A major portion of Americans are inclined towards leasing a car rather than buying. Approximately, a quarter of the new cars bought by various companies were put up for lease during the 1st quarter of 2014, according to sources. Not only the proportions but the type of cars being leased is also changing dramatically. Ideally, people were prone to lease luxury vehicles, since buying them would mean making huge investments, but the trends are changing. People are now leasing cheaper cars for daily commute or other purposes. So now you can hire a car for daily commute, vacations or even just for airport transportation.
The main reason for people willing to lease cars rather than buying them is the lower monthly payments. Leasing is becoming even cheaper than buying. Americans have become increasingly conscious about the way they spend post Great Recession. The financial upheavals that shook U.S resulted in the Americans becoming more cautious about borrowing and buying. So leasing seemed to be the perfect solution. Leasing a car means, you have to pay for its depreciation from the time you hire it till the time you return the vehicle.
The Growing Trend of Leasing a Vehicle
The latest trends show that the millennials are inclined towards accessing goods and luxury without owning them. So instead of buying they prefer using things and paying for the experience of temporarily owning things. That said, there are obviously some downsides of leasing like rental companies charging excess for extra miles driven, penalties for returning the car early or without a full tank, additional administration fees, etc.
Like every cloud has a silver lining, there are ways to prevent such rip offs. The best way is to be aware of the rip-offs, researching about car leasing and looking for ways in which you can avoid paying in excess. The following sections will reveal various aspects about leasing a car.
Leasing vs. Hiring a Car
When we talk about car rentals, most of us are unable to differentiate between leasing and renting. There is a thin line between the two, and to choose the right option it is necessary that you know the differences. Situations vary with each individual, so the choices will vary depending upon individual situations. The major determining factors would be - the time period for which you need a car or the purpose of hiring/ leasing the car.
The only similarity between a leased car and a rented car is that you pay for the using the car for a specific time period, but the differences are many. The financial arrangements, the commitments and expectations also vary to a great extent. Here are some of the basic differences between leasing and renting a car that will help you choose the best suited option:
Car lease is offered by car dealerships, whereas car rental is offered by the various standalone car rental companies at various locations and at the airports. Car rental companies have various outlets at different locations of a country, so you can hire from one point and return it to another, but remember you will have to pay extra for doing so. The dealers offering lease also sell cars and is an alternative to conventional financed purchase. Rental companies own the fleet of cars and rent them out solely for the purpose of generating revenue. Renting is ideal for a short period of time or as a temporary replacement for your primary vehicle.
Car dealers would offer you a chance to buy the car you have leased, but you can never expect this from a rental company.
The time period for using the car is a major difference between renting and leasing a car. Leasing is a long term commitment and just like buying a car, you will have to pay monthly payments till you decide to buy the car or lease another car. Renting a car means a short term commitment. You can rent a car for week or two or even for a few days. The agreements and policies would also differ a lot between the two options.
If you lease a car, you will be offered a chance to own the vehicle. When the lease comes to an end, you will have two options – either buy the car you have been driving or end the lease outright. On the contrary, with rental vehicles there is no ownership potential. You pay for the time you use the car and return it to the rental company as per the contract.
Additional Car Insurance
The additional car insurance while renting a car is optional, whereas the insurance for leased car is mandatory. Minimum liability insurance is required if you want to drive a car, but if you choose to lease a car you should have full coverage. This should include comprehensive and collision benefits to protect the value of the vehicle you have leased. In case you rent a car, your personal auto insurance will offer coverage for the rented car, though the car rental company will offer you additional insurance options and you will be solely responsible for deciding whether or not you need it. In case of car rentals, additional insurance is a way to maximize the profits of car rental company, so be very careful when renting a car.
One more difference between leasing and renting a car is that, you can choose the exact type of car you want when leasing but you may have to compromise with your choice depending upon the availability when renting a car. So if you want to rent, you will have to plan ahead and book a car in advance. Don’t be surprised if you are upgraded to another vehicle, because of unavailability of the car you booked.
After knowing all this, you will be in a better position to decide whether you should go ahead with a short term rental commitment or a long term leasing. Identifying the purpose of using a car, will simplify the process further and you make a better decision. Also make sure you consider the budget when opting between leasing and renting.
