What to Know Before Leasing a Car

Money and where to get it is often the main concern when trying to purchase a new car. Due to this, many people find the idea of leasing particularly attractive. In most cases, it is far more manageable to sign a new Honda Civic lease over buying it outright, whether you live in Chicago or Los Angeles.

When considering leasing, there are a few things every potential buyer should know.

Leasing Terminology

Understanding the terms of an agreement are crucial to ensuring it will beneficial. When it comes to leasing, these terms are important to understanding exactly what everything means.

• Capitalized Cost: This means the overall price of the car. This could be a reference to the MSRP (Manufacturer’s Suggested Retail Price) or the price determined through negotiations.
• Residual Value: The value the car will be at the end of the leasing agreement.
• Money Factor (Rate): The interest rate of the loan being issued. This is not displayed as an annual percentage. It is possible to negotiate this rate as well.
• Capital Cost Reduction: What this really means is a down payment. Leasing agreements usually do not include capital cost reduction as anything other than an incentive.

Extra Costs

Leasing often includes lower monthly payments when compared to traditional financing. Some monthly cash flow will lose its advantage through increased costs in insurance. To protect themselves from them, it is wise of drivers to purchase “Gap Insurance” in addition to other insurances. This will cover the difference in actual cash value and the amount owed.

Repairs

Although the buyer is only leasing the car, they are still responsible for all repairs or service that need to be performed on the vehicle. Many people who sign leasing agreements don’t realize this.

Exit Options

Eventually, it will be time to change to a new car, either that or the leasing agreement will come to an end. To make this part of the process as painless as possible, it is a good idea to know the options provided when these things come to be. Many offer incentives to purchase the car rather than return it.

No matter what type of agreement is being made, it is always worth knowing as much information as possible. This is crucial to making a good decision and understanding how things will play out over the entirety of the agreement. Leasing agreements can be especially tricky due to incentives options and confusing terminology. If potential buyers educate themselves in these areas, they can avoid a lot of problems in the future.

Knowledge is always the most powerful tool for ensuring favorable outcomes, and a leasing agreement is no different.

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