Car Leasing Basics

The popularity of leasing over buying car has soared over the past few years. As you compare leasing with buying a car and suffering a humongous monthly fee, leasing provides a better and more viable financial option for many.

For auto leasing, you need to know the tricks of the trade so that you will not end up paying more than when you directly buy the car. There are car dealers and manufacturers who can give you your money’s worth if you want to go for this option. You can also opt for novated leasing and seek help from your current company and a novated leasing business to provide you with your dream car while helping you reduce tax payments for your vehicles in the process.

You will get a better deal out of the car dealers if you appear knowledgeable about the auto leasing industry, so read up.

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Photo Credit: Lily Heckman via Pinterest

Auto Leasing Defined

You would “lease” a car by paying for the costs by which the vehicle depreciates in value. You can calculate depreciation costs by subtracting the car’s value by the time that the lease ends, from its original value. There are cars which depreciate more than other brands. The rule of thumb is, the smaller the amount that your car depreciates, the lesser the costs to lease.

Once you decide to go for leasing over buying a vehicle, you may choose the one with the least depreciation value.

If you decide to go for this option, you need to learn about “lease term”. This is the number of months that the vehicle is leased. Typically, leases last for 24, 36 or 48 months, depending on your contract.

Leasing or buying: Which option is kinder to your pocket?

-Automobile leasing requires you to have a good credit, so if your credit score is low, it is better to go for buying.

You may even be disapproved for a lease if your credit history is not good. Or, at the very least, you will be required to pay higher monthly dues.

-Leasing companies would need to profit from you.

They will invest capital on buying the car, then lease that car out. Just like with any loan, their money should earn interest so you better consider this as well when considering the advantages of buying.

-Make sure that you get the best deal out of car leasing by comparing the monthly costs with the interest rates of your local car dealer.

Take note of your household and personal budget prior to leasing a car. Settle for something less if your budget is insufficient. You can always opt to upgrade or try a different leasing plan as soon as your financial capabilities improve.

 

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