4 Uncommon Facts about Leasing a Vehicle

Leasing a vehicle appears to be a straightforward proposition. Aggressive advertising makes many feel they understand the broad details of leasing, particularly the price, terms of the lease in years and required money down. But there are several less well known aspects of leasing a vehicle. The following information details four of these uncommon lease details.

No Easy Way Out

When leasing a vehicle, you need to understand that you have entered a contract and there is no provision - short of paying the full amount of the lease - to exit the agreement. Two often-held assumptions appear to offer a way out.

  • Three-Day Return - Many believe there is a three-day window after signing a lease in which you can return the car and walk away. In fact, no such return provision exists when you are leasing a vehicle.
  • Assuming the Lease - Similarly, it is a commonly held misconception that if you can’t meet the lease payments you’ve contracted for, you can find another person to assume the lease and let them take over payments. There is no requirement for the leasing company to do this. They might, but if they do allow an assumption, there are fees associated with it.

You Can Negotiate

When leasing a vehicle many believe the terms are the terms and that is that. This belief arises because a vehicle lease rate is based on the initial cost of the vehicle minus its residual value at lease end. However, you can negotiate the initial cost of the vehicle, particularly when dealing with an auto dealer. If you can lower the initial cost, the residual value remans the same and your monthly lease payment goes down.

Leasing Used, Pay More

When leasing a vehicle, you are paying the depreciation on the car - the difference between what it costs and what it’s worth at lease end. It would be logical to assume that leasing a used car would be less expensive because the depreciation is less. However, this often is not the case. Leasing companies face the same processing costs but it is for a vehicle that has less demand and less residual value. Often they attempt to offset this when leasing a vehicle with higher initial costs. Additionally, your maintenance costs will be higher with a used car, further cutting into any savings from lower monthly cots.

Bad Economy, Higher Lease Rates

Although it seems counter-intuitive, in a down economy there are seldom savings to be found on monthly payments when leasing a vehicle. A bad economy leads to less demand, and that would be expected to result in lower prices, special deals and opportunities to negotiate. With car sales, this is the case. But when leasing a vehicle, the opposite happens. Because there is an increase in new car inventories, residual car values - that is the price of used cars - drop faster than the discounts on new cars. The result is leasing companies must raise monthly lease rates to cover that greater depreciation.

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