Buying a car is a beautiful dream and of course a major financial investment to any individual. Buying a new car or a used car or opting for leasing a car is majorly a personal choice. Here let us explore the whole picture associated with leasing a car and its calculation concepts.
☛ Terms you need to know about car lease
- Auto Price: This is the market price at the retail level. You can talk to the dealer if he can bring down it a little bit. Remember that this amount is negotiable.
- Money Factor: This is the interest rates that are associated with the car lease process. Do you know how interest rates are calculated? Get an idea!
- Term of Lease: Often called lease term, this denotes how many years you are entitled to lease of the car. Time is precious and of course fascinating. Read mind-blowing facts about time here.
Residual value: At the end of the lease term, this is the amount you shall have to pay in case you want to purchase the car and make it your own.
- High Mileage Leases: These are the additional miles that as a lessee you can enjoy, in addition to the ones mentioned in the agreement. Some dealers offer these to their privileged customers. By the way, do you know the tips to get more mileage for your vehicle? Here they are!
- Sales Tax: These are the taxes applicable as per your state rules. Know more about sales tax here.
☛ How does a car lease work?
You should know what exactly is involved when you are planning to go with a car lease. Here is a step by step explanation that shows what a car lease means:
- Firstly, you shall have to pay a certain amount of down payment to your car dealer. This is similar to the amount you pay as a down payment when you decide to buy a car through some cash and rest other in finance method. In terms of the car lease, the down payment that you pay is termed as Capital Reduction.
- Then, depending on the condition, model and other specifications of the car, you shall have to pay monthly payments for the whole period of the lease.
- You shall have to abide to the terms and conditions of your car dealer, which shall include many important points including the life of the lease, number of miles that you can run in the life of lease and additional charges that you may have to pay at the end of the lease term, and the circumstances around them.
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☛ What you need to check before opting for a car lease?
You should be aware of certain things, especially if you are taking a car on lease for the first time. Here are such points for your reference:
- Mileage Limitation: A car lease importantly carries the number of miles that you can drive in that car per year. This number is called Annual Miles. If you exceed these miles, you shall have to pay extra at the end of the lease period.
However, you can have an option to opt for extra miles by paying a certain amount at before your dealer. You can talk about these terms and conditions during your lease agreement itself.
- Insurance coverage: If the car has insurance coverage, check its validity. Make a clear note of what is covered under that insurance policy. Most often, owners of cars that are taken on lease shall have to pay for car bumps, tires replacement or any other sort of damage that occurs to the car during the lease period.
- Maintenance: Does the dealer has any offer for free maintenance for the car? Check this out. Some dealers do offer free maintenance on certain models to attract and retain customers. If not, you shall have to take care of the car’s maintenance throughout the tenure of the lease to keep it in good shape. But you can have an extra benefit.
Guess what? You can enjoy smoother rides throughout the lease period, and at the end, if you want to retain the car by paying the additional amount you can have a car that is in excellent condition. So, it is a win-win scenario.
- Buyback options: What are the terms and conditions that the dealer is mentioning for buyback? Read them carefully and get a general idea.
- Penalties: Can you break the car lease period and return it in the mid of the period, in case if you have to due to any reason? What are the penalties involved in this? Talk about these in detail with the dealer.
☛ Is car lease a better idea?
Purchasing is a car is a big financial decision. The investment does not grow over time, because a car’s financial value always goes on decreasing with its life. Even if you want to resell the car after around 3-5 years, you never get more than what you have paid and not also the same at the least.
Considering the return on investment, leasing a car can certainly be a better idea. Firstly, you have to pay only a smaller amount as down payment, which means your pocket is not burdened all at once. Also, the monthly payments are lesser compared to those when you buy a brand new car.
To decide, whether car lease is a good idea, we should weigh the pros and cons and then come to a final judgment. So here we go!
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☛ Benefits of Car Lease
- You pay lesser down payments and lower monthly installments.
- At the end of the car lease, merely return the car and boom! You are ready to try another model car now.
- You need not to spend too much on its care and maintenance, which means fewer repair expenses from your side.
- The depreciation effect that always surrounds the purchase of a car never really hits you.
No hassles of selling the old car. Once the lease period is completed, park the car and return the keys. It’s that simple!
- You need not break your head for looking out for cheaper finance options that are tiring when you purchase a car on finance.
- You can try luxury cars on a lease, which might be a burden financially when you want to buy them.
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☛ Disadvantages of Car Lease
- At the end of the lease period, you would not have any ownership on the car. You should return it or if you loved it, pay the extra amount and purchase it.
- Penalties may occur in many forms – extra miles covered, any damages that have occurred to the car, or any violations of car dealer’s terms and conditions.
- In case you are not satisfied with the car or want to return the car due to personal reasons like moving out of the state or country, you shall have to face heavy penalties.
- You cannot customize or change the appearance of the car, which you are free to do in your car.
Once the lease period ends, the amount you spent so far has no physical shape. It’s all the convenience and memorable experiences that you enjoyed with the car that would be left with you.
☛ Why use CalculatorHut’s Car Lease Calculator?
CalculatorHut is a trusted name in providing online calculators for free. It presents a wide range of 100+ online scientific and other calculators for free. CalculatorHut’s car lease calculator is one such free calculator from its huge library that helps you in calculating various parameters that are essential for understanding the car lease process.
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