Are you in need of a car? Do you wish to drive it rather than owning it due to a small budget? Are you unable to make a huge down payment? It would be in your best interest to consider getting a car lease. Car leasing means renting a vehicle from a leasing company. Rather than making a huge down payment to purchase a car, leasing would cater to you with an option to pay small monthly installments while driving the leased car.
Let us discuss the important aspects that you should know about car leasing.
Types of car lease
You could choose between an open-end lease and a closed-end lease.
- The open-end option has been offered to the businesses. The lessee would be required to pay the difference between the pre-determined residual value and the market value of the vehicle. It would be determined when the lease is about to end.
For example, if you go beyond the maximum mileage limit, you would be subjected to pay fees for every mile you exceeded. Moreover, the car would be evaluated upon return. In the event, the wear and tear have been beyond the acceptable level defined in your contract, you would be required to pay the requisite charges.
You could also choose to purchase the car at the residual value. It would be worth mentioning here that the buyout price should be stipulated in the contract when signing the lease.
Benefits of car lease
Foremost, leasing a car entails a minimal upfront cost. Most of the leasing companies would only need the leasing payment for the initial month along with a security deposit. On the other hand, buying a vehicle needs a huge sum of money, as you would be required to pay the price of the car instantly. It would be inclusive of a down payment made to your car loan lender.
It would be worth mentioning here that monthly lease payments would be relatively lower when compared to the monthly car loan payments. Rest assured you would be renting the car only for the leasing company. You would not be required to pay the entire amount of the car, as you would if you consider purchasing the vehicle.
Drawbacks of car lease
A majority of leasing companies would impose a limit on the mileage limits you could drive in one year. In the event, you go beyond the maximum mileage; you would be required to pay the cost of every mile you exceed.
When you terminate your car lease before the agreed term might also burn a considerable hole in your pocket. Even though leases would finish their car lease term, you might come across instances when you were forced to end the lease. It would be inclusive of an event when the car encounters an accident or when your car has been stolen. It would be important for you to understand the policy of the lessor in such circumstances from the beginning to avoid any unpleasant surprises later.
The charges for interest rates could also be a huge drawback. While your monthly lease payments might look reasonable, you might be required to pay a huge amount, provided you calculate your overall lease payments throughout the terms of the lease.
Dipen Khatri is a motivated freelance writer and research-driven author. His love for writing and investigation began blooming in her tricky teenage years and has continued to grow from there.