Car Leasing Guide
Researching and then purchasing a brand new car is never an easy process. In fact you will find that itís one of the most expensive financial decisions you will ever make so you need to take the time to make the right choice when it comes to finance.
These days many people are wisely considering alternative, cost effective options that enable them to drive the vehicle that they want at a price they can afford. Car leasing provides an affordable way to finance your next new vehicle.
So What Is Car Leasing?
The whole concept of car leasing seems to confuse a lot of people but it really isnít very difficult to understand. You agree to pay a down-payment plus regular monthly charges for a period of typically between two and four years. The amount you pay each month is calculated based upon the value of the vehicle, the anticipated depreciation over the lease period and the mileage that you expect to cover, along with a few other factors. The vehicle that you are driving never actually belongs to you it belongs to your supplier. At the end of the agreed lease period you simply return the vehicle to your provider and maybe youíll sign up for a new contract for another brand new vehicle.
Car leasing is based entirely on the fact that you are paying for the amount that the vehicle value depreciates during the time you are driving it. Depreciation is the difference between the vehicleís value when it is brand new and the value that it will be when your lease contract comes to an end (this is called residual value). This is the main factor that determines just how much it will cost to lease the vehicle.
Basically, the less that the value of a vehicle depreciates over time the less you will be paying each month in leasing charges. It is very important to note that the depreciation in the value of a vehicle varies enormously from model to model. Models with the lowest rate of depreciation are often the most popular!
European and Japanese makes tend to have lower rate of deprecation than American and if you are looking for specific brands you cannot go wrong with Honda, Toyota and surprisingly Mercedes.
Advantages of Car Leasing
One of the key advantages of car leasing is that you get to drive a brand new, top of the line car when alternative finance options may have meant that your choice was restricted to pre-owned vehicles. You are likely to find that leasing is actually less expensive than borrowing from a bank and then repaying the loan.
Another key advantage is that you donít necessarily have to worry about maintenance or repairs. Many leasing contracts include all maintenance and servicing which means less expense and much less to worry about, but be sure to discuss this with your leasing company.
Some people will not like the fact that they never actually own the vehicle but for others, myself included, this is a distinct advantage. At the end of the leasing period the car is simply returned to the garage. You donít have to worry about selling the vehicle, getting it ready for prospective buyers to road test or being on hand to deal with potential purchasers.
Itís also worth noting that the auto industry has been struggling in these tough economic times but this has been good for consumers as there are some almost unbelievable deals to be had. Many car leasing providers will happily include a basket load of, discount insurance and various other enticements to get your business. So be sure to shop around before making your choice of supplier.
Disadvantages of Car Leasing
Many people will say that the fact that you never actually own the car is a disadvantage. One aspect that should be considered is the possibility of damage to the vehicle. Your car lease contract will include what is generally described as Ďfair wear and tearí but accidental damage may not be covered, so you need to ensure that you have the right insurance.
While considering insurance it is worth mentioning the need for gap insurance. Gap insurance is a special form of vehicle insurance that is designed to cover the short-fall between the amount that will be paid by an insurance company, should a vehicle be written off, and the amount owed on the lease. Because depreciation tends to be faster early in a vehicleís life, if that vehicle is unfortunately written off during this time then the amount that will be paid by the insurance company, based upon the vehicle value, will be less than the amount owed on the lease contract. This is the Ďgapí covered by gap insurance.
Another thing to be aware of is the potential for excess mileage charges. When signing up for a car lease deal it is really important to ensure that you make a generous allowance for your anticipated mileage as you will be charged for every mile you cover in excess of this amount.
On a final note; when shopping for the best deal be certain that you are comparing like with like. Some contract hire deals can appear to be exceptionally good value but you may find that they omit many of the extras that are included as standard from other suppliers.
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