Understanding leasing process critical to nabbing a good deal
Even with low interest rates that make buying a car more affordable, many consumers are leasing a new car or truck instead.
New-vehicle leasing climbed in the first three months of 2013 to the highest level in seven years, according to Experian Automotive, a unit of credit data tracker Experian. Leasing accounted for nearly 28 percent of all new vehicles financed in the quarter — the greatest proportion in records that go back to 2006.
“Lenders have seen overall stability come back to the market since the recession, and leasing has gradually returned as a larger part of many lender strategies,” said Melinda Zabritski, senior director of automotive credit at Experian.
Leasing has its perks, especially if you want to drive a new car every couple of years while keeping monthly payments low. But understanding whether leasing is right for you and how complex lease agreements work is essential to avoid ending up paying more than you bargained for.
Here are a few tips to get a good deal when leasing a new car or truck:
Leasing vs. buying: Generally, buying a car and holding onto it for many years is the least expensive way to own a vehicle.
Although cars and trucks depreciate, or lose value over time, the vehicles retain some value that you can turn around and apply toward your next purchase.
When leasing, the monthly payment will typically be less than what you'd pay if you borrowed money to buy the car.
And the short-term commitment opens the door for you to drive a newer vehicle after a couple of years.
Don't forget to haggle: Consumers have become accustomed to haggling over the price, down payment or interest rate on a loan when buying a vehicle, but few realize you can employ the same strategy when you lease.
As in a purchase transaction, experts recommend someone contemplating a lease take steps to familiarize themselves with the sticker price and any factory incentives being offered. Then haggle with the sales staff to get a lower price before applying the lease terms.
Be realistic about mileage: Lease contracts include limits on how many miles you can put on the vehicle. Once you go above the limit in the lease, you'll be charged a per-mile rate.
One option is to prepay for additional miles at a lower rate. But make sure you have it built into the lease agreement that you'll be credited for any unused miles.
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