A light blue Volkswagen Beetle cabriolet is in your future or at least you hope it is if you can swing your car payments. Those monthly payments can, however, be reduced if you choose car leasing over traditional loan financing. For when you lease a car, your costs are lower than buying, with the difference here being that you return your leased car at the end of the lease term.
New car leasing also offers some options that you will want to keep in mind as you consider your Volkswagen or other vehicle acquisition. Be a savvy consumer and weigh these options when shopping for a new car.
Money Down
Like regular bank loan financing, you will need to bring some money with you when you negotiate your lease deal. Even if your deal includes no money down, there are other costs that must be added included dealer fees, registration expenses and taxes.
For starters, your down payment represents your car’s “capitalized cost reduction” or the money that you pay before you begin your lease. It is possible to get this cost rolled into your monthly payments, effectively raising your costs from month to month, while limiting your initial pay out.
Some consumers prefer to make their payments all at once. For example, if you have a 24-month car lease, you can make those payments ahead of time and be done with you financial obligation. This option allows you to operate from a position a strength, where you negotiate the best car deal possible, then make your payment.
Car Leasing Terms
Lease terms are typically for three years or 36 months, but it is possible to lease a car for as little as 12 months or as long as 48 months. Car leasing companies may prefer that you opt for a standard lease contract, but as the customer you can negotiate terms that are right for you.
Keep in mind that the longer your term, the lower your monthly payments. Also, consider that your new car warranty can run out before your lease is done. Therefore, align your lease term with the length of that warranty or be prepared to assume extra costs that can raid your wallet. You can also buy an extended warranty, with that cost rolled into your lease agreement.
Open or Closed
Not too common with consumer car leasing are so-called open-end car leases. Also known as an equity lease, under this arrangement you must purchase the car at the end of lease term. That predetermined amount must be covered in a one-time or balloon payment or you can seek additional financing to cover these costs. With this option, a three-year lease can turn into a four-year used car loan, making for seven long years of car payments.
Most consumers prefer closed-end leases and that is what car leasing companies generally offer. With a closed-end lease, your financial obligation ends when you return your vehicle at lease end. You may still need to pay additional charges for going over the mileage limit or for excess wear and tear, but your car payments end as the lease term comes to a close.
Gap Insurance
Always ask for gap insurance coverage when signing any lease deal. Gap or guaranteed asset protection ensures that if your Volkswagen or other car is totaled or stolen, you are not responsible for future lease payments or a lease deficiency. Never underestimate the importance of such coverage because if your leased car is written off as a total loss, there could be thousands of dollars of lease termination costs to cover. Gap insurance literally fills in the gap between your responsibilities and what the car leasing company says that you owe them, a worthwhile expense to be added to any lease agreement.
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