How You Can Save Money on a Car Lease
Every year, there are many individuals who make the decision to lease a vehicle instead of financing to own. A car lease can offer several benefits to the leasee. One of the biggest benefits is out-of-pocket expenses are significantly lower compared to financing a vehicle. By leasing a vehicle you can circumvent upfront sales tax and may be able to avoid a downpayment altogether. Lastly, monthly payments for leased vehicles tend to be cheaper than those of financed vehicles.
For many, leasing a vehicle works out better in their particular situation. For instance, if you plan to relocate far and don’t want to bring a vehicle or if you simply enjoy driving newer vehicle models without higher costs. Unfortunately, studies have shown the average monthly payment for leased vehicles is rising. To keep costs on the lower side, here are a few things you can do.
Negotiate Purchase Price
Although you aren’t paying to own, you should still negotiate the purchase price to secure a good deal. From here, you can mention leasing as a form of finance. This is a tactic many people don’t realize is available to them; just because you’re leasing doesn’t mean negotiations are off the table. In car leasing, this is referred to as capitalized cost. The cap cost includes the negotiated price of the vehicle plus additional fees and taxes that aren’t financed. In some cases, it can also include the balance of a previous trade-in or loan.
To better negotiate a car lease, start by learning the terminology. You should understand cap costs, residual value, disposition fee, closed-end lease, and similar terms associated with a leasing purchase. From here, research prices and deals, shop multiple dealerships, and be open to different car models to ensure you get the best deal.
Shop for Insurance and Warranties
Unfortunately, many people believe that leasing a vehicle guarantees them comprehensive vehicle coverage. However, it’s important to note lease and warranty are completely independent from one another. Let’s assume you’ve just solidified a three-year lease and that the vehicle factory term is also three years. If you need any vehicle repairs within that three-year period, you’re covered. However, if you decide to renew your lease, the factory warranty is no longer covered and you’ll need an extended vehicle protection plan.
When you lease a car, your dealership of choice will also likely offer you an extended warranty that kicks in when the manufacturer warranty expires. But you should shop around for different plans and consider a warranty that’s custom-built for your vehicle type. For instance, if you’ve leased an Equinox, you want to look into extended car warranties for Chevrolet (you can learn more about this type of warranty here: https://gogetolive.com/extended-car-warranty/chevrolet/).
Pay Attention to End of Lease Terms
Many leases have end-of-lease procedures that can cost you if you don’t pay close attention to the terms. A typical lease ends after about 36 months. Depending on your contract, you’ll pay extra if you drove it a certain amount of miles. Some dealerships require you to change the tires before you return the car. Other contracts have provisions for what’s considered normal wear and tear. Lastly, the contract will detail payments and penalties associated with wear and tear and over mileage.
Buy Extra Miles
If you think you’ll run over your standard allotment of miles as detailed in your contract, it’s best to buy extra miles upfront. Often, the penalties for going over the agreed upon mileage are higher than they would be if you purchased additional mileage ahead of time. Furthermore, if you happen to have any extra unused miles, some dealerships refund you money for what you don’t use.
As a vehicle owner, car depreciation may not feel tangible. Depreciation refers to the difference in the value of a car from the time it’s purchased to the time it’s sold. From the moment you get a new vehicle and leave the car lot, your car’s depreciation starts to begin. Every year, you can expect the value of your car to depreciate by 15-20 per cent. While depreciation is unavoidable, if you can search for a car that depreciates less quickly than others. You can check out depreciation rates for different vehicles in Consumer Reports. As a starting point, check out this article on newer vehicles that depreciate least.