Car leasing allows you to drive a car in a fixed mileage and month. This is similar to renting a house instead of buying a house. Although it involves a less long-term commitment, you still have to pay for it.
Advantages of car leasing:
Because you don't pay the full value of your car, you usually have a lower monthly payment.
If driving a newer or high-end car is important to you, your monthly rental fee will be more affordable than paying a large deposit to buy it.
If you rent a car, you usually get a new car. This can help save on ongoing maintenance costs.
Disadvantages of car leasing:
When the lease expires, the car won't be yours. You have to buy a new car or a rented car.
At the end of the lease, if you don't rent another car from the dealer, you may also need to pay a vehicle payment fee.
Most car leasing has mileage limits. If you drive more than your quota, you will have to pay a high fee per mile.
Questions to ask before leasing
Before you decide to rent a car, consider your priorities:
Do you want to buy a new car or a used car? If you choose to rent a car, the monthly supply of a new car may be less.
How many miles do you drive every year? If you drive a lot, leasing may become expensive.
Can you look after the inside and outside of the car? If you return the car in poor condition, you may have to pay an extra fee.
How to rent a car
If you are going to rent a car, please follow these steps:
Do your research. When renting a car, you have almost unlimited options. You should first narrow down the types and brands you are interested in and consider whether the price is in line with your budget.
Visit dealers. Next, visit several dealers for a test drive. This will help you narrow down what you're looking for
Negotiate lease terms. When you visit a dealer, you're not just talking about the price of the car. In the leasing process, almost everything can be negotiated. The negotiation stage is your only chance to get a written allowance
Maintain your car throughout the rental process. Remember that you must return the car at the end of the lease. If the car is bad, you may have to pay extra.
At the end of the lease, you will have several options. You can give your car to a car dealer, buy a car or rent a new car.
Mistakes to avoid when renting a car
Leasing can reduce your payment, but if you don't pay attention to those small words, it may end up very expensive. If you decide to rent your next car, please avoid the following five common mistakes.
1. Too much money in advance
2. Do not buy differential insurance
3. Underestimate how many miles a car can run
4. Do not maintain the car
5. The car rental time is too long
Common lease conditions
When renting a car, you may encounter some common rental terms and definitions:
Capitalized cost: the amount you will pay to rent a car.
Closed lease: also known as a free lease. At the end of the lease term, the lender is responsible for any reduction in the residual value of the vehicle.
Depreciation rate: the depreciation rate of the car during the lease term
Differential insurance: Asset Protection (differential) insurance covers the difference between the value of the car and the money you owe on the lease.
Currency factor: the interest rate equivalent to rent, usually expressed with decimal points, such as 0.0015. You can multiply the currency factor by 2400 to get the interest rate (3.6% here)
MSRP: indicates the manufacturer's recommended retail price. This can be used as the starting point of vehicle initial value negotiation.
Open lease: you are responsible for any change in the residual value of the car. Therefore, if there is additional mileage, damage, and wear, which hurts the value of the car, you are responsible for the difference between the residual value of the car and the expected value when you sign the lease.
Residual value: the value of the car at the end of the lease term.
In general, choosing to rent rather than buy a car is a good way to drive a new car with the latest technology and functions, and spend less money every month. But you have to do your homework, shop around, pay close attention to the lease terms, and make sure the lease you get is in line with your driving habits and budget.
