Automotive financing can be an extremely confusing thing to think about when looking for a new vehicle. Unless you have the luxury of buying a car, truck, or SUV with cash, it is also something you will likely consider at some point in the purchase process. Depending on how much your experience with typical car loans and leases, you may find yourself confused by complicated terms and legal concepts that may seem like a foreign language. The good news is a little bit of knowledge goes a long way. This is especially true for something that can be even more confusing than automotive loans: car leases. As another attractive option to afford the car that you want or need is for example, something like a Chevy lease.
The reality is car leases can often be an even better choice than a traditional loan or financing for some people. Depending on what you need from a car, how long you intend to use it, the number of miles you drive each year, and what your budget is, a lease agreement can make certain options possible with lower monthly payments. The key is understanding the basics of what a car lease is, and how it can help you.
Car Leasing 101
Anytime you ask a salesperson or go online to research car leasing, you’re likely to come across a lot of technical and legal jargon that doesn’t adequately or easily explain what a lease actually is or entails. When you remove the complicated wording, however, a car lease is actually surprisingly easy to understand.
Anytime you lease a car, you are essentially renting it over a long period of time. Much like financing a car, you pay monthly payments for the vehicle until the end of the agreement. Unlike a loan, however, at the end of the term period, you will return the car or pay the difference on it completely. This gives you the option to hang onto the vehicle or upgrade to something new/different if you want without having to sell your existing ride.
It is important to understand how lease agreements are determined, especially when it comes to the final price you will be paying.
Essentially, the cost of the car that determines your monthly payments and is based on the final price you negotiate and the expected value of the car at the end of the leasing term. In other words, you are paying for the amount the car depreciates over time. As a result, you will be paying less during the leasing term unless you purchase it outright at the end.
The Benefits Of Car Leasing
Ultimately, a car lease is very similar to an automotive loan in the sense that it helps you afford something expensive over an extended period of time. With that said, there are many benefits to leasing over traditional automotive loans that you should consider before making a final decision. As an example, leasing is an excellent option if you are not the type to keep a vehicle for several years.
The great thing about these agreements is the ability to find a new vehicle at the end of the term. Since you give the vehicle back, you don’t have anything to sell or trade-in. While it may seem like you are losing out on the trade-in value of the car, this is usually something you did not pay for in the first place. In other words, you are not losing out on extra money.
One thing that attracts many people to the option of a car lease is lower monthly payments. Since you are paying a much smaller amount in the long run compared to the price of the vehicle, you will see this on a monthly basis. This can even be an excellent way to afford a vehicle with a higher price tag than you would normally consider. Lower monthly payments mean more vehicle for less money and some extra cash left over for other things.
In truth, car leasing tends to be more appropriate for potential owners with a certain type of personality. Drivers who like to keep their vehicles for years, driving them into the ground before getting a new one, are better off with typical loans. This is because a car lease is meant to be a short-term thing. Rent the car for three years, return it, go for something new. This basic idea is why dealerships offer car leases in the first place: to cater to the individuals who like to have the latest and greatest every few years if possible. If you are one of these people, a car lease might be the great option.
Things To Consider
It’s important to remember that leasing, just like any other financing option, is not without its flaws. Once again, make sure your mentality is appropriate for the nature of leasing a car: do so only if you will be purchasing something new in a few year’s time. Otherwise, you may actually end up spending more money if you extend the lease or purchase the car outright compared to a typical automotive loan.
Most car lease agreements also come with certain restrictions to minimize the wear and tear on the vehicle during the term period. As a result, you should plan on monitoring and limiting your amount of driving each year. Traditionally, many lease agreements have a 15,000 mile per year limit. Going over this limit is still possible, but you will be paying extra.
Finally, consider all of your options before making a final choice on a car lease. If you know that you want to lease a car, look at different dealerships to see which one can provide you the best terms. A car lease is just like an automotive loan in that it pays to research and compare different options before signing on the dotted line. This way, you will be able to save more money without having to make any sacrifices on the vehicle that you want to purchase.
When done right, leasing can be the perfect option for almost anyone to afford the vehicle they want. Combined with the extra perks of upgrading to something new and lowering your monthly payments, a lease is certainly something you shouldn’t ignore.