Leasing a Car the Smart Way
A Car Lease involves paying a small amount of money in order to drive a car. Monthly installments made for the term of the lease, and on expiry of the term, you return the car. Before leasing a car, it is important to think whether it is right for you to start with. If it is, then follow the right way to ensure that what you are getting is the best deal.
Leasing a Car
However, leasing a car has some disadvantages. These include:
- Your ownership of the car is limited with the lease agreement. Since you only rent the car, you do not have equity in it to channel towards purchasing of another vehicle.
- Terms of lease can contain unfavourable penalties and may confine you to paying the penalties if you fail to meet what is required in the agreement.
- The effect of prolonged lease spanning a few years, say 12, may surpass that should you have bought one car either new or used.
Majority of those who like leasing go with the fact that monthly payment is less than the actual purchase plan because you are not paying for the car. On the other hand, you are actually paying for the amount by which the car is likely to depreciate between the times in which your lease remains in effect, interest and fees factored in.
Interest rates are lower nowadays relative to prices for used cars, a reason for the low lease rates that attract most of the car hires.
Once you have decided to lease a car, you need to consider a number of factors. These are:
- Your cash flow in a month will determine whether car leasing is a good deal. I f you need access to more money in a month, leasing it will favour you.
- You need to consider whether you have enough money for down payment and initial cost. Most leases have low down payments, waived depending on what you agree.
- How much you drive also is very important. Some car owners charge per mile travelled to cater for the wear and tear of the car under hire.
- Your experience on maintenance of a car will also guide you since those who are prone to damage or scratches are not suitable for lease to prevent unbudgeted loss.
- The purpose of the leased car also needs be considered. For instance, driving a leased car for business will lead to depreciation and car finances deducted in your taxes.
- How long you intend to keep the car and your flexibility. Leases do not know emergencies or challenges that can be risky especially if you cannot alter your schedule; you may end up incurring penalties.
Once you see the binding agreement, check to make sure the capital cost is the price you have negotiated, and a reasonable acquisition fee from the bank. After setting the capital cost now, look at the terms of the lease contract. Consider how much the lease costs right at the beginning before you even get the car. Ensure that you understand the expected of you after entering the contract. Try to reduce your attachment with the car because if you do and decide to purchase it once the lease expires, you may end up paying more than the car is actually worth.