some closing costs as you return the car, but that's all. If a lease is "open-ended," the value of the car at the end of the lease will be determined by an appraiser that works for the car dealership. That means that if the value of the car comes in low, you'll have to pay the difference in addition to the closing costs.
Know the Fees You Might Have to Pay
A lease comes with many attendant fees that may not be immediately obvious. Understanding these fees will give you a better idea of the true cost of the lease:
- Inception Fees: Everything you pay at the beginning of the lease, including the down payment, registration fees, title fees, and taxes.
- Interest Rate: This is the price you pay for use of the car. The lower the interest rate, the less the lease will cost overall.
- Extra Mileage Charges: The amount you pay for each mile exceeding the miles allowed under the lease.
- Early Return Charges: Penalty fees for ending the lease and returning the car early.
- Charges for Extra Wear and Tear: Most dealerships expect a car to come back with some wear and tear, but may differ on the kinds of repairs that constitute "normal wear and tear." Make sure you understand what kinds of damage are excessive and how much you would have to pay for repairs.
Finally, make sure you're protected. Your lease terms should include gap insurance, which will pay for the difference between the worth of the car and what you owe if the car is ever lost or stolen. Make sure the manufacturer's warranty extends through the life of the lease, so that all routine repairs and maintenance are covered.