Leasing a Car: Step by Step Guide
More and more people nowadays prefer leasing a car rather than buying it. A few years ago leasing was an unknown term and people had no idea how it works and what benefits it brings. However, nowadays the number of people who lease a vehicle is increasing with a rapid speed. Before diving in depth into the topic, it is important to make it clear what leasing a car means.
Car leasing can be compared to renting where a person choses a vehicle for an agreed price for a certain period of time. Leasing agreement allows driving but not owning it. You have an absolute freedom of choice over the vehicle’s model, make and model. Leasing contract is tailored specifically to you and it specifies the annual mileage that is allowed, the length of the contract and how you want the payments to be structured.
Leasing is a very straightforward process and it works in the following way. When you decide on the car, you will have to make the down payment, which is mostly common known as an initial payment. In the vast majority of cases, it equals the approximate monthly payment. Then, you will just have to make monthly payments based on the amount mentioned in your leasing contract. These payments will have to be done until the end of the contract. Typically, monthly payments are lower when the contract is set for a longer period of time.
When the contract reaches its expiration date, you simply need to return the vehicle back to the dealership. In case if you surpass the allowed mileage, you will get exposed to additional penalties imposed by the dealer. Now, when it is clear what car leasing means, it is time to depict a step by step guide for leasing a car.
1. Get acquainted with leasing
As was mentioned above, car leasing is just like renting but for a longer period of time and for extra cost. More and more people prefer leasing a vehicle rather than buying it as it allows driving a new car for less money than when buying it.
2. Construct a leasing agreement
Specialists recommend leasing a vehicle for no longer than three years. This is normally due to the fact that during these three years, your car will be protected by the manufacturer’s warranty. However, there are people that decide to increase the leasing duration to four and even five years in order to lower the monthly payments. Although, it can lead to investing more money in a car that might never be yours.
You should also keep in mind that the majority lease deals have a limitation on the number of miles allowed, which typically accounts for 12,000 miles per year, which, in turn, equals to 36,000 miles for three years’ period. If you surpass that millage you will have to pay penalties accounting for approximately 10-15 cents for an additional mile.
3. Calculate the monthly payment
It is advised to make estimations of monthly payments by yourself in order to determine a good deal as you proceed with searching. The formula for calculating the monthly lease payment might look quite complicated in the beginning but with some patience it is possible to do it by yourself. In addition to that, there are a number of online services that can perform this action for you. These services are able to make calculations while taking different factors such as down payment and mileage into consideration. However, before making estimations, you need to know the residual value of the vehicle. This can be accomplished by calling the finance manager at the dealership and asking for a three-year residual value of the vehicle that you want.
4. Check the manufacturers’ lease deals
A lot of car manufacturers offer extremely discounted lease deals. Although, these advertised specials might have additional, hidden costs. Thus, you should always check if the promised monthly payment includes sales tax and fees. Additionally, these special deals require high drive-off payments that are sometimes similar to the down payment when you buy a car.
5. Test drive a vehicle
When you have already done your research and have decided on the car you want, it is time for the test drive. This is the best way to get an understanding whether the car is suitable for you. It might be the case that you like the car and it matches all your criteria but when you test drive it you are not satisfied with it anymore. Therefore, you should always ask a dealer to give you a car for a test drive before you actually sign a leasing contract.
6. Test drive a salesperson
Another important detail that a lot of people underestimate is test driving a salesperson of the dealership. It simply means that you need to determine whether you feel comfortable dealing with this person. Some of the factors to be taken into consideration is whether he/she responds to your phone calls and whether your questions are answered in a straightforward manner. Apart from that, it is also advised to check the reviews of the dealership you are considering.
7. Negotiate the lease payment
At this stage, you will normally have a price quote and an understanding of the level of customer satisfaction at the dealer. If you want to get a better deal, you can always contact other dealers that have the vehicle you want and see whether they can beat the price. Do not forget to ask a salesperson for the worksheet illustrating all the numbers in the deal. By doing this, you will get acquainted with all the hidden costs associated with a deal. Do not forget about sales tax, which needs to be included in your full monthly payment.
Another thing that might be helpful for you is requesting to have the car delivered to your home or office. By doing this, you will skip the step of visiting the finance office where you will be told about additional products such as fabric treatments and alarm systems.
8. Assess and sign the paperwork
The last step of leasing a car is reviewing and signing the paperwork. Despite the location where you want to close the deal, a sales representative will ask you to sign a lease contract and a number of documents. If you have already seen the worksheet for the deal you have committed to, signing of the contract will be just a formality. Even though, you have to make sure that numbers in the worksheet match with the numbers in the contract and no additional fees or charges were added. Without any doubt, you will want to close the deal as soon as possible and drive your new car but you have to understand you are signing and what it means. Keep in mind that when you sign a lease contract there is no way back.
Another important detail to be mentioned is that you have to ensure that an agreement includes a gap insurance, which can protect you if the leased car gets stoles or completely damaged in an accident. Keep in mind that the time that you put into the research before leasing a vehicle is going to pay dividends over the years. You will not be just driving the car of your dream but you will be also saving money in the long-run.
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