The car market has been facing setbacks that keep it under pressure for a minute…
When you think of getting into a new car you will definitely have some options to choose from. If you’re considering between leasing and buying, let us give you some food for thought. We will dive into the topic and explain why car leasing is smart and when it makes sense.
Leasing or buying a car may be a solution for you depending on whether you aim to own it or not. If you consider buying an auto you will most likely deal with a vehicle loan, relatively higher monthly costs and credit score matter. When you get your car in ownership all the maintenance, depreciation, or selling issues will be there. Along with that, you will be able to modify and upgrade your asset.
To make it simple, leasing is a way to “borrow” a car instead of buying a new or used car. Typically you enter the lease contract for up to 5 years. In order to calculate your monthly payment amount, the company will analyze the sales price of the new car versus its residual value (what it should be worth when your lease expires).
We can take as an example a new vehicle priced at $30,000. The company estimates that it will be worth $18,000 in three years. Calculating depreciation and dividing it into the number of months you’ll pay $333 a month, not including additional charges. Most likely you’ll have to pay a small amount of money before you drive off the lot to cover taxes and a range of fees.
Your credit score may help you with Cap Cost Reduction. Usually the higher your credit score, the lower your interest rate or according to lease terminology money factor. If you want to lock in lower monthly payments throughout the lease, you can consider putting additional money down.
The major difference between leasing and buying is that you don’t acquire any equity in the vehicle. It’s very similar to renting. You make monthly payments but have no ownership claim to the asset once the lease expires.
In this case, it means you can’t sell the car or trade it in. At the same time, you don’t have to deal with the risks of market fluctuations and car depreciation as the company takes care of the car after the lease contract.
If driving a newer or high-end car is important to you, then leasing might be for you. This way you use your new auto for a few years, get it back to the company and change it for the next new one over and over.
The lease contract discourages any modification or customization. As you are not the owner and the company is going to resell it after your lease contract ends, no upgrades are possible unless you agree on that beforehand.
You should think of the number of miles you drive per year. If you drive a lot or if you are going to use the leased car for business purposes like a taxi, leasing may get expensive.
Most leases sent in have a limit from 10 000 to 15 000 miles per year. Make sure that you will have little trouble staying within these limits because extra miles will most likely be charged according to the terms of your agreement.
Because you’re not paying the entire value of the car, you’ll have a lower monthly payment, usually 30%-60% lower than loans. You only pay for depreciation during the term while buying requires paying the full car price spread for the months of the contract. Also, since Grand Prix Motors leased vehicles are acquired with no down payment, there is no upfront capital investment. That could free up badly needed capital for other purposes.
You also should consider the tear and wear terms. If you can take care of the car’s interior and exterior and maintain the normal state of a car there should be no problems. But if you return the car in poor condition, you may incur additional charges.
Now it’s time to define when leasing a car makes sense for you.
Car leasing is smart if you’re on a tight budget as the monthly payments for the same car will differ drastically compared to the buying. Some people even opt for a more luxurious car than they otherwise could afford. If you don’t expect to drive less than the mileage limit annually, you may ask your company to lower the yearly allowance.
That way, the residual value – or “buy-back” – will increase. That reduces the amount you have to finance, which should lower your monthly payment even more. While leases don’t involve down payments, you may want to make the initial payment though. That is called a cap cost reduction and is used to lower the monthly payments on the lease.
Leasing certainly has some advantages over buying in the regard of changing your wheels every couple of years. You may drive a high-end vehicle for a very affordable price. Luxury cars can offer low-price lease arrangements because the cars have a higher residual value.
That means that the cars are worth more by the end of the lease term than what non-luxury models will be after the same period of time. And since you will only have use of the car for a few years, dealers can often make them available with very attractive terms. When the lease is up in a few years, you can return it and get your next new car.
With a car lease, you’re getting a new car for the first trouble-free year. Many new cars offer a warranty that lasts at least three years. So when you take out a three-year lease, most of the repairs should be covered. That can help save on ongoing maintenance costs.
With a lease, you simply return the car and just walk away at the end of the contract. There’s no hassle with selling your used car to a dealership or a private buyer. You are free to choose your new nice car and enjoy your ride.
Depending on what you want from your vehicle, leasing could be for you.
If you have decided to lease, your personal expert from Grand Prix Motors will make sure to explain to you all the details and provide you with the best option that fits you. You will get the most competitive price for your deal that no other dealership can beat.
#enjoy your freedom with Grand Prix Motors!
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