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Simply Click on the following topics: Important Terms you should know SOME IMPORTANT TERMS YOU SHOULD KNOW Before you go out and start negotiating a lease there are some things you should
be aware of. The RESIDUAL VALUE is the what the lease company projects will be the value of the car at the end of your lease term. Remember, you are only paying for the time that you use the vehicle. A higher Residual Value usually results in lower payments and you will probably turn the vehicle in at the end of the lease term. A lower Residual Value means higher payments but probably some equity in the vehicle at the end of the lease. If you are considering buying the vehicle at the end of the lease this would be the better option. Most dealers will use any equity in your vehicle as a down payment on a new vehicle. The MONEY FACTOR which you should ask the Dealer to translate into an interest rate. The money Factor is the cost of money and is determined by the Federal Reserve. By multiplying the money factor by 2400 you can determine the interest rate. These are three important terms you should write down before going out to shop. Determining whether you should buy or lease is not as simple as a little arithmetic and a few facts. It is also a lifestyle decision and you must evaluate your needs and desires as well as the numbers before you decide. Mile Limitations. When you purchase a vehicle you can put as many miles as you like. Most lease programs have strict limitations on mileage. Depending on your contract it is usually between 12,000 and 15,000 miles annually. Driving over the allotted miles can result in additional charges when your lease ends. Make sure you know what these charges are, just in case. Normal Wear and Tear. A lease contract always allows for normal wear and tear. If you do not normally keep your vehicles maintained you should probably buy to avoid additional charges at the end of your lease. Find out what your lease company considers to be normal wear and tear. Normal Ownership Time. If you typically buy a new car every two or three years a lease may be right for you. If you traditionally like to keep your vehicle for many years, an outright purchase may be the ticket. Keep in mind that if you are able to purchase the vehicle at the end of your lease term and the current terms are exceptional this may be a good way to avoid a lot of up front money. Some benefits when leasing. Instead of paying sales tax up front, each monthly payment is taxed as opposed to paying a lump sum on the entire value of the vehicle when you purchase. Ask your accountant because there may be tax incentives especially if you are self-employed and use the vehicle for business reasons. When you purchase and finance a vehicle there is about a 2 year period where you owe more than the vehicle is worth. In other words, if you total the vehicle you may actually owe the lender some money. Your lease agreement should include GAP INSURANCE, where the lease company has insurance to cover such dilemmas should the unfortunate happen. Ask your Dealer about Gap insurance. Answer the following questions and see the bottom for an evaluation. The results of this test are only meant to determine if you are a good candidate for a lease and the final decision must come from you. 1. Do you prefer to drive a vehicle for about 2-4 years and then trade it in?
If you answered yes to most of these questions, than you are a good candidate for a lease. If you answered no, than purchasing is probably the way to go. Consider all of your options and negotiate a good price on the vehicle before you decide. Hopefully we have answered some of the questions you may have regarding your final decision. If you have a question we haven’t answered, E-mail us at LeaseQuestions@AutoNetUSA.com and we’ll do our best to satisfy you. |
