Do you have any info on Leasing a Car?
How does leasing a car work? I understand that its kind of like renting a car and the lease is for 3 years. But can you switch cars durring your lease? And if you like a car how can you lease to own? Any and all information would be appreciated!
- fire4511Lv 71 decade agoFavorite Answer
Leasing is an alternative form of financing. Both have fixed terms and payments. With a purchase you finance the whole price of the vehicle and pay that amount, plus interest, back to the finance source. With a lease you also finance the full price of the vehicle, and pay all the interest. You only repay part of the principle of the loan. A lease has an estimated value of the vehicle at the end of the lease term. (Residual value) This is deducted from the principle and you only pay the difference in your monthly payments.
Assume a vehicle that costs $30,000 and a trade in worth $5000. Also assume you are financing, or leasing the vehicle for 5 years. A final assumption is that at the end of the 5-year period, the vehicle is worth $7500.
With a purchase you would pay back $25,000 plus interest over the period of the loan. You would own the vehicle (worth $7500) You can keep it, or trade it in on a new vehicle
With a lease you pay back $17,500 ($25,000- $7500 residual value), and the interest that is charged on the $25,000.
Your payment is less, but at the end of the term you have nothing!
With a lease there is a limit on the number of miles you can drive and a per mile charge after that. You are also responsible for any and all damage to the vehicle. At the end of the lease, when you turn the car in, you will have to pay for any and all damage and over miles charges!
With both a lease, and a purchase, you are responsible for all maintenance. Some leases, but not many, may have a maintenance program, but that does cost extra, and will increase your monthly payment.
The lease is for one specific vehicle, just like a purchase. You can not switch cars. You can usually buy the car at the end of the lease for the residual value.Source(s): 27 years in the auto business
- GailLv 44 years ago
most people that lease a vehicle do it for business reasons. it is a tax right off. i leased a vehicle a few years ago because i was just stupid and did not ask anyone how it works. the monthly price was ok at first. then we had an earthquake and my note went up to off set some disaster fund or something like that. now i know that the rate is not locked in kinda like a credit card with a variable interest rate. when the rate goes up your interest rate goes up this is oppose to the fixed rate of interest rate. i also wanted to pay off tthe vehicle in advance so i would send 3 payments at a time.Well my note never went down they only stated that no payment was due for 3 months. i did not like that but the last idiotic thing was after the lease was up they demand you to return the car but it has to be under a certain annual mileage gage. like 12,000 per year or you violated the lease. also you can purchase the vehicle for thousands of dollars as the last payoff which is what they call the residual fee. i am not sure how long you can lease the vehicle but the average time is 2-6. i never saw a 1 year lease. your credit score is always a factor in financing anything.
- 1 decade ago
If you drive less than 12K miles per year, it is worth it. Cars loose their value the minute it leaves the dealership.
Keep in mind that the end of lease there is a charge if you do not re-lease another vehicle from the finance company or dealer. Can be 300-450.
Once you lease, it is for the duration of the contract. Usually, you have 30 days to change your mind at most dealerships. Kind of like testing out. Usually, you will like your NEW car. They will also offer you end of lease purchase option.