Auto Leasing Introduction - What is Auto Leasing?
Understand what automobile leasing is — and what it is not
Leasing is a simple concept that most often is confused by a lot of people as the same as buying a car. Since people are not really that informed on how leasing works a lot of mistakes are made, and they are often taken advantage of by the dealers.
The biggest secret to successfully leasing is by knowing how it all works, and by taking the time to learn and prepare yourself before you make any decisions.
If you do not take the time out to learn about leasing and the concepts to leasing you will expose yourself to making mistakes that could cost you money.
When you try to understand leasing by drawing the knowledge of apartment leasing or car renting, will often only make you misunderstand the concept of car leasing. It is not the same; they are very different from each other.
Well there are two reasons why leasing has become so popular, one is because the prices of new cars has increased so much over the years that it is to expensive for some people to buy a car. The second reason is because of the 1980s federal law changes. They removed the finance interest deduction on car loans, which made owning a car more expensive.
To solve the problem auto manufactures and finance companies creates the now very common leasing program. It is very similar to the business leasing, just simplified a bit more.
Why else would it be popular? You could drive the car you want, which is often better car than you could buy, for less. It also eliminates all the loan and car headaches.
Leasing is not for everyone. It depends on our lifestyle and your needs at the moment. If you drive more miles than the expected 12,000 miles a year, and like to customize your car; leasing is not for you. If you like having a new car every two to three years, drive less or equal to the expected 12,000 miles a year, and do no mind driving a car that cannot be paid off; leasing is for you.
The process of leasing may be more complicated than buying a car. It requires you to be well prepared and have a pretty good knowledge of car leasing, in order to get a good deal. Some may think leasing is not for them, others may think it is. It all depends on who you are.
Do not believe when dealers tell you that leasing means you always pay the full sticker price. That is not true. When you lease a car, you negotiate the price, just as if you were buying.
The only time you will not need to negotiate is when the dealer is offering a special price, such as sales, or rebates.
When you have negotiated the price and you and the dealer come to an agreement, you sign a contract. The dealer then sells the car to the leasing company at that price. That price is important, because then the leasing company leases the car to you at that price, which is then divided in monthly payments.
The dealer is not the leasing company
The car dealer is only works out the leasing agreements with you on behalf of the leasing company. You do not deal with the leasing company until you start your firs payment. Once you sign the contract, you are dealing only with the leasing company, unless there is something wrong with the actual car. The leasing company pays the dealer by commission, which increases his profit.
Dealers often use leasing companies that are subsidiaries of the car manufacturer, but you can dealers also offer leases from other leasing companies or bank that they have business terms already worked out.
You can find your own leasing company
You can look for your own leasing company, which can sometimes help you in getting a better price. The negative to this is that it will take more than one visit to get everything situated between you, the dealer, and the leasing company. Using the dealers lasing company could sometimes be more convenient to arrange the car and the leasing company all in one visit. Sometimes the dealer’s lasing company can offer special leasing terms to help the dealer sell more cars.
When leasing a car you sign a contract, that contract means that you are agreeing to make on-time regular monthly payments, pay any taxes and fees, have a good insurance, and taking real good car of the car. You are also agreeing to keeping the car for a certain time, and are expected to keep your contract to the end.
When your contract is finished, you are expected to return you car with normal expected damages to the car. Any more damages will cost you extra, to pay for the damages. If you go over the agreed mileage, they will also charge you extra.
The dealer does sell "excess wear and tear" warranty that will cover you for extra damage. For example, you pay $500 up front to protect against $5000 of extra damage, which might come in handy for any unexpected damages to the car, like the surprise scratches you find on your car in the parking lot.
At the end of your lease, you do have the option to buy the car, or you could trade it in for another car. If you want to do any of those things, you could just drop off the car and walk away.