A complete guide about leasing process and how it works

A lease is a contract or agreement between two parties, in which one is the owner of the asset who willingly provides the authority to the other party to use the asset for personal or commercial use, for an agreed period of time, in return for a fixed amount of payment.

Leasing a car

A car lease allows you to drive a brand new car, without purchasing and paying a large sum for it. For leasing a car, you have to pay a minimum amount of the actual price of the car, depending on the monthly payment for the period of the lease. When this period expires, you should return the car.

Eligibility standards for leasing

Dealers that provide their cars for leasing actually allow their customers to use vehicles unsupervised freely for a number of months or years with minor or negligible down-payments and interests.

The requirements for leasing are not so much but banks that provide lease show flexibility in adjusting down-payment as well as interest rates if the customer has good credit scores. You have to show that you would be a reliable customer by showing that all your loans and your accounts should be current. You must have been employed for two years and have a steady income and a driving license.

Typically, a leasing application can be accepted or rejected for all of the said reasons, but you can get the car on lease with a co-signer if you are unable to prove any of them.

Market trends for leasing a car

Timings of the lease can be important when you want to maximize your savings. It is said that the best time to lease a vehicle is right after the model is introduced. Companies deliberately put a high amount of residual value to increase their sales. This is when you are likely to save more money. Usually, during the months of July and October, companies introduce the new models of their vehicles, so this is the time when you can maximize your saving and look to have a car on lease.

Leasing options available in the market

Leasing can be difficult, especially when you are going for a long-term lease, but it is not that tricky.

There are 3 types of lease: gross, net, and modified gross lease. In a gross lease, the tenant has agreed to bear all the operating expenses and is not limited to paying taxes, utilities, and maintenance, etc. For a net lease, the base rent is lower than a gross lease. The third and major type of lease is the modified gross lease in which the negotiations between the tenant and the company happily agree upon a mutual agreement of bearing the expenses. That means that the lease rate remains the same even if the cost of the vehicle increases or decreases.

 Is it better to buy a car or lease it? Comparison of buying & leasing

If you have a craze for driving new cars and want to keep updating your impression, it’s better to lease a car than to buy.

When you opt for leasing, you pay a portion of the total amount of the vehicle’s actual value during the time you are using the vehicle. It’s up to you to not make the sales tax when making the down-payment as you can pay sales tax on your monthly payments as well.

You may also be required to pay a security deposit that you would not be asked when you buy a car.

When you buy, you make payments for the entire value of the vehicle, irrespective of how many miles you drive it or for how much time you are going to keep it. You can pay through deposits or have an auto financing loan. Later you don’t have to return it to the buyer, rather you can keep it as long you want and use it.  You can also sell it for a better price for a newly introduced model.

Pros & cons of leasing a car

pros and cons

Leasing a car has its own advantages and disadvantages. Let’s talk about the advantages first. You have the option to pay minimal down payments. Although it appears that leasing may cost you more but they are covered with warranty and with lower monthly payments you can easily cut your expense of having a car of your own. There will be no depreciation or sales tax concerns.

For cons, you will be having mileage limitations, if you go beyond those limitations you have to pay for the excess mileage use. Monthly payments involve fees of wear and tear, damage repairs, early lease termination fees, and usually higher insurance premium fees.

What to keep in mind while leasing a car?

When you lease a car, it will be easy if you have some prior knowledge about leasing a car. Learn about the eligibility criteria first along with all the documents required before applying for a lease.

What is the process of leasing & how it works?

There are 9 steps in the car leasing process generally that you should know about.

  • Credit score

As we mentioned earlier that your credit will tell you if you are eligible for leasing a vehicle or not. So, it is better to clear all the hurdles you think could stop you from leasing your dream car.

  • Know your budget

It is better to crush the numbers to make sure what and how much you can afford before the feeling of financially clutched. When leasing a car, your monthly payment might go higher than your finance.

  • Select your right car

You might be having a small car, but now you are married and want a big vehicle for your family. You may be looking to lease a car for official purposes. Whatever your reasons are, identify the need first and then make the right choice.

  • Look for the right dealership

You cannot ignore the right dealer for your car. The more you look for the right dealer, the less you will be bugged in the future.

  • Take a drive

After getting the right car and the dealer, take a test drive to know if it is the right fit for you and your needs.

  • Carefully check the down-payments

Don’t let anybody trick you and make you pay high down-payments. Carefully read every clause, ask about the points that don’t suit you.

  • Don’t forget to review the lease agreement

It’s important to see if the agreement you are making protects your interest, if not try to negotiate.

  • Initialize payments

When you read and agree on all the levels of having your car on a lease, don’t delay that much in making payments. You have already spent too much time in the documentation process.

  • Don’t neglect routine maintenance

Yes, maintenance of your vehicle is important if you don’t want to put yourself in any kind of trouble while going on a long drive. Take your car to a proper mechanic for regular checkups.

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