If you’ve never leased a car before, it’s important to understand how it works before you commit to anything. Here are eight things you need to know about leasing cars.
1. You Don’t Have to Worry About the Depreciation
When you buy a car, you’re paying the price of that car, known in leasing terms as the capitalized cost. With a car lease, a residual is set of what the dealer thinks the car will be worth at the lease’s end. However, most of the time the car does not end up being worth that much, so you essentially lease the car for a good rate and avoid depreciation.
2. Your Lease Is Negotiable
You can and should negotiate your lease agreement. Focus on the capitalized cost so you pay less over the life of the lease, but also see if you can get some of the common lease fees waived.
3. Gap Insurance Is Automatically Included
If the car you’re leasing gets stolen or totaled, you’re on the hook for paying it off. Luckily, gap insurance is standard on every lease, so you don’t have to worry about purchasing it.
4. Leasing Goes on Your Credit History
When you apply for a lease, a hard inquiry goes on your credit score, which could bring it down a small amount. The lease also affects your credit history just like a car loan would. It can either help or hurt your credit score, depending on whether you make all your payments on time.
5. Putting Money Down Isn’t Recommended
You benefit by leasing because the manufacturer takes on all the risk for the car, unless you decide to put money down. A down payment on a lease is almost never a good idea.
6. There Are Mileage Limits
The typical lease agreement has an annual limit of 12,000 miles, but 10,000 miles and 15,000 miles are also common limits. Make sure you estimate your annual mileage before you lease a car. If you go over the limits, you’ll need to pay per-mile overage charges.
7. You Must Keep the Car in Good Condition
When you return the car to the Orange County car dealerafter your lease is up, it needs to be in approximately the same condition as when you got it. Minor wear and tear is fine, but the dealer will charge you for anything beyond that, or you’ll need to get it repaired yourself.
8. An Early Exit Can Be Costly
If you want out of your lease early, it will affect your credit the same way defaulting on a loan would, and you’ll still be responsible for making the remaining payments. Some sites let you transfer your lease to another driver, but it’s better to get a lease only if you’re sure you can commit to it.
For those interested in leasing or buying a car, Orange Countyresidents can turn to the trusted auto brokers at Below Invoice. Get preapproved on our website, or give us a call at 949-630-0303 to schedule an appointment.