Leasing a car allows you to drive new, expensive cars for less. There are minimal, and sometimes, no down payments or upfront sales tax charges. The monthly payments are also low since you’re only paying for the car’s depreciation value during the lease term.
Statistics show that young people are more likely to lease cars than their older counterparts. It gives them an opportunity to drive luxurious car models that they can’t afford to buy. No matter your reasons for leasing a car, the below tips can help you get a good deal on a car lease.
1. Learn Leasing Terminology
You’ll encounter car leasing lingo a lot when leasing a car. Take time to understand the terms before discussing a car leasing contract. Here are the three most common terms, but there are many terminologies you’ll encounter when leasing.
- Residual value: This is the car’s anticipated value at the end of the lease term. The lessor or the leasing company uses a third party’s vehicle analysis tool and its market price to determine the residual value.
- Money Factor: The money factor is similar to the interest rate you pay on a car loan. The money factor is determined by dividing the annual percentage rate (APR) by 2,400.
- Capitalized cost: Also known as the cap cost, this is the price of the car at the start of the lease and any additional costs.
2. Calculate the Monthly Lease Payments
Create a realistic budget based on the amount you’re willing to spend on a car lease. Your budget should indicate the maximum amount you can pay comfortably each month. Use a car lease calculator to get the actual amount you’ll pay for the lease. Find out if you’ll also pay sales tax and factor that in. That way, you’re less likely to get tricked into getting a car that costs more than what you had planned to spend.
3. Know Your Mileage
Car mileage affects the monthly lease payments. Before signing a car lease agreement, have a rough estimate of the miles you’ll cover in a year. The typical car lease agreement in many dealerships covers 10,000 to 15,000 miles per year. Different terms may apply if you go below or above the limit.
The lower the mileage, the less you’ll pay per month since the car depreciation rate also reduces. Ensure you give a mileage figure that’s closer to what you’ll cover. If you overestimate your mileage, you may end up paying for extra mileage. On the other hand, you can end up paying for excess mileage at the end of the lease term if you underquote the mileage.
4. Look Beyond the Monthly Payments
It is easy to look at the monthly payments when leasing a vehicle. Don’t pay attention to experienced salespeople who try to entice you with low monthly payments. Take time to go through the lease contract and ensure you understand every detail before signing. Ask questions about the lease’s total cost and find out if a down payment is needed, the applicable fees, and the interest you’ll be required to pay.