(Newswire.net — December 4, 2019) — There are a number of advantages to leasing new cars. Chief among them is the ability to always drive under warranty, with no concerns over the potential for costly repairs. However, you do have to be careful to get into your lease the right way to derive the fullest benefit. To that end, here are six questions to ask before leasing a car to make sure you’re getting the best deal possible.
1. What’s My Credit Score?
This question should be asked of your bank or credit union. Most offer this information as a free service — or at a minimal charge — without any effect on your score. You should also get a free copy of each of your credit reports from the big three credit reporting companies (Experian, Equifax and Transunion). You can get this for free online at annualcreditreport.com. Look it over for errors and get them corrected if any are found.
2. What Specials Are Available?
Every manufacturer runs specials, typically each month. Granted, they’re usually on slower selling models — however, there are times when the car you want is being offered at an exceptional rate. While you can absolutely get this information on your own by visiting the website of your builder of choice, it’s always a good idea to ask at the dealership too. There might be a dealer-only offering to consider as well. Hey, you never know where you’ll find the best lease deals.
3. How Much Will the Car Be Worth at the End of the Lease?
Also known as the “residual” value, this is one of the key determinants of the amount you’ll pay to lease the car. The amount of depreciation the car will experience while you’re driving it influences the rate upon which your monthly payment is based. Simply put, when you lease a car, you pay for the portion of its value you’ll consume while it is in your possession. The residual value is the predicted worth of the vehicle after the lease period ends — assuming it is in excellent condition and its mileage is low.
4. How Many Miles Per Year Can I Drive?
As mentioned above, the condition of the car is another key factor when it comes to determining how much you’ll pay to lease the car. The best lease deals typically come in around 12,000 miles per year on mainstream cars and 10,000 miles per year on luxury cars. Some high-end cars might even require you to keep the car at 7,500 miles per year or less. You’ll be required to pay $.25 per mile in most cases if you exceed this “mileage cap.”
5. What’s the Interest Rate?
You’ll be required to pay interest on the money loaned to finance the lease. This charge is known as the “money factor” and is usually expressed as five-digit number preceded by a decimal point — .00125. Dividing the effective interest rate by 2400 returns this number. So, in order to get back to the true interest rate, you’ll just multiply the quoted money factor by 2400. Here, it’s important to know what interest rate your credit score entitles you to receive. The higher your score the lower the rate you will be expected to pay.
6. What Will This Lease Cost in Total?
In addition to your monthly payment, you’ll be required to pay sales tax each month along with your payment. You’ll also be expected to make a down payment (also known as a capital reduction payment). There are also a few other fees involved such as a disposition fee when you return the car and in some case you may encounter an initiation fee as well. All of these expenses figure into the total cost of the lease. So basically, multiply the total of the payments you’ll make by the number of months your lease runs. You’ll also need to add in the capital reduction cost and fees. The total will be the amount of money you’ll pay to drive the car.
Asking these questions before leasing a car will give you a basis of comparison against buying it outright or even purchasing a used car instead. Either way, you’ll have the ability to determine the best use of your money for your given situation.