What is a car lease and how does it work?

2015 Buick Enclave

What is a car lease and how does it work?

Many people prefer leasing over buying because leasing provides the buyer with a brand new car that is under warranty and is dependable for a low monthly payment. A car lease is a finance option that allows a consumer to obtain a new car while only paying a percentage of the total value of the car. Residual value is the expected value of the car at the end of the lease. The lease percentage paid is calculated by subtracting the residual value of the car from the total price of the car. The difference of the total value and residual value is the lease price of the vehicle. Essentially, a lease pays for the deprecation of the vehicle throughout the course of a lease agreement.

An average lease runs for a 3 year term with an allocated 12,000 to 15,000 miles per year. 3 year terms are recommended because new-car bumper-to-bumper warranties are usually available for the first 3 years of purchase. The new-car warranty will cover most of the vehicle repairs needed throughout the course of the lease.

Once the lease terms have been fulfilled, you'll have no equity in the vehicle and will need to explore other vehicle options. Most leasing consumers consider this a benefit rather than an obstacle because each new car you lease will have up to date technology and safety features. However, if you would like to keep the car at the end of the lease terms you can generally buy it by paying cash or by taking out a car loan to finance the remaining balance owed on the car.

It is important to evaluate individual driving habits when considering a lease. There are many different factors to weigh before deciding if leasing is right for your budget and lifestyle. Most lease payments are negotiable and can be adjusted to meet individual needs. Stop by Baum Chevrolet Buick today for leasing assistance.

Sources:

http://www.autobytel.com/car-financing/lease-a-car/what-is-a-car-lease-100519/

http://usnews.rankingsandreviews.com/cars-trucks/Buying_vs_Leasing/

http://auto.howstuffworks.com/buying-selling/how-to-lease-a-car1.htm

http://auto.howstuffworks.com/buying-selling/how-to-lease-a-car.htm