If you are thinking about leasing that new car as opposed to purchasing it outright there are a few things that you should know. Leasing a car is a choice that CAN be a smart decision for some people because they MAY be able to get the car that they want for less (Hello, tax write-off for your business). The lower out-the-door, or “end of the year” cost I should say is considered to be the number one advantage over buying. With a lease, your monthly payment will usually be lower than if you purchased the car outright and made the corresponding payments. There are some drawbacks to leasing though. First off, if you decide to lease, you will have a miles restriction hanging over your head. For example, a 12,000-per year cap, or 36,000 miles for a 36 month lease. Go over that limit and you’ll be forced to pay up for each mile over (between 5 to 20 cents per mile. Ouch!) This may not be viable for some people, or at the least put a damper on that cross-country road trip you had planned. Secondly, you will never be the owner of the car. When the lease is up you go back to the dealership and turn the car back in (there can be a lease-with-option-to-buy method however).
Make sure to check for lease specials if you decide this is the road that you want to take. Lease specials are advertised by most dealerships when they have something special that they can offer on a certain make or model. Traditional means of advertising such as print and television are a great place to learn about any potential deals out there. When looking for one make sure that you find one that has no, or a low, down payment. Unless you’re looking for a luxury car, in which case you may have to put down between $3,000-$5,000 according to what I’ve seen recently advertised. When you lease, any money that you put down up-front can never be recuperated because you will not own the car. This upfront cost is partly paying for the depreciation of the car, just as the monthly payments are. Leasing is mostly a question of lifestyle for most people. Many like to swap cars out for a new one every few years simply for the thrill, while some go for a lease simply because they can write off 100% of the lease payments which they wouldn’t be able to do if they purchased the car instead. (If neither of these options apply to you, we’d highly recommend buy a used car, or a 2-3 year old CPO (certified pre-owned) and letting the first owner take the big depreciation hit, rather than putting so much money into a liability.
At any rate if you do decide to lease, once you’ve gotten several quotes and visited the local dealers and negotiated and shook hands on a great deal (P.S. If you want to streamline the process you can get multiple quotes from all the local dealers in your city with a few clicks. Visit a site like New Car Leases at Automotive.com, one of the oldest auto research/buying websites that can actually save you money). Once you’re at the dealer and are filling out the paperwork, carefully review the lease agreement before you sign anything. There are some important details that you must consider in order to ensure that you are getting the best deal possible from the dealership. The length of the lease should be one of the first things that agree on. Since leasing a car is a big decision, you need to know exactly how long you will be driving it. Make sure you are comfortable with this number in comparison to the price point. The typical lease is 36 months. Also, be sure that you know exactly how much you will owe at the time of signing. If the monthly payments sounds too good to be true make sure you will not owe a big sum of money upfront. The more you pay upfront, the less your payments will be. In the long run, since this is a lease, it makes sense to have monthly payments that are a bit higher as opposed to a large down payment. Why let them use your money for free? Also, very importantly check the amount of miles that you are allowed to drive per year. The standard amount of miles allowed with a lease is 12,000-per year. Make sure that your lease is for this amount at minimum. Lastly, you will want to ask about gap insurance and iron out the details. Say if you drive off the lot and somehow end up wrecking the car, you don’t want to be upside down.