Leasing a car is one of the best ways to get a vehicle to drive for several months or years without necessarily purchasing it. You rent the car for 24, 36, or 48 months and make regular monthly payments.
The monthly car leasing payments are usually based on the expected depreciation value over the lease period. Therefore, it is cheaper than financing the purchase of a car by over $120 on average.
However, many people have no idea how to lease a car. These individuals may end up either getting scammed or suffering significant losses. This article outlines the steps to take when leasing a car to help you get a cheaper deal.
How to Lease a Car
So, you have made up your mind to lease a car? Do you understand how exactly to do that? Car leasing is more than just walking into a dealership and signing a contract. It takes several distinct steps, which include the following:
Step 1: Review Your Reasons for Leasing a Car
Why do you want to lease a car and not purchase one outrightly? Ensure you understand that leasing is similar to car rental since you pay for a car you cannot own. You may drive the car for 24, 36, or 48 months, but you must return it to the dealership.
Therefore, if all you want is to drive a new car, leasing is the best option. Otherwise, you’re better off entering into a deal to finance the purchase of the vehicle. With financing, you pay for the car for an agreed period and become its owner.
The best way to know what you want is to acquaint yourself with how leasing works and the reasons to lease a car. Once you know exactly what you need, you can negotiate the contract with the dealership.
Step 2: Agree on a Lease Deal
You and the dealership agree on the details of the contract, including the lease term, monthly payments, mileage limit, and so on. The following are some of the must-have components of a typical car lease contract:
- Lease Term: Ideally, the lease term should be up to 36 months to enable you to benefit from the three-year manufacturer’s warranty. However, with a shorter lease term, you must contend with costly monthly payments. So, if you want significantly lower monthly payments, you may want to sign up for a longer lease term. With that, they risk taking responsibility for vehicle repairs.
- Mileage Limit: The lease contract also includes the annual mileage limit, which can be 10,000 to 15,000 miles. Therefore, for a three-year lease, the total mileage should stay within 36,000 miles. Anything above that can attract a penalty of 15 to 30 cents per mile. You can avoid that by going to get a higher-mileage vehicle.
- Down Payment: In some cases, the dealership will require you to make a down payment or cap reduction when leasing a car. Make a large down payment to reduce your monthly payments. If that’s not an issue, pay the first month and any obligatory fees.
- Insurance: The car dealership may require you to take insurance cover for the car. You may need slightly higher coverage than for a car you own. So, ask your insurance provider for a quote on the same. You’ll take the liability off the leasing company’s hands.
Step 3: Budget for Lease Payment and Car Maintenance
Before you start wondering how to lease a car, the first budget is. Consider items such as the down payment, monthly payments, insurance, and fuel costs. You can get a better car for a smaller monthly payment with leasing. However, leasing can be expensive, primarily due to a shortage of new cars and the high cost of used vehicles.
Instead of jumping into car leasing, compare the monthly leasing costs with those of purchasing a similar vehicle. If the difference isn’t huge, you may consider financing the vehicle for purchase rather than leasing.
Step 4: Check Out for Manufacturer Lease Deals
Now that you have a budget, it’s time to shop for enticing manufacturer lease deals. Most carmakers offer periodic discounts on car leases, enabling you to enjoy much lower prices. If you find them, go ahead and sign up.
However, you should be on the lookout for the hidden costs often included in these lease deals. For example, some manufacturers may obligate you to pay for sales tax and drive-off fees, which you can ill afford.
Step 5: Find a Car to Lease
Didn’t find a manufacturer’s lease deal? You can find cars to lease by checking online. Some websites allow you to search for a suitable car by entering the car’s make, model, and year of manufacture. You can pick one that meets your needs from the resultant list of cars.
On some websites, you can narrow down the search by entering the vehicle’s color, trim, features, and price. After picking a suitable car, contact the dealer to check for availability. Compare pricing by several dealers and negotiate for the lowest price possible.
