4 Important Points You Should Think On Before Leasing a Car
Almost 25% of new cars in the USA are used under lease agreement and users are those who are appealed by low monthly payments and who long to drive new cars but don’t want to shell out a large sum for purchasing the cars.
A lease can be a very good option for the right person, e.g. the best lease deals New York City can be found when you focus on certain points. Here are a few things you should pay attention to before you go into a car lease.
1. Leasing Jargon
When you set out for leasing a car, you may be confused with the terminology that manufacturers and salespersons use. It’s better to learn a few terms to avoid the confusion.
Capitalized Cost: This is the cost of the vehicle. It can be Manufacturer’s Suggested Retail Price (MSRP) or may be decreased depending on your negotiations.
Capital Cost Reduction: This refers to a down payment. The most beneficial leases (for those not intending to buy at the end of the lease) should not involve this unless it’s very enticing.
Residual Value: This refers to the car’s expected value at the end of the lease. The more this value is in relation to the capitalized cost, the more beneficial the car lease is.
Rate, Factor or Money Factor: This refers to the rate of interest of your loan, but not stated as an annual percentage rate (APR). The numbers stated should be multiplied by 2.4 to derive an APR. E.g. a 1.35 money factor is equal to 3.24 APR. Interest rates on leases tend to be 2-3 times higher than interest rates on normal car loans; but you can negotiate this rate.
2. You Should Negotiate a Lease
In order to make a car lease the most beneficial for you, you should try to negotiate it and try to bring down the capitalized cost. And if you have a good credit score, you can decrease or even remove some of the costs. E.g. small costs like tire fees, documents fees, etc. can be waived totally if you take an effort to negotiate. Thus you can get some top lease deals Brooklyn, NY, or anywhere else in the country.
Even though a “Manufacturer’s Leasing Special” is advertised by a dealership, you must negotiate. Salespersons depend on giving a new car to you to drive away; so, you (consumers) always have an advantage in negotiations.
3. Leasing Affects Your Credit Score
A car lease affects your credit score just as taking a car loan does that. When you apply for a lease, a credit inquiry on your report is triggered; this has a small undesirable effect on your credit score. Your credit utilization is increased due to a lease due to which your credit score may be adversely affected. But over time, there will be a fall in your credit utilization and if your payments are on time, your score will increase again.
4. Options to Exit
Returning a leased car early is equivalent to defaulting on an auto loan. There will be a loss to your credit and you’ll still owe money. However, you have the option to ‘sublet’ your vehicle through some companies.
When your lease is approaching an end, decide whether to buy the car or return it. In case of buying, you can negotiate the buyout price. If you have sufficient cash and the purchase price is less than that of an equivalent used car, it makes sense to buy the car and sell it for prompt equity. But if you need to get financing, the extra fees may nullify any favorable pricing you got.
If the car is worth less than the purchase price when the lease comes to an end, you should either return the car or strongly try some negotiations. But, a true benefit of the car is in ending the lease by returning the car and moving on.
Think well on all these points and find a lease deal that will give you the pleasure of driving a great car without any regrets.