Over the years, auto leasing has become more popular, considering the fact that buyers are increasingly challenged when it comes to finding affordable financing. However, many customers are not well-informed as to how leasing works and find it difficult to determine if a particular offer is right for them. In simple words, auto leasing refers to the payment to use a vehicle over a defined fixed or indefinite period of time.
With auto leasing, the advertised monthly payments entice many people, since they are considerably lower than what you’ll pay per month if you purchase a car.
One of the benefits of auto leasing is that you don’t have to make large down payment as you do when purchasing a vehicle. What you pay is the depreciation of the car. Hence, you have to cover only the monthly payments, using the remaining cash as you see fit.
A further benefit of car leasing is that you can negotiate the terms of the contract and strike a deal to lower your monthly payments. That’s why, it is important to shop around.
As an added benefit, at the end of the lease term, you have the option to fully purchase the vehicle or return the leased car. You won’t be required to renew the contract.
Requirements in Auto Leasing
If you plan to lease a car in the United States, you’d better read the leasing requirements as some providers are strict with applicants.
You have to agree to do all necessary maintenance on the leased car. Further, you are liable for all wear and tear over the leasing period, for example scratches and worn tires. Car lease residuals represent statements of the vehicle’s expected depreciation for the life of the lease. A number of factors can affect its value, including the period of lease, the average annual mileage expected, the predicted figures for supply and demand, the make and model of the vehicle, resale history, rise and fall in gas price, etc. In brief, lease residuals amount to educated guesses.
The estimates of residual values differ depending on the person who is doing the calculations. Dealers that work with different lease providers may offer considerably differing residual values. While some consumers think that residuals are fixed for a certain model and make, the truth is often different.
Some Tips for Auto Leasing
Double check your credit score with the credit reporting bureaus. You can obtain a free report once a year from major bureaus such as the TransUnion, Equilax, and Experian. Keep in mind that your score determines the lease money factor, i.e. the interest rate you will pay if approved. In fact, the FICO credit score determines what you pay for credit cards, insurance, mortgages, auto financing and leasing. .Every bureau holds a different credit score, and it is best if you know them all. To get your hands on the best rates, you will need to have a score of above 700. Scores below 640 will not work well in terms of negotiating favourable conditions. You might consider boosting your credit score before applying for auto leasing.