You already know that access to affordable, reliable transportation is non-negotiable. That’s why more Americans are leasing a car these days than ever before. In fact, about a third of the car and truck transactions that take place in this country are car leases rather than sales.
Why the national trend toward car leasing a car over buying one? Smart leasing decisions can help consumers avoid the financial impact of used vehicles losing their value, all the while allowing drivers to skip several expensive trips to the car mechanic.
It might be the right time for you to lease your next vehicle rather than tossing away your investment into an asset that’s guaranteed to lose its worth. Getting the best deal means knowing how leasing a car works, and this helpful guide is an ideal place to start. Read on for a detailed breakdown of everything you need to know before leasing your next car or truck.
Understand the Advantages of Leasing vs Buying a Car
Leasing is a great option for getting behind the wheel of the vehicle of your dreams, but it pays to know the pros and cons of leasing a car before you make a commitment. Depending on your needs and your budget, it may more sense to purchase a vehicle than to lease one.
Here are a few chief reasons to lease or buy a car; consider your options carefully before visiting a dealer.
Consider leasing if…
- You’re like the idea of variety
- You’re searching for the lowest monthly payment
- You don’t want to worry about resale
- You’re tired of costly maintenance expenses
Consider buying if…
- Your ultimate goal is to own your vehicle
- You want flexibility in insuring your vehicle
- You’d like to sell your car down the road
- Your aim is to customize your vehicle
Remember that cars, unlike real estate, only lose value over time. That means investing in a vehicle is less about building wealth and more about minimizing expenses. As with any investment, you can make a smart decision by evaluating risk.
Risk is minimal when leasing a car as most maintenance issues are covered by warranty and leases periods are relatively short, usually less than a year. Because you never own their vehicle, your maintenance costs are minimal but you’ll continue making monthly payments as long as you are leasing. However, this monthly cost may be less than what you’re already paying for maintenance on an annual basis.
If you are confident in your ability to keep your car in top condition, then buying may be the preferred option. Once a car is paid off, payments end and you’ll have another asset in your pocket. The downside is that the value of that asset will decline rapidly every year, even if you keep the car pristine. Furthermore, repair costs are going to rise rapidly as the car gets older.
Prepare Yourself to Negotiate a Car Lease
If you’re trying to upgrade your ride and still wondering, “How does leasing a car work?”, then there’s a good chance you may need to brush up on your negotiation skills before hitting the lot.
Being a brilliant negotiator isn’t completely necessary if you are visiting a reputable dealer (we’ll touch more on that below), but it’s important to understand how to talk about car leasing so you know what’s going on when you speak to a professional.
Here are a few tips on preparing yourself to get exactly what you want.
Know the Lingo
There’s a long list of unique phrases and language that you’ll encounter when leasing a vehicle. Familiarity with terms like “due at signing” and “buyout price” goes a long way toward making your car leasing experience as smooth as possible.
Do Your Research
Continue to peruse sources like these that provide you with the insider perspective on leasing a car. Knowing what to expect will help you from feeling blind sighted with new information when you go to negotiate your lease. For example, reviewing the market interest rate for your vehicle will be helpful for negotiating the interest rate on your lease agreement with a dealer. You could also try services that bring lease buyers and sellers on a single platform. These platforms act as a middle man and help in finalizing a deal between two parties who can no longer pay for their monthly lease payments. You can transfer your car lease to someone, take over someone’s car lease, or even swap with one another. Most of these platforms are known for their high-quality ads and you can find someone to take over or buy your car lease in a short span.
Build Confidence with Practice
Often the easiest way to feel more comfortable with something is to practice it over and over. The same goes with talking to salesmen and negotiating a lease. A simple practice exercise, like a friend helping you to roleplay the interaction with a dealer, can help you sound cool and confident when you negotiate the lease in real life.
Learn to Spot Bad Business Practices
Learning to negotiate and studying the ins and outs of leasing won’t do you any good if a car dealer’s goal is to take advantage of you. Thankfully, in 2018, access to the Internet makes it much easier to spot a shady dealership than ever before.
If you haven’t purchase a car in several years, it’s important to note that the industry has become increasingly customer service oriented in the past decade. If your dealer doesn’t treat you like royalty, be sure that another dealership down the street most certainly will. Consider the following tips when visiting dealerships as well:
- Use advertising to evaluate a dealerships integrity; if it seems way too good to be true, it probably is
- Don’t be intimidated by high-pressure sales tactics, and don’t put up with dealerships that try to use them on you
- Like any business, cleanliness and neatness says volumes about how much a company respects its customers
- Evaluate online reviews and use your best judgement
Tips for Getting Out of a Car Lease
Like any contract, a lease can be broken. This will almost always incur additional costs for the person leasing the car, however. You’re better off not signing a lease if you aren’t sure how the terms will impact your experience driving the car long term. That being said, common car leasing mistakes to avoid include…
- Assuming the lowest monthly payment is the best deal (negotiate those interest rates!)
- Locking yourself into a multi-year lease
- Paying a higher monthly payment for vehicle add-ons
- Incorrectly gauging your annual mileage
What happens if you’ve already signed a lease and discover the terms of the deal aren’t meeting your needs? You still have options.
Negotiate with the Dealership: Working with your dealership to get out of a lease may not be the best strategic move considering they have plenty of leverage, but it may be the most convenient way to deal with the problem. Dealers can purchase the car back from you to cover the remainder of the lease or may offer a new lease on a different vehicle with new terms.
Work with a Bank or Credit Union: If you have strong credit and a good relationship with your bank or local credit union, you can discuss a vehicle loan to pay off the remainder of the cost of your lease vehicle. Effectively, this means the bank would own your vehicle and you’d be paying them monthly instead of the dealer, but this could translate to more favorable terms than the original lease.
Pay Off the Vehicle: This option may not be available if you are trying to break your lease due to financial hardship. However, this is one of the most efficient ways of getting out of your lease term without increasing your total investment into the vehicle.
The Best Time to Lease a Car
Once you’ve picked out your vehicle, done your homework, and feel confident negotiating, it’s time to begin the lease process. You can start by getting in touch with local dealers and comparing prices, but it might make sense to assess your credit before you decide on a price range.
Interested in learning more about your financing options when leasing a vehicle? Curious about ways to get out of your current lease? Reach out to Red Mountain Funding and rely on their expertise when it comes to auto financing. We have helped keep Arizona drivers on the road in safe, reliable vehicles for over 20 years.