Car Leasing Basics – 4 Auto Lease Tips You Cannot Ignore

car-leasing-basicsOver the past few years, the popularity of car leasing has increased manifolds. Car leasing is an great concept to reduce your overall monthly costs and provides you an option for qualifying to use a better car in the same monthly outgo.

But still many people are afraid of car leasing deals and think that the basic process of auto leasing is related to something fishy and scams. This fear basically emanates from lack of understanding towards the basics of car and automobile leasing. Car leasing is a great concept, the only thing required is to know the tricks of the trade. In this post, we will present the basics of car leasing and offer some useful tips.

What is Car Leasing

Car leasing is a concept, where you get a license to use the vehicle for the leasing period and return the vehicle to the leasing company after the expiry of the lease term. You have to pay an amount depending upon the difference of original price of the car and its depreciated value at the end of the lease term. This reduces your monthly payment outgo considerably as compared to the ‘buy’ option, where you are required to make a down payment in the beginning or pay large monthly payments since you are not returning the vehicle after the expiry of the lease term.

5 Things to Understand Before Making a Car Leasing Decision

Once you have understood the basic concept, let us give you 5 basic facts, which you must consider.

  • Automobile leasing requires you to have a good credit. After all, auto leasing companies are there to make business. If you credit score is low and you have not been able to service your loans dutifully in the past, then chances are that you will not be able to find a great auto lease deal.  In such situations, it might be better to go for buying.
  • Please understand that the leasing companies would need to profit from you. Do not expect the moon from them.
  • Search and research a lot before finalizing the lease deal. There is a lot of difference in the value of different auto lease deals. Please make yourself familiar with the jargons used in the industry and enable yourself to compare different offerings.
  • Be prepared to shell out good money on the car maintenance. Please understand that you are responsible for the maintenance of the car in a leasing arrangement. Many people mistakenly understand that like in a rent-a-car option, maintenance is the responsibility of the leasing company. It is not true.
  • Leasing option is wonderful if you are in a habit to change your model after 2-3 years. Definitely go for leasing if you are the type who wants to own the latest cars in the market. You cannot think of buying a new car every now and then if you are not in possession of a lot of money to spend.

4 Car Leasing Tips

Here we present you 4 useful tips, which you cannot afford to ignore before finalizing the deal.

  1. The depreciation cost of different models and different makes vary a lot. Your monthly payments depend on the depreciated value. So, you need to choose a car, which fetches large depreciated value. It is seen that Japanese and European cars usually have lower depreciation rates, as compared to the American vehicles.
  2. Most luxury cars have the lowest depreciation values. Again understand the importance of depreciated value. If you can carry on with a non-luxury car, then go for it. Luxury cars are always costlier leas deals because of their low depreciated value.
  3. Choose a shorter lease period. A shorter lease terms allows you to optimize the warranty of the vehicle.
  4. Yet another reason for choosing a short term lease is that for a long-term lease the car’s value will decrease by the time the lease ends, and this is mostly when engine problems begin.
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Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.