Do you want to drive a brand new car without breaking the bank just for monthly payments? In that case, you might want to opt for car leasing instead. In many cases, leasing a car lets you drive a new car for less than you would have within a month on an auto-purchase loan for the same vehicle. The only thing you should note is that you won’t be able to own the car once the lease ends – that is unless the contract of your lease offers you the option to purchase the car from your dealer.
What is car leasing?
A car lease refers to a popular form of auto financing that lets you rent a vehicle from a dealership for only a specified amount of miles and a certain time length. When you lease a car, you generally make monthly lease payments, and in exchange for this, the dealer permits you to drive the car. Once you reach the end of your lease contract, you have the option to return the car to the dealership, or you can choose to buy out the lease should you want to own the car permanently – only if it’s an available option in your contract.
A good credit standing is usually required if you want to lease a new car. In fact, Experian data suggests that people who are leasing a new vehicle in 2020 had a 733 average credit score. FICo also considers a credit score of 670 and beyond to be satisfactory. It’s worth noting that even though you aren’t the owner of the vehicle you’re currently leasing, your credit reports will still show the history of your lease payment.
That said, there are also plenty of great
deals for car leasing that you can enjoy. Some companies provide special offers when you lease a car, which is helpful, especially when you’re finding it hard to choose a vehicle that suits your needs best. This way, you can guarantee that you’re driving a vehicle that’s in great condition without worrying about the risk or concerns regarding vehicle depreciation.
How is leasing a car different from loaning a car?
Vans for lease are almost similar to a car loan in many ways. A car lease typically requires the lessee (the person leasing the car) to put some cash down for the vehicle and make monthly payments, the same as what you’re required to do with car loans.
The difference is that a car lease has lower monthly fees compared to a car loan. However, these low-cost payments have a downside. Instead of gradually building equity in the vehicle, you’re only merely paying for the privilege or experience of driving it for an established amount of miles and time.
While you can usually apply for auto financing through third-party lenders or a bank aside from a car dealership, it’s not common to arrange a lease through a bank. In this case, you will most probably be working directly with a vehicle-finance company or a dealership.
At the end of your lease, which takes about two to four years, you have to return the vehicle to the dealership and walk away from the monthly payments and the car for good. However, it’s also possible that you can purchase your vehicle at the end of your lease if your contract allows it.
Is it possible to lease secondhand cars?
It’s possible for you to lease a used car. For this, it’s recommended that you work with a franchised dealership that can arrange to finance a certified and pre-owned vehicle. Examples of these dealerships can be Toyota or BMW.
Dealerships that adhere to the “lease here, pay here” rule tends to lease secondhand cars to individuals who have bad credit – but these types of leases are often full of “gotchas” and deceit. You may want to avoid leasing from dealers such as this to make great value for your money.
Is leasing the right option for me?
You might be considering whether or not leasing your car remains a practical and helpful option for you take. It’s worth noting that while monthly lease payments cost lesser than car loans, car leasing may still prove to be more expensive than a loan in the long run.
But even so, it still makes perfect sense to lease instead of purchasing a car, depending on your lifestyle and desires. Here are some situations where you might want to consider leasing a car:
- You need a vehicle for a short time. Maybe you’re residing somewhere short-term and require a car to move around. Taking a two-year car lease would make more sense than buying one.
- You don’t want to own a vehicle. If you view the prospect of owning a car as a hassle, car leasing may be best for you.
- You want to drive brand new cars. If you lease new vehicles exclusively, you get to enjoy the perks of a brand new car without the hassle of selling a secondhand one every time you trade up.
