When you buy a car, it is advisable to check all the available options.
You can get a car by either paying cash, borrowing, or leasing it. Cars change every year, and as technological advances are made every day, you may need to change your car sooner rather than later.
Leasing is a great way to purchase cars for your business without having to make a significant initial investment. Many people are not even aware that they can lease a car.
This is because some leasing contracts are too complex for them to understand. This article gives you important tips when you decide to lease a car.
1. Identify your needs
When you buy a car, it is important that you first ask yourself why you need a car. Is it for business or for luxury? Do you have a large family with special requirements? Your needs determine the type of car you choose. An estate car offers you enough legroom and luggage space if you have a family.
If you work in the construction industry, you can opt for a truck or a pickup with a double cab.
2. Learn about how leases work
When you sign a leasing contract, you have to pay a small deposit and monthly instalments. At the end of the leasing period you hand over the car and the leasing contract is terminated. The advantage of a leasing contract is that you can drive a car that is worth more than you can afford. You can also experiment with new models before making a purchase.
Some of the disadvantages of a leasing contract are: you don’t own the car, and the lease payments are more expensive in the long run than owning a car. Leasing is good for companies that need a car but do not have the capital to buy one. It also works well when you travel abroad. You can lease a car and use it comfortably during your journey as if you owned it, without the hassle of actually owning it.
3. Create a budget
Rent payments should not take up a large part of your household budget. You will need to weigh up the pros and cons before signing. If you have a dream car that you have always wanted, you can compare the leasing rates as opposed to buying the car.
When choosing your leasing car, look for a car that has low mileage, low maintenance and has safety features. Leasing cars are associated with additional costs for insurance payment. Make sure that these are kept to a minimum. In most cases, the insurance premiums are converted into a lump sum together with the leasing repayments.
4. Take the car for a test drive
Take your leased car for a test drive, just like a normal car that you buy. You are not obliged to choose a specific car model, so you can test different car models before making a final decision. Make sure that the engine is quiet and does not leak. If you drive long distances, you should make sure that the car has enough legroom and is economical in fuel consumption.
5. Think about financing
Most lease terms are designed to be affordable on a monthly basis depending on the vehicle model. If you think you may need financing for the lease, it is advisable to clarify the details with your bank or lender before going to a meeting with the leasing company.
Avoid going to the dealer without a financing plan as they will offer you car loans that are usually more expensive than traditional credit institutions. Do not go for the first price the dealer offers. Check what other dealers offer and negotiate your purchase price. The lower the retail price, the lower the leasing conditions.
6. Have the lease terms in writing
Once you have agreed on the leasing conditions, have it given to you in writing. You can have it checked by your lawyer before you agree to sign. You will often find the word “capitalized costs” in the leasing conditions. This refers to the final price of the car, the destination charges, and the acquisition costs. If you make a down payment for the lease, this is called a capitalized cost reduction. You can reduce your lease payments by making a large down payment.
You may find that the car you are leasing is actually a good car and decide to buy it. To do this, you need to know the residual value of the car. The residual value of the car is defined as the value that remains of the car at the end of the leasing period. This value is low, and after a leasing period of 3 years, you may find it affordable to own the car.
If you feel like the deal is too good to be true, you may want to think again. A car dealership is often a highly-charged environment where the dealer wants to get the best price while you want to pay the least amount.
7. Hidden fees
Most car owners who opt for leasing are often so enthusiastic about the monthly leasing installments that they forget about hidden fees that the dealer has introduced. Even if the amounts are small, they must be considered in the long term.
Just $50 per month, every month, can accumulate, making the leasing terms unattainable for many. Some dealers may also charge you a fee if you decide to buy the car at the end of the leasing period. For this reason, it is advisable to have your lawyer explain the leasing conditions to you before signing. You can also reduce the residual value of the car if the manufacturer offers discounts.
Leasing a car is a good option if you want to try out a particular model of car before you decide to buy. However, you must read the leasing contract carefully before you commit to leasing. You should not believe every word the car dealer says. Have your lawyer check the leasing conditions before you sign. Use a financial calculator to determine the residual value. This is important if you decide to buy the car after the leasing period has expired.