how does leasing a car work?

Question

i see on tv all the time about how you can lease a new car for $200 a month.

is that true? do you need a down payment or anything? ...you just give them $200 a month and you can drive their car? thats how it works?

Answer 1

Normally they want some kind of down payment. Then you are restricted to how many miles get put on the vehicle during the lease or per year. You have to have all services done ontime or ahead. You can't take the car out of the country (big problem with military who lease then get moved overseas)

Like the above answer, most people get hammered when they turn the vehicle back in.
Too many miles
late on a, or a few, services
scratches and dents
Many people wind up paying from a few hundred to several thousand dollars to get out of a lease.

Leases are great for companies. They can write the lease off on their taxes.

Bad... BAD idea for private people. Financially that is.... many people do it because they have bad credit or they just don't do the math.

Answer 2

Leasing a car is basically buying a percentage of the car. The finance company determines the residual value of vehicle for the lease period. The redidual value is what the car is projected to be worth once the term has experied with an national average of mileage. This is how the percentage is determined.
You also pay an interest rate on the percentage that your responsible for called the money factor. At the end of the lease term you have first crack at this vehicle at the specified price set on the date of the original contract. Most people do not exercise this option because they always want a new car. Leasing was a profound way for automakers to sell more cars it is creative financing at it's best.

PRO's of leasing-

Usually you will get more car for the money.

You drive your car while it is under the factory warranty avoiding costly repairs.

Short term contracts will let you change cars as often as every 2 years.


CON's of leasing.

If you go over the miles and no longer want the car than you need to pay a large amount of money(some companies charge at much as 25 cents per mile), or buy the car for that specified price of the original contract which will probably put you in a massive negative equity position.

Overall I think leasing is a good idea for most. The rich have a saying " one buys thing that go up value, while leasing things that lose value" or something to that effect.

Answer 3

Simply put, leasing allows you to RENT a new car that you can not normally afford. The car' value is pro-rated and you end up paying for what you have used. At the end of the lease you can purchase the remaining value of the car, hand it in and walk away, trade it in for another. BUT! BUT! BUT! BUT!
You must maintain the vehicle. When the lease ends, the tires must have a certain amount of tread, no cosmetic defects, all maintenance in the Scheduled Maintenance must be completed at the Leaser's expence "AND" you have been limited to a certain amount of miles. If you exceed the allowable mileage you get charged X-amount for the overage.
Leaseing use to be a good way to get into a new car but today, you can loose more than your pants. A good idea is to look at a vehicle that is one or two years old. You do not have to pay STICKER price and you may also have some of the factory warranty remaining on it. Be careful!!! The dealer will tyr to charge you to TRANSFER the warranty. They found another way to make money off of you.
New cars can be financed five years or more. The sales people first ask..."How much of a payment can you afford"? This is where they get you. Car sales are down and the consumer has more power than they realize. Make the dealership work! All you need to do if figure how much you can afford and how many years you intend on keeping the vehicle. Here is an example...
$10,000.00 for 60 months will cost you a monthly payment of around $200.00. At the end of five years, you own the vehicle.
Leasing= A $20,000.00 car is leased for 48 months. You make payments on aproximately $10,000.00 and the payment may be almost the same. You still have to maintain it. You are limited to 12,000 miles per year. When you turn it in, you have nothing! You can finish purchasing the same car but now you end up financing another $10,000.00. AFTER eight or nine years, the car now belongs to you.

Answer 4

Leasing is great.

They usually don't require a downpayment, but what you do pay is known as "Total Drive Off".... which includes 1st month's payment, DMV fees, taxes and bank fees. Some do require a security deposit, which gets refunded at the end. I believe BMW has a program where if you put a large security deposit ($5000 or so) they lower your payment by 20% or so. Don't know if they still offer it though.

I like leasing because it allows you to drive an expensive luxury car for no more than the payment you'd make on a Honda Accord. For example, you can lease a Lexus RX350 for less than $500 while had you financed it it'd be over $1000.

Another great thing is at the end of the lease, you just turn in the vehicle rather than worrying about selling it.

Mileage restrictions exist but you can negotiate for extra mileage. I know leasees who got the dealers to include 20k miles a year even though they barely drive 12k miles... just in case.

Some leasing companies will include GAP insurance and end-of-the-lease damage insurance for free. Which should alleviate any worries about being charged for any damages.

Leasing is also great if you want to get rid of the car before the contract is up. With so many popular dump your lease sites such as http://www.swapalease.com you don't have to pay the heavy penalties that banks charge to terminate your lease. Try selling a financed vehicle with half the payments remaining..... almost impossible because most banks will not let anyone assume your payments.... unlike a lease which most banks allow.

Leasing does require better credit (BMW & MB won't lease to anyone with less than Tier-1 credit).... and usually higher insurance coverage.

Also there's no requirement that you have to "show proof of maintenance"..... I used to skip maintenance all the time and they don't care as long as you don't return the car on a flatbed or something.

Answer 5

Rick's answer is very thourough, but one other thing I would point out is that since very few people keep their cars 5 or more years, most consumers never really "own" their vehicle any way. One thing I have always liked about leasing is that for the 2-4 years I am going to drive a car, I am making a lower monthly payment than if I financed the same car for 60 months and traded in 2-4 years. If you do your normal maintenance (and why wouldn't you) and take reasonable care of the car (and again, why wouldn't you), you shouldn't be charged for excess wear and tear. When you go into the lease, if you choose terms that realistically allow for the number of miles you drive, then end of lease mileage penalty shouldn't be a big issue. It's important here to be realistic - if you know you drive 20,000 miles per year, don't sign up for a 12,000 mile a year lease to save money on the front end. You'll just end up paying it later.

Answer 6

usually you will have a payment of abou 2,000 when you sigh the lease. it is a cheaper monthly payment then financeing but after your lease is up in about 3 years. you dont have a car. its like renting a car for an long time. i suggest you buy a car

Answer 7

It definitely doesn't worl like that. What they fail to tell you is at the end of the lease you owe a ton of money. They get you for everything; tites, dents, mileage, interior, etc.

If it's too good to be true, it is.

Answer 8

you give them a thousand or two, pay by the month,then pay a termanation fee and the leases end. you end up with no car and no money.. Its only good for a bizness tax wright off. don't do it...