Leasing a car can be a better option than buying one under the right circumstances. However, you have to be careful to ensure yours is a situation in which an advantage can be derived from doing so.
Taking note of these factors to consider when leasing a car can help you get the most benefit from the arrangement.
1. Your Credit Score
In most cases, you’ll need at least a 620 to qualify for a lease. So do yourself a favor and get a copy of each of your three credit reports at AnnualCreditReport.com before you go shopping. If you find errors, get them cleared up before submitting credit applications to ensure your request is evaluated based upon the merits you’ve earned by being responsible with your usage of credit.
2. The Resale Value of the Car
One of the key factors figuring into the sum of money you’ll pay to lease a car is the amount of depreciation it is expected to experience during your stewardship of the automobile. Thus, you want to choose an auto with a reputation for having a strong resale value.
The more the car is expected to be worth at the end of the lease, the less you’ll pay because one of the elements upon which your payments are based is the model’s historical rate of depreciation.
3. The Price You “Pay” for the Car
While it’s true your payments are founded upon the degree of depreciation, they’re also calculated as a percentage of the overall price for which you acquire the car.
This is one of the key aspects of the best lease deals.
Basically, the leasing company buys the car — based upon the price you negotiate with the seller — then rents it back to you at an agreed-upon rate. The resale value will stay the same, but the sale price can be lowered through negotiation — which in turn will make your monthly payment less, because the leasing company has less cash invested in the car.
It should be noted that number usually won’t be as easily negotiated if you’re taking advantage of a manufacturer-offered lease deal.
4.The Interest You’ll Pay
As we mentioned above, you’ll need a pretty strong credit score to lease a car in the first place. However, the higher your score, the lower the interest rate you’ll encounter. Here’s the thing though, you won’t see it listed as “interest.”
Instead, it will be referred to as the “money factor” and will usually be expressed as a triple digit figure preceded by a decimal point. Multiply that number by 2400 to find out what it adds up to in percentages. You can then compare that number to what other people with your credit score are being offered.
5. The Amount of Driving You Do
Given one of the underlying principles of a lease is to return the car with as much value left in it as possible, the more miles you put on the car during your contract period, the more the value of the vehicle will be diminished. This is why most contracts limit drivers to 12,000 or 15,000 miles annually.
You’ll typically encounter a charge of $.25 per mile to make up the difference If you go over. Thus, it’s important to have a handle on the amount of driving you do over the course of a year to avoid excess costs when you return the car. And yes, you can “buy” extra miles during the lease, but again — you’ll be paying more than you initially anticipated.
These are five of the most consequential factors to consider when leasing a car. Paying close attention to them will help you get the best deal possible.