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Lower Payments and Zero Down
Lower Payments and Zero Down
Since the amount a vehicle depreciates over a lease is less than the cost to finance that vehicle over the same time period, monthly lease payments can be less--considerably so in many cases. This allows consumers to use the money they save for other things, or to lease a more-expensive vehicle than they could normally afford to finance for the same monthly payment.
To arrive at this monthly lease payment, a leasing institution (the "lessor'') combines:
the vehicle's estimated depreciation over the lease period,
the interest being paid to the lessor to finance the vehicle, and
assorted dealer fees.
Most leases can be started without a down payment (known as a "capitalized cost reduction," in leasing terms). Again, because lease payments are based on a smaller amount of money than if the vehicle was financed, less money is needed upfront to initiate a lease. A down payment may be used in some cases to lower monthly payments; however, this counters one of the main benefits of leasing which is getting a new car with little money down.
Two and Three Year Leases
Two and Three Year Leases
The short lease periods available are very attractive to consumers who like the idea of driving a new vehicle every two to three years. It also helps keep maintenance costs down by avoiding the high cost of maintenance and repairs that an older vehicle with high mileage often requires. Since most manufacturer warranties cover vehicles for at least the first two to three years--with the exception of required routine servicing--most serious maintenance costs get absorbed by the manufacturer anyway. Extended warranties and protection packages can be purchased.
Returning the Vehicle at Lease-End
Returning the Vehicle at Lease-End
At the end of a lease, you have the option of returning the vehicle to the lessor or purchasing the vehicle (you will know the history). If you choose to return it, some basic requirements must be met.
First, the vehicle must be in good shape (as determined by the leasing company - checklist) and free of excessive wear and tear. Any evidence of rough or abusive treatment will result in repair costs being charged back to you.
Second, the vehicle must be returned as delivered. Any performance modifications or aftermarket parts should be removed and the vehicle returned to original condition.
Third, total mileage should not exceed the annual mileage cap set by the lease agreement. If the vehicle has more mileage than the lease agreement stipulates, you may be charged anywhere from 10 to 20 cents per kilometer over the mileage cap.
Often some of these requirements can be overlooked if you plan on leasing or purchasing another vehicle from the same company (watch for hidden costs).
Buying the Vehicle at Lease-End
Buying the Vehicle at Lease-End
If your lease includes a purchase option, you may choose to purchase the vehicle at the end of the lease. In evaluating this option, another set of factors must be considered.
The top factor is the vehicles lease-end value, or residual value. With the more common closed-end lease, the end value is actually calculated at the beginning of the lease. This ensures that you pay a predetermined amount regardless of the vehicle's actual market value. If the market value is higher than the end value, then you're getting a good deal. If the end value is less than market value, the lessor absorbs the loss, you don't. Regardless of market value, you pay the same amount.
Source: YouTube
View the video: "Buying vs. Leasing a Car"
View the video: "Buying vs. Leasing a Car"
In this video, the presenter compares the costs of buying or leasing a car, whether keeping or returning the car at the end of the lease.
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