How Do Car Leases Work?

How Do Car Leases Work?

Posted on Friday, October 13, 2017

If you want to switch from new car to new car, leasing may be right for you.

Do you understand the process of leasing a car? For those who only need a car for a short amount of time, who like to trade up to the next model frequently, who do not have a down payment, or who even just do not want the hassle of buying a car, leasing a car can make a lot of financial sense. Is leasing right for you?

The Basics Of Leasing A Car

Consider a car lease a sort of long-term, more restrictive car rental. Instead of buying a car, you sign a lease and make a payment every month, usually with very little or nothing down. Over a set period of time, usually two to three years, you make your lease payments. Once the lease is up, you can buy the car or lease another one, although either way, you will pay a fee for the privilege.

Leases are a bit more restrictive than outright ownership. Dealerships use leases to ensure they receive a steady stream of late-model used cars, which usually go straight into their certified pre-owned program, so leased cars can only be driven a set number of miles over the life of the lease. You are also expected to keep the car in good shape and to come into the dealership for occasional repairs, recalls, and other matters. Think of it much like leasing an apartment; just like you have to keep the apartment clean and in good shape, so it is with the car.

Why Lease A Car?

Leasing a car might mean you can get something a little sportier.

As you can see, leasing is not for everyone. If you have to drive your car relentlessly, use it a lot for work or hauling heavy loads, or plan to keep a car for a long time, leasing decidedly is not for you. There are other factors that may not make a lease very appealing; most people want ownership of their car and use it to trade in for another one. Or they just want to be on the hook only to themselves if they get in a wreck.

In other situations, leasing cars can be incredibly useful. It is especially popular with younger people, people who travel and stay for long periods in places for work, and people who want a nicer car but do not feel any desire to own it. Leasing is especially popular for luxury cars because you get the fun without the obligation of dealing with the wear and tear.

So, depending on what you need, leasing may be right for you. if so, be ready. Just like buying a car, there is more to it than just the sticker price. Read the lease agreement closely and look at fees and your obligations, financial and otherwise. What happens if you go over miles? What are your repair costs and obligations? What happens if the car is a lemon? Make sure you understand all this before you sign.

Still, leasing should be on the table, especially if you want a nicer car, and want to trade up every few years, but do not want to deal with the costs of ownership. Leasing is not for everyone, but take a look at your options as you shop, and check out the research from CarFoundMe to learn more about every aspect of buying or leasing a car.