MSRP is the suggested retail price provided by manufacturers. However, know that you can always negotiate the vehicle price down from the MSRP price to reduce your overall monthly lease payment.
Down payment isn’t always required on a lease, and in cases where your vehicle is totaled in an accident during the first few months, your down payment would be lost.
What to Consider Before You Get a Lease
Leasing a car is like having a long-term rental car. You pay a low monthly fee without having to spend too much upfront to buy the car, and you get to drive it around throughout the length of your rental lease term. When your lease term ends—assuming you have a walk-away lease and kept the vehicle in great condition, you can simply return the vehicle with no obligations. While leasing a car poses minimal risk in the short term, it isn’t always the best financial decision in the long term. If you’re considering getting a car lease, make sure you do your due diligence and consider the following questions.
1. What are your driving needs?
What are you getting a car for? Do you need a reliable way to commute to work everyday? Or do you need to drop off and pick up your kids for school and all their extracurricular activities? Have you considered what car is best suited for your lifestyle? Leasing will give you the excitement of having a new car, but before you get carried away with the new car smell, make sure you are leasing the right car that matches your day to day needs. Try to lease a car that have the least depreciation, as your monthly lease payments will be dependent on the residual value of the vehicle.
2. How much do you drive?
Standard lease agreements usually come with 12,000 miles allowed per year. If you go over that allotted mileage, you’ll be charged an excess mileage fee per your agreed upon lease terms. Excess mileage cost can add up as is usually between 15 to 25 cents per every mile in excess. If you have a long daily commute or you’re an avid roadtripper, you may want to negotiate additional mileage for your lease term, or consider buying a gently used car with better fuel efficiency. If you know how to look, a lightly used car would be a great deal as the original owner already absorbed the depreciation when they purchased it new.
3. How much monthly payment can you afford?
The lower the better, right? In general speaking, yes. But before you jump to conclusion, factor in your actual day to day needs and long term plans. Do you foresee the need for having a car beyond the next 2-3 years? Compare your auto loan payment options vs a lease. While a monthly payment on a lease would usually be lower compared to new car loan, you might be able to afford more car and get a better deal with a used car loan. Do you know what car you want? Use our Auto Loan Calculator to see what your monthly and down payments would be.
Pros and Cons on Lease vs Buy
One of the most important aspect to consider is whether you should buy or lease. Leasing is attractive for someone who always wants a new car. However, there are also perks of ownership and additional flexibility when the car is actually yours.
|Upfront Cost||Down payment (optional), first month’s payment, registration, taxes, title and fees||Down payment, registration, taxes, title and fees|
|Monthly Payment||Usually lower compare to a monthly loan payment because you are only paying the depreciation cost of the vehicle and interest charges||Usually higher than a lease payment, because your total loan amount is likely higher, plus interest and other finance charges|
|Driving and usage||Limited mileage per year, can be negotiated but usually between 12,000 - 15,000 miles per year. Excess wear and tear will most likely incur penalty charges as well.||You can drive as much as you like and not worry about the condition of it as much. However mileage and condition will impact the vehicle’s future resale value.|
|Customization||Not allowed on a lease vehicle.||Free to do whatever you like.|
|Ownership||At the end of a lease term, you can choose to buyout the vehicle or return it, but you don’t own the vehicle unless you purchase.||It’s your baby! You can keep the car for as long as you like.|