Auto finance is now different. It is now populated with all sorts of choices to help you purchase that vehicle of your dreams. Auto lease deals are one of the most popular.An auto lease is effectively a long-term rental agreement – terms typically start at 24 months with 36 and 48 months much more common. Auto lease agreements do have a few twists to watch out for though.With an auto lease you never own the vehicle. The lease company purchases the vehicle. You lease it from the leasing company. At the end of the lease agreement you simply return the vehicle. As long as the vehicle is in good condition and hasn’t exceeded your mileage limits that’s all there is to it. Lease contracts are set up so that the lease company can extract the maximum value at the end of the contract. They own the vehicle so they can sell it at the end. The cost to them is effectively the difference between the original purchase price and the eventual selling price.So, suppose you find a vehicle for $20,000 purchase price. The lease company does some sums and tells you that if you take out a 3 year contract with a 12,000 mile per annum mileage limit they will guarantee a residual value of $8,000. The net cost to the auto leasing company is $12,000 plus administration charges (setting up the contract and selling the vehicle at the end) and finance charges.
As you are only paying finance charges on part of the value of the vehicle ($12,000+costs in the above example) your monthly payments are lower. Even better, as the auto lease company owns the vehicle you don’t have to pay a large deposit.The result is that you can drive a new auto for low upfront cost and relatively low monthly payments. The downside is that you never own the vehicle and may have nothing to show for all your payments at the end of the agreement.Most lease packages include an option to purchase at the end of the contract. Residual values are normally pretty conservative. So, provided you return the auto in good condition and inside your mileage limits the odds are that it will be worth more than the pre-defined residual value. You than have 3 options: 1. Buy the vehicle for the agreed residual value 2. Part exchange the vehicle and use the extra value as the deposit on your next lease vehicle. 3 You can hand the vehicle back and walk away.Auto lease companies claim that most people trade in and use the difference to pay their next deposit. Many auto leasers do this time after time going from one lease contract to the next. They like driving new vehicles and they don’t vehiclee that they never own the vehicle at the end of the contract.
Just in case this all makes auto leasing look very attractive you should note that in the long run leasing almost always will be a bit more expensive than buying through an auto loan. While lease companies have to compete to keep their prices attractive they still do have to make money. In the end auto lease companies have to pay enough to make the auto leasing business profitable.Auto leasing contracts are not for everyone. To manage their risks auto leasing companies put tight constraints on the contracts they offer. Leases are for fixed period and it is practically impossible to exit a lease early. Calculation of residual values is highly mileage dependent so you may find any excess mileage payments are expensive. Nevertheless, if you want to drive a new vehicle, can guarantee to keep the vehicle for the full term of the lease, and can stick to the mileage limits in your agreement, leasing can be a great choice. Save hundreds of dollars on your next new auto. Auto leasing lets you drive a new car for less than you might think. For help and information on obtaining the auto loan or auto lease that is right for you visit http://www.autoloan.jklblog.com
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