Leasing a Car the Smart Way


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While it generally makes more sense to buy a car rather than to lease one, it can occasionally be worthwhile to lease. Before you sign the document, make sure you understand exactly what the lease entails.

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Buying a car can be rather complicated, as the whole process tends to be somewhat mysterious. It’s often hard to know if you’re getting a good deal or not, even as the salesman claims that he’s selling you the car “at invoice.” Leasing a car is much the same way, except that the terminology is different and you don’t get to keep the car. You’re still going to spend a lot of money, though, so it makes sense to be as well informed about leasing as possible.

For most consumers, leasing makes less sense than buying. When you buy, you have a tangible product that you can resell later or trade in for a new one. With a lease, the only thing you are buying is the right to use the vehicle for a while. If you don’t drive a lot or if you just like having a new vehicle every couple of years, leasing may be a good choice for you. Before you get involved, here are some things you may wish to consider:

The money factor – This is the equivalent of an interest rate on a car sale. The money factor, in order to remain mysterious, will be presented as an odd number with a lot of decimal places. To convert it to an approximate interest rate, multiply it by 24. The money factor, like just about everything else in a lease, should be negotiable.

The amount due at signing – The size of the check that you have to submit when you sign the lease can be sizable. You’ll hear a lot about low payments in the commercials, but little (except in the fine print) about the amount you have to pay upfront. That will include title fees, license fees, deposits and a reduction in the capital cost that will reduce the size of your monthly payments. Ask about this ahead of time; you don’t want “sticker shock” when you see the total.

Duration of the lease – Make sure you understand how long the lease will last. If you want a car for three years, make sure the lease isn’t for 24 months.

What happens at lease end? You may have to pay, or you may get to walk away, or you may have the opportunity to buy the vehicle. The end of lease situation is spelled out in the document; make sure you understand it before you sign.

Total mileage allowance – The lease will stipulate how many miles you may drive over the course of the lease; you will have to pay a per mile charge if you exceed that. The per mile fee can be excessive, so make sure that the number of miles that you are given matches your driving expectations. Keep in mind that the mileage amount and the per mile fee is negotiable.

Each of these things can be an expensive nightmare if you aren’t prepared for them. Leasing a car is different from buying one and you need to understand that long before you sign your name on the contract. Otherwise, you could be in for an expensive ride.

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