Remember, whatever your decision is, you will have to return the car in good condition to avoid extra charges, you cannot make any physical changes in the vehicle and you will have to take care of the mileage limits.
How to Lease a Car
Leasing a car lets you drive a new car, without having to purchase it. There’s no need to take a loan or make huge cash payments. You only pay a small amount upfront (ideally lesser than the traditional 20 percent needed for a car loan) and pay the monthly payments. In many cases, leasing a new car at regular intervals might become expensive than buying one but many motorists will not mind paying extra for the vehicle they are not able to purchase in near future.
So if you have decided that leasing is a better option for you than renting, here are some tips that will help you choose a good car lease:
· The Lease Deal: The tenure of leasing is very important in order to have a good car lease deal. Experts say people should lease a car for a maximum period of 3 years to take advantage of the 3-years manufacturer’s warranty. Many people extend the car lease up to 4 - 5 years to lower the monthly lease payment, but that means they will invest in vehicle that is not theirs and they will have to bear costly repairs. Almost all leased cars will come with a mileage cap and you will have to pay extra for each mile that exceeds the cap. You may also be required to pay drive-off fees upfront, but make sure you negotiate this as much as possible with the car dealer.
· Manufacture Lease Deals: Many car manufacturers also offer special lease deals and discounts, so keep an eye on the car lease ads by the manufacturers. If you find a good deal, it would be good to lease a car directly from the manufacturer but make sure you check whether there are additional charges or not. Also check whether the advertised price is inclusive of taxes and other fees or not.
· Look for the Exact Car You Want to Lease: it is evident that you will have a specific choice/ preference regarding the car you want to lease. Many dealers would try to persuade you about an upgrade but stick to your choice. There are many car dealerships offering leases, so you may be lucky to find more than one dealer offering the same car you want to lease. You will be in a better position to negotiate the price in such situations. Take advantage of this.
· Review Quotes: If you have made up your mind to lease a car, make sure you check the individual websites for quotes. Oftentimes, dealers offer discounts through their websites and has several other advantages compared to over-the-counter shopping. Once you have received the quotes online, you can give a call to the sales person and check which offer is better.
· Find Good Dealers: To have a good experience, it is essential to find a good dealer. When considering a dealer see if you are comfortable talking with the person and the staffs. Check whether your queries are being answered clearly, whether your phone call is being attended promptly, etc. If the person attends your calls in an unfriendly manner, it is better to keep your search on. You can also read reviews about the dealer to get a solid idea about the reputation.
· Compare Deals: Once you’ve receive a handful of car lease deals, make sure you compare them and call back the dealers to check if they have other offers for you or not. Also ask for a complete break-up of the prices so that you know how much you are paying towards a specific service. It is a good idea to ask the dealer to drop the car at your door step, so that you don’t have to visit their office again just to pick up the car.
· Check before You Sign: It is always recommended to go through the contract thoroughly before signing. The salesperson will try to add extra features in the last minute but never give in to such offers. Stick to what has been already discussed, until you have left out something really important.
A car lease deal can make or break your vacation or whatever purpose you are leasing the car for, so make sure you make a sensible choice and avoid things that can complicate the car lease experience. No matter how well you prepare yourself before leasing a car, you are bound to make some mistakes. In the next section we will talk about the major mistakes that should be avoided when finalizing a car lease deal.
Car Leasing Mistakes to Avoid
With car prices reaching the sky, more and more people are opting for car leases. Leasing a car not only keeps you away from very long term commitments of owning a car but also keeps the monthly payments to a bare minimum (if you strike the right deal). Car leasing is also a good deal for people willing to buy a new car but with a shortage of the mandatory down payment.
Even though car leasing is a straight forward and fool-proof option, many people make mistakes that can burn a hole in their pockets. Committing mistakes while leasing a car means you end up paying more than what you would have paid for purchasing a car.
So make sure you avoid making the below mentioned mistakes when considering leasing a car:
· Too Much Upfront: It is natural to be overwhelmed with the rock bottom prices that the car dealers advertise, but remember you have to pay huge upfront money to enjoy these bare minimum monthly prices. This advance upfront is considered to be portion of the total car lease, but this can be a wrong step if severe damage is done to your car or in case of a theft. The car dealer would be compensated by the insurance company, but there are chances of you getting back the money you upfront you already paid. Paying less upfront can save you from such situations.
