What Is A Car Lease? Details You Positively Need To Know

line of parked lease cars what is a car lease

What Is A Car Lease & What Do You Need To Know?

What is a car lease?

It’s not a new thing. People have been buying cars and financing their vehicles through auto leases for a long time. But if you’ve never tried it before, it can look tough.

So how does someone lease a car and is it a good idea for you?

white automobile parked on ocean beach

Leasing tends to work for car owners who enjoy having the newest gadgets and tech. People who don’t drive often, those who don’t have many payments lefts on their car or have a car to trade in.

So here is a quick list of car lease tips that’ll help you avoid mistakes and answer the question what is a car lease.

What Is A Car Lease?

Leasing helps lower the cost of the monthly payments of purchasing a car. It helps you to find out how much you spent on a car. Once you’ve figured out how much you can spend, you can begin checking out car leases that work with your budget.

New cars usually lease the most. Though used cars sometimes lease as well. What is a car lease is selling a part of the car’s value instead of the full price? Your budget may go a bit further using leasing and you might even be able to purchase a brand new car.

While you’re checking out vehicles, narrow it down to a couple options as soon as you can. If you can figure out what features matter to you and the cars that have those features, you’ll be solid once you arrive at the dealership.

Saving Money

While you’re looking at new vehicles, check out the fuel efficiency of each vehicle. The EPA’s ratings are updated and closer to miles per gallon in the real world. So new cars will for sure make that mileage. The less you spend on gasoline every month, the more money in your pocket.

Doing some research could also reveal some cool perks that might lower your monthly cost. Such as a warranty that goes for as long as the car lease. That’s pretty common.

lap top camera coffee finance

A few manufacturers add in maintenance costs, such as tire rotation and oil changes for a short amount of time. Sometimes the dealer provides roadside assistance as well.

Lastly, a few advanced safety features could decrease your monthly bill. Call your insurance company ahead of time and see if systems such as emergency braking would decrease your bill.

Comparing

Dealerships offer different types of car leasing options that depend on make and model. But you can find deals on any type of car, from pickup trucks to SUVs.

After you figure out your budget and what kind of lease car you want, you can check out the car lease deals in your area. A good starting point is the Best Lease Deals, a list of car lease special offers every month.

Miles Matter

On average, Americans drive 13,000 miles a year. Most car leases allow room for 9,000-15,000 miles, with 12,000 the most common in a year. Most car owners drive more than a car lease allows.

Knowing how much a person drives is important information. Many car owners drive less than 10,000 miles a year, though there are also lots of people who drive up to 20,000 miles every year.

Knowing your needs as a drive and daily habits will help you find out how much you’ll pay when your car lease is up.

Leases will hit you hard for driving more than the car lease allows, often 20 cents per mile. If you continue driving past the limit and exceed five miles, you’ll pay an extra dollar when you return your car.

Negotiation

The monthly payment will probably be the most important number for you to keep track of. But once you’re talking to a salesman at a car dealership, there are other things to consider such as the purchase price.

shaking hands on negotiated deal

Negotiate the purchase price right away.

Your monthly payments will be based on the total price of the car with the features you agree to. You could prepare yourself by looking over the Best Price Program before starting negotiations.

Trade-Ins and Down Payments

When purchasing a car instead of leasing one, people often get a down payment of 20 percent of the total price. This often includes the total value of the car traded in. In other words, anything that decreases the amount of money you borrow equates to the “capital cost reduction.”

Large down payments are not needed when leasing a vehicle. Some leases include zero down lease deals. Though if that’s the case the buyer’s credit rating would have to be amazing.

This doesn’t imply that trade in cars and down payments can’t apply to a lease car. Whatever decreases the amount you’re investing equals a lower payment for you.

However, if something does happen to the car, such as grand theft auto, you won’t be able to get your money back.

So getting the lowest payment possible is a good idea.

Closing Costs

There will be more to pay for even after your down payment and/or trade. Taxes and fees apply after you lease a car. Often ads will say something along the lines of, “2,999 due upon signing.”

The dollar amount will differ depending on the dealership. But they must tell you the total amount you’re paying. Check your car lease, somewhere on the front page, there will be a list that will show you how the dealership got the price you’re paying.

black board with costs showing upward arrow

That amount usually has things like title fees, registration fees, and the first payment. If you’re trading in a car or putting money down, that amount should be included on the list as well.

Get Started

Hopefully, now you understand what is a car lease.

These tips should help you trade in your car or put a payment down with a good idea of how to go about it.

For information on auto leases and on a credit and how to best handle it, check out our website here.

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6 Comments

  1. Hi Patrick –

    I was not a fan of car leasing, but that was before.

    I’m quite frugal and I do want to have a period of no car payment to save some money.

    But after keeping 2 cars for 15 years, maintenance costs felt like car payments, even more so. So I turned to auto leasing and has never been happier.

    Thanks for explaining why a low down payment or no down payment is better.

    Now I get it. I’ll check out the best lease deals since my car lease will be up by the end of the year and I need to know the best deals out there.

    Great post!
    Gigi

    • Hi Gigi,

      There is always two sides to the coin.  Owning versus leasing is the same it just depends on what’s best for your particular situation.

      Just as you pointed out, over time it can become more costly to maintain a car and you can end up holding it too long. 

      Some times you can get the car you want for far less than purchasing it.  And if it’s one that holds it’s residual value you could come out ahead at the end of the lease.

      That’s why it pays to do your research before you head out to the dealership.

      Another feature that I like about leasing is that when you have no trade-in or you are short on cash for a down payment, you can always get into a lease car for a low monthly down payment.

      All the best.

  2. I never knew that there was a thing such as a car lease but then again I’m not a car person haha!

    This is something that I need to think about as I am trying to be frugal in most aspects of my life.

    Thank you for taking the time to write this article, I will be sure to do my research.

    • Hey my pleasure,

      There is more than one way to finance a new car.  Some times the lease deal is better than buying outright, you just have to make sure by doing your research.

      You could save a bundle with all the car lease deals available.  Generally you will be facing a lower down payment and most programs offering warranties over the life of the lease.

      One of the downsides to leasing is there will be a mileage limitation. So if you drive a lot it’s probably not the right way to go.

      When you have your choice nailed down, make sure you negotiate the purchase price first.  Get the lowest price possible for a car lease, as this will impact your monthly payments the most.

      Best of luck.

  3. We are currently in the market for a new car, so a car lease my be an option for us.

    I have not thought about the mileage at all – which could be a problem, considering that we are planning on taking several long car trips over the term of the lease.

    Thanks for opening my eyes to what I should expect, should we chose to lease.

    Blessings!

    • Hi Claudia,

      If you are in the new car market and have limited resources and want a small down payment a lease might be a consideration.

      If you are contemplating several long road trips, this may be detrimental to leasing a car. If you know the mileage you will be travelling you can negotiate a lease that includes higher mileage. This will cost more, but it still may work out for you.

      There are many pros and cons to a car lease, but if you consider all of your options you may find this to be the best strategy for you.

      Best of luck!

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