Buying a car is often a rite of passage for many, but finding the right car, not to mention handling the complicated finances and terminology, can be daunting. And some prospective buyers may not be able to afford to buy a new or used car, but there is another route. They can instead find lease deals on new or used cars, and this can be a convenient option for a budget-minded buyer, especially one who does not need to own a particular car for decades on end.
What is a Lease?
Essentially, a lease is a loan on a car, rather than buying it outright. A lease contract sets the terms, such as how many months the car will be leased, the car’s value, and the interest, or “money factor,” being paid on it. The buyer will pay a portion of the car’s value based on its depreciation, plus paying relevant taxes and fees. These are often new cars, since they have better reliability than older ones, but used cars still get around: around 40 million used cars change hands every year between private-party and dealership sales, and some of those are bound to be leases. And car dealerships are ready to help buyers find good lease deals: nearly all car dealerships offer on-site financing, and many will work with around 5-10 different banks or loan providers so they can offer competitive rates. There are plenty of used cars and new cars alike to be had. How can leasing be done?
The Process
According to Nerd Wallet, there are several clear, easy steps to follow to get the best deal on an auto lease. First, choosing a car that holds its value, or has limited depreciation, is optimal, since that reduces payments on it. The leftover value of the car is the “residual value,” and more is better. Also, a buyer looking for lease deals can search for special deals, since dealers who have slow sales may make their cars more attractive this way.
Once a car’s desired make and model is chosen, the buyer can look up its fair market value and get a quote from the dealer (without telling them about the intent to lease). The buyer can view his/her options online or in person and find the exact car with the desired features, options, and price, then tell the dealer that he/she will lease the car, and negotiate the terms for it. Good lease deals are based on the buyer’s intended use for the car, price range, and anything else relevant, and these terms may be difficult or impossible to modify later, so carefully setting them now is essential. Once the deal is set, the buyer can request that the car be delivered, and the documents are all filled out and signed, and the buyer will probably pay an acquisition fee and/or a disposition fee. Of course, having insurance on the car is important for lease deals, too, and avoiding damaging or wearing out the car while using it is essential. There could be penalties for excessive wear and tear when the leased car is finally returned.