· Mileage Caps: Most of the car lease deals come along with mileage caps. Ideally the mileage caps range from 12,000 miles to 15,000 miles per year. In case you go above this limit, you will have to pay extra for each mile beyond the limit. The charge for extra miles varies with individual car dealer, so make sure you negotiate well before signing the contract. To determine whether the mileage limit is feasible, make a rough calculation about the miles covered per day and then multiply by 30 and then multiply the total by 12 to get the annual miles covered (approx.). You can ask the dealer to increase the mileage limit but in any case you will have to pay higher. Either you will have to pay upfront for the extra miles or pay a higher monthly payment.
· Not Maintaining the Car Properly: Since the car is not your property, you might not want to maintain it properly. But remember, if too much damage is made to the car, you will have to pay extra fees. If severe damage is done, it is wise to repair them before returning. Also make sure to read the contract guidelines for damages before signing the contract. If you return the car without repairing the damages, the dealer would assess them and charge accordingly. But be sure that this will be higher than the normal repairing charges.
· Very Long Term Leasing: Leasing means a long term commitment, but it should not go beyond 3 years. If you stretch the contract beyond 3 years, you will invite troubles. Ideally the vehicle warranty is included within the lease contract and beyond that you will have to take care of the repair and maintenance. This means you will be spending too much for someone else’s vehicle.
· Paying In Full: While leasing most of the buyers focus on monthly lease payments, but ideally you should focus on the bigger picture. Check whether the dealer is charging the exact cost price of the car or not. If they are, negotiate the amount and try to bring down the price as much as possible. Even if you are able to save $1000 on the sticker price, it is mean a lot over the entire lease term.
The major reason why people opt leasing over buying is to save on the monthly payments. So to make the most of your car leasing, you should look for the best deal that will allow you to drive your favourite car at low cost.
Why is Leasing Better than Buying a Car?
Choosing between buying and leasing can be a tough one. There is every reason to become nostalgic about owning a car, but then you have to consider your finances. For some buying a car would mean becoming emotionally twined with the piece of metal while for some others it would just be an investment.
To be able to make the right decision, you need to identify the major distinctions. There are pros and cons with both leasing and buying, so you will have to weigh each element carefully and then decide which way to go. The major disadvantage with leasing a car is that you will pay for the car every month but it won’t be your own property. Once the lease ends you will have to hand over the keys to the owner, so you don’t even build any equity with the car. That said, there are many advantages of leasing a car over buying and they are:
· Lower Monthly Payments: If savings is your main concern, then leasing is perfect for you since you can save a lot of money with short-terms leases. The principal amount to be paid for leasing a car is much less than what is required to buy a car. So the monthly payments automatically go down. So you are in a position to lease a luxury car without having to spend a lot.
· Ride a New Car Every Year: Yes it’s that interesting. If you wish to drive a new car every few years, leasing of just the perfect choice for you. The lease ideally ends within 2-3 years, so you have the opportunity end the current lease and take another brand new car on lease.
· No Maintenance Worries: When you lease a new car, its warranty would be included within the leasing terms. Ideally the warranty lasts up to 3 years, so all the repairs and maintenance would be included under the warranty and there will be nothing that you will have to spend from your pocket.
· No Resale Hassles: If you already have a car, the only way to enjoy ride in a new car is by selling off the existing one and buying a new one. As you can imagine a lot of hard work and haggling is involved in this process. Very few people have the luxury to maintain more than one car, so it is evident that you will have to put up your car for sale at some point. With leasing you don’t have to worry about this. Once the lease ends, hand over the keys and you’re done. The only thing you need to worry about is using the leased car safely, so that you don’t have to pay extra charges at the end of the lease.
· Tax Deductions: If you use a leased car for business purpose, you will be eligible for better tax write offs than auto loan. This is mainly because IRS allows people to deduct both financial costs and depreciations, which are part of the monthly payments that people pay for leasing a car.
Leasing can be beneficial for people who are willing to buy a car, since at the end of the lease; you will be offered two options – either end the lease or buy the car. You have to pay the residual amount, and the car will be yours. Since you know the car well and have driven it for quite a long time, you will feel more confident about owning the leased car. If not, you can safely end the lease and move on to leasing another car when required.
