You may be planning to buy your next car, but there is another option that is immensely popular and can put you behind the wheel of a new car every few years. And that would be car leasing. Car leasing is especially popular among luxury brands such as BMW and Mercedes-Benz, with car shoppers more often choosing to lease a car than to buy one. That’s because a car lease is more affordable than monthly payments, not universally so, but especially so with certain luxury brands.

If you plan to lease your next car, there are certain things to keep in mind including its depreciation, mileage and lease terms. By leasing, you enjoy the same new car warranty car buyers get, plus whatever maintenance plans are available.

  1. Shop around.  Just as you would with any new car, you will want to shop around for a lease. Often times, consumers are under the impression that a lease deal is set in stone. However, you can negotiate the lease to meet your needs — you aren’t required to accept the dealer’s or the manufacturer’s published lease offer.A lease contains numerous financial and legal terms, and your monthly payment is based on several factors including your anticipated mileage, its projected residual value at lease term and the interest rate you are being charged for the lease. Familiarize yourself with these terms and be prepared to strike the best deal you can.
  2. Dig deep.  Lease agreements can be confusing, especially if you are not familiar with some of the terms used. The residual or resale value of a car is what the manufacturer predicts it will be worth at the end of your lease term. Its capitalized cost represents the recorded expenses of an asset’s cost.Be mindful that your lease deal may include additional fees, including some that you can challenge. A disposition fee is a charge that can add several hundred dollars to your costs and covers the dealer taking the vehicle back from you. Similarly, an acquisition fee does the same thing. You may be charged for one, but you should not be charged for both. A purchase option fee may also be listed, in the event you want to buy the car at the end of lease term. These fees are negotiable, but taxes and government fees are fixed.
  3. Leave no “gaps” in your insurance coverage.  Consumers that choose to lease can find themselves in for a rude awakening if their new car is totaled following an accident or is stolen and never recovered. Your lease should include “gap” insurance, known in the industry as guaranteed asset protection. What this does is pay off your remaining lease payments, leaving you with no additional expense.You can also buy gap insurance from an auto insurer. Talk with your current insurance company and ask if gap protection is offered. Regardless where you get gap coverage, this plan will protect you against “negative equity” or what most every consumer faces when buying a new car.
  4. Trade-in or cash down.  Once you are satisfied with your car lease deal, then you’re ready to negotiate your down payment, if one is required. You may be asked to put a certain amount down and make both your first and your last monthly payment. Your dealer may accept your trade in lieu of a downpayment, but you should first confirm the vehicle’s value before discussing a possible trade.One option is for you to head to the Kelley Blue Book website at kbb.com and enter in the information about your car including the make, model, model year, trim level and mileage. From there you will be asked a few more questions before its book value is listed. You will want to obtain both its private market value and its trade-in value — the price you get for your car will likely fall between those two numbers. Ask for the highest possible value and apply that amount to your lease to lower your monthly payments or take the remaining funds as a check.

Lease Considerations

Leasing is important option for consumers and is prized by business’s for its tax deduction features. For consumers, a lease can provide a new car every few years, but that also means that you’ll always be making car payments. If you drive beyond the mileage limitations, you will pay a few of up to 25 cents per mile. You’re also responsible for excess wear and tear, and any damage to your car that is not fixed by you.

Resources

U.S. News: Better to Buy Cars New, Used, or Leased? — http://money.usnews.com/money/blogs/my-money/2010/09/29/better-to-buy-cars-new-used-or-leased

Kiplinger: Five Myths on Leasing a Car — http://www.kiplinger.com/columns/car/archive/2008/car0107.html

Nolo: Leasing a Car — http://www.nolo.com/legal-encyclopedia/leasing-car-29967.html

Jeff Foster has been blogging and writing about automotive related topics since 2009. He is currently working with AutoFair Hyundai.

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