Step 6: Determine an Approximate Monthly Payment
Do you want to know how to lease a car? You may already have determined the things that would go into the contract. However, you still have no idea how much you will pay monthly. Check our lease price calculators and use them to figure out just how much you will pay.
The lease calculators can produce different figures based on what you feed them. For instance, you will have a different price based on what you enter for the lease term, trade-in, or down payment. The figure you get from these calculators is provisional and may not be the same as that from the dealership. Be sure to ask the salesperson for out-the-door or final pricing.
Step 7: Contact the Dealership Online
Shopping for a car in person can be hectic. Besides walking around many showrooms, you must speak to many salespeople in person. You may use the dealership’s website to find suitable cars and send requests for price quotes to the salespeople.
Once the dealership contacts you with the price quote, you should follow up by calling or emailing them. Contact several dealerships to determine the most affordable one. Compare the price quote with the figures from the lease calculator.
Step 8: Call the Salesperson
If you accept the price quoted by the car dealership, contact the salesperson and offer to lease the vehicle. Check that you can trust the salesperson and are comfortable dealing with them. Look for simple behavioural traits such as the ease or difficulty with which they return your phone calls.
Step 9: Negotiate for Affordable Lease Payment
After getting several price quotes and analysing customer satisfaction at several dealerships, you should negotiate your lease payment. You can negotiate tactfully by calling dealers with the lowest offer you have so far. If the dealers can beat that price, you have a good deal! If they refuse to negotiate, don’t hesitate to pick the most affordable price.
You may check out the deals from different dealerships online or visit the car lot. If you pick the latter option, you should carry all the price quotes and lease payment estimates you have. Show the salesperson the deals you have already secured to see if they can offer a better one. Accurately match the lease term, down payment, and annual mileage allowance.
Ideally, the salesperson should provide you with a worksheet with all numbers involved in the deal. Watch out for hidden fees and compare the offer to the quotes you’ve already secured. Ensure that the quote includes sales tax. With that, you can be sure about your total monthly payment.
Before signing the lease, ask the salesperson if it’s possible for them to deliver the car to your office or home. You’ll not only save time but also avoid visiting the finance office. And you won’t have to sign up for extras like fabric treatments and alarm systems.
Step 10: Cross-Check and Sign the Contract
You must sign the contract and associated documents regardless of where you close the deal. Dealerships have a finance and insurance (F&I) manager who processes all paperwork on car leases. Watch out for additional offers, including a vehicle locator, alarm, fabric protection, and prepaid maintenance plans. If you’re not ready for these extras, don’t let the finance manager convince you to take them.
The details on the lease contract are not any different from the worksheet. Therefore, if you have already seen the worksheet, you shouldn’t waste too much time assessing the contract. However, Check that the details in the contract match those in the worksheet.
Make sure that you understand what you’re signing. After signing, it will be impossible for you to undo any damage. Ensure the contract provides gap insurance to protect you if the vehicle gets lost or totaled. Once you’re sure about the contents of the contract, you can go ahead and sign it.
The Bottom Line
Now that you know how to lease a car correctly, you should get a vehicle to use on your daily commute. Knowing the different components of a car lease can help you negotiate better. Doing thorough due diligence enables you to enter into a contract with the most affordable monthly lease payments. It’s critical to sign a contract only when you know its contents. Otherwise, you might end up with excessive monthly payments on your lease.
Frequently Asked Questions (FAQ)
Yes, leasing a car is brilliant, especially if you want a vehicle to drive for some time without necessarily buying it. Besides, the monthly payments on a car lease are more affordable than financing a car. Therefore, if you want to drive new cars often, try leasing.
You can lease a car from a dealership. Manufacturers provide new vehicles to the dealerships, allowing them to sell or lease out. Check online for dealerships that lease out vehicles or visit their showrooms. Once you find a suitable vehicle, sign a contract and lease it.