The choice between leasing and buying depends on your personal priorities and most importantly your financial conditions. So evaluate each aspect well and then take a rational decision.
How to Choose a Car Leasing Company
With the rise in the number of people willing to lease a car rather than buying, many car leasing companies have emerged which use unethical ways to maximize their profits. Apart from choosing the right and the right car, you also need to find the right car leasing company to make the most of the money you spend.
If you try searching for car leasing companies on the Internet you will see numerous companies listed, but not all of them are reputed enough or have the best interests in their minds. So if you want to have a good car leasing experience, you will have to do your homework and research to find the right company. Many less reputed companies would use false advertisements, cashing out deposits before delivering, etc.
The best way to determine whether a company is genuine or not, is to check the background. Ask for list of past clients and their contact details so that you can talk to them directly and ask about their experiences. Also ask for a list of dealers and their contact information, so that you can check for yourself whether they are providing services that suit you.
While it is natural to get wooed by extremely cheap deals, since everyone is out there to make profits, so no one will offer you deals just like that. Extremely cheap deals indicate either both the quality and terms of service is not up to the mark or there are a lot of hidden costs. In either you will be at trouble, so beware. So make sure to get a detailed break -up of the costs quoted by the leasing companies. Many smaller leasing companies would sub-contract the deal and add up their charges to the deal before offering you. This results in higher expenses on your part.
So when choosing a car leasing company make sure you check their reputation. If they stick to the lowest price after you meet them, ask them to include it in the contract and mention that no extra or hidden charges would be added to it later. Read the fine prints on the contract as well, here is where the major twists can be found. Also check the vehicles for yourself. Many companies would advertise that they have the best vehicles, but when you actually arrive to lease, they’ll make you compromise with your choice. Read reviews, talk with past clients and get references from people close to you. These are the only ways in which you can prevent yourself from being stuck in a bad deal.
With interest rates on auto loans going down, car buying has become easier, but still a major portion of the Americans are choosing to lease cars instead of buying. Even though there is more stability in the market since the recession, people have become conscious about the way they spend their hard earned cash. So car leasing is gaining popularity over the years.
If you wish to own a car for a very short period of time, then think of hiring a car, but if you want a car for a considerable period of time leasing would be more feasible. Though leasing has its own perks, you should be careful enough while leasing a car, so that you don’t fall prey to traps. There are hundreds of companies offering car leases, but not everyone is genuine, so make your choice wisely. Check their reputations, past records and read reviews/ testimonials.
If you decide that leasing is a better choice for you than buying or renting, then you must ask yourself a few questions before signing a contract:
· Is leasing cheaper than buying a car?
· How much will you be paying each month?
· What type of lease is suitable for you?
· Do you know enough about mileage caps?
· Will the car warranty be included within the car lease deal?
· Do you need to worry about the repairs and maintenance of the leased car?
· What if you give up your car before the lease ends?
· What about car insurance for leasing?
· How much can you negotiate?
· Should you buy the car at the end of the lease?
Only when you have the answers for each of the above mentioned question, you can go ahead and lease a car. Like any other car rental, make sure you read the lease agreement well. If you have negotiated the price or the mileage limit, they should be included in the lease contract. Never forget to negotiate! The car dealers would want to maximize their profits so they will try to suck up as much money as they can. You will have to haggle and get what suits you.
If you want to save further on your car lease, you will have to look out for deals and discounts. Check the various car rental websites and personal website of the car dealers and see whether you are lucky to find discounts. You can also directly ask the staffs for discounts that are applicable like the seasonal discounts, weekend discounts, etc. So you are now prepared to approach a car dealer and lease your favourite car. The choices are many so choose the one that sits your personality!
Author Bio: Vineet Agarwal has been long associated with V1 Technologies which offers world class Website Design, SEO & PPC, Domain & Hosting, Mobile AppDevelopment and other similar services. Aside from being a dynamic entrepreneur, Vineet is an avid traveller and loves exploring new countries and culture. Discount car rentals interest him largely and he has been extensively sharing his knowledge with friends and peers about discount car rentals and mistakes to avoid when hiring cars.