Almost 20% of all new cars sold are leased but leases remain a mystery to most new car buyers. We show you not only what leases are but how in some cases, they can be preferable to buying! Industry experts have predicted that new cars sales for 2012 will exceed 14 million cars, which means that in 2012 alone roughly 3 million new cars will be leased.
When it comes to purchasing your new car there are really only two available options: buy it or lease it. The first approach is straightforward enough, but what exactly is a new car lease? Car commercials are always talking about "great lease rates for qualified buyers," but what does that mean? We answer those questions and offer some essential leasing tips and facts that anyone who is considering buying a new car should know.
Simply put a lease is a long-term rental. Much like when you rent an apartment or a condo, you are paying to use the car, but do not actually own it. The money paid to lease the car goes toward what is called "depreciation," or the value the car will lose over time. Similarly to buying a new car, leases usually have two financial components: a down payment and payments you will make on a monthly basis.
When the lease ends, you will have to return the car but if you really love your ride, there's usually an option to buy your leased car if you want to keep it.
One of the more attractive aspects about leases is that they feature lower monthly payments than you would make if you were purchasing the car. You can use our handy loan vs. lease calculator found here to figure out the exact difference between the two.
Manufacturers will also offer special lease rates from time to time, simply head over to our Rebate Center and all you need to enter is a Zip Code to see what special offers are currently available that could save you a bundle of cash.
If you are the type of person who always likes to have the latest and greatest, then leasing will hold extra appeal. Every few years your lease will expire and you'll have the chance to hop back into a new ride. This ensures that your set of wheels always stays current when it comes to style and technology. And who knows, your needs for an automobile could change as well every few years.
Most leases last between two and four years and the length of a lease is called a "term." If you're going to lease, we would recommend a term length of three years; that's roughly the length of most standard warranties so you won't have to worry about major maintenance.
So if you lease, not only will you be driving the latest cars around but since they'll all still be under warranty your maintenance costs will be kept to a minimum.
There are a few key aspects to your lease that you should pay attention to. Term length is probably the most important, but you also want to keep an eye on other conditions like mileage limits and wear and tear penalties.
Most leases will have mileage limits written into them (usually between 10,000 and 15,000 miles) and you will have to pay a penalty for going over those limits. These penalties are generally enforced on a per mile basis, so if the per mile penalty is $0.25 and you drive 2,000 miles over the limit you will owe an extra $500 on your lease. If you opt to buy the car outright after the lease ends, then the penalties are forgiven and won't count against the cost of the car.
Excessive wear and tear penalties are much the same. Anything beyond reasonable wear and tear on the vehicle could potentially cost you, such as errant pen marks on the backseat, that one time you spilled a Coke all over the backseat, or when Fido had an accident. Incidents like these would fall outside of "normal" wear and tear and might incur penalties which are again avoidable should you purchase the car at the end of the lease.
Keep these things in mind and you'll be ready to go get a great deal on your new car lease! If you have any more questions on leasing or anything related to new car buying, head over to our helpful How-To Section which will guide you on the road to getting a great price on your next new car.