Do you want to drive a higher-priced car but are unable to afford it? If you want to avoid a car’s depreciation and reliability issues in the long term or are looking for a more cost-effective option to acquire a new ride then you should lease a car. Leasing new or used cars is a great way to avoid paying more than you can afford.
What Is a Car Lease?
A car lease allows you to drive a car from a dealership for a specified time and miles. During this period, you make monthly lease payments for the vehicle usage. When the lease expires, you return the car to the dealership, but you can opt to start a new lease with a new car. If the lease has a buyout option, you can choose to buy and keep the car.
Features of an Auto Lease
Depending on your financial situation, leasing a car can be more appealing than buying one. Before signing the lease agreement, research your options. You should know how a car lease works, the restrictions, and the penalties involved. To get started, check out the following features of an auto lease:
An acquisition fee is a fee charged by a car leasing company to originate the lease. This fee covers the administrative costs of drafting and setting up the lease. These costs include verifying your personal details and checking your credit report.
The acquisition fees vary depending on the company you’re working with and the car you’re leasing. A high-end luxury vehicle often has a higher acquisition fee than a mid-priced one. For a better deal, you can negotiate or find a lease without the acquisition fee.
A lease buyout is an option to buy the leased car. The buyout option allows you to own a vehicle you understand and are comfortable with. You avoid the involved hassles when returning the vehicle to the leasing company.
To own the vehicle through the lease buyout option, you need to pay for:
- The vehicle’s residual value
- Any remaining lease payments
- Sales tax
- Other fees outlined in the lease agreement
If you’re thinking of a lease buyout, make sure your lease agreement has the option. You will need to understand the various factors that will impact your buyout price. These factors include the car’s value, timing, and financing.
This is the calculated value of the leased car at the end of the lease. In most cases, this figure is given on the lease contract. The residual value helps determine your monthly lease payments and buyout price if you decide to buy the car.
This feature is also known as the cap cost. Capitalized cost represents the initial price of the leased vehicle. The cap cost includes additional costs such as registration fees, taxes, insurance, and service contracts. Some ways to reduce the cap cost include down payments, manufacturer rebates, dealer coupons, and trade-in allowances. The cap cost may be negotiable.
Capitalized Cost Reductions
Capitalized cost reduction is the down payment you make when leasing a car.
In the car lease, you pay for the difference between the cap cost and the residual value of the leased vehicle. Since the down payment reduces the cap cost, your monthly lease payments will reduce.
Capitalized cost reduction is not a mandatory requirement. If you prefer paying the down payment, you can decide on the amount you want to put down.
An auto lease contract has a fixed mileage allowance. If you exceed the agreed mileage allowance, you’ll have to pay an extra charge for every mile traveled. While you can negotiate for a higher mileage allowance, your monthly lease payments will increase.
A lease disposition fee is charged at the lease expiration as you return the leased car. This fee covers the costs of preparing the car to sell it. These costs may include reconditioning or cleaning expenses. You may avoid the disposition fee if you purchase the leased car or lease/buy another car.
Lease a Car with Ease
If you want to optimize the benefits of a car lease, you will need to understand it first. These are some auto lease features you’ll come across when you lease a car. Leasing a car is an affordable option for anyone interested in getting new or used cars. Contact a broker for more information today.