Car leasing can be ideal for people who don’t want to purchase a vehicle outright. Finding auto lease deals can be easy if you know what to focus on and find the right partner. Here’s how you go about applying for a car lease:
Understand Car Leasing Terms
Auto leasing contracts come with many terminologies. You may struggle to communicate with the dealer if you don’t understand the lease terms. Always research common contract terminologies before looking for deals. The following are terms every contract will have:
Lessor
This is the company that gives you the lease deal. The lessor can be the original vehicle manufacturer or an auto dealership
Lessee
You are the lessee. The lessor grants you the right to use their vehicle for an agreed-upon period.
Co-Signer
A co-signer is like a loan guarantor. Their signature improves your chances of getting a lease. It helps you get better terms as it instills confidence in the lessor.
Purchase Option
Look out for this term if you want to buy the car at the end of the leasing period. Lessors state the purchase price in the contract if lessees are interested in buying.
Rent Charge
This is the money you’ll pay monthly to keep your lease. A lessor determines the rent charge after forecasting the vehicle’s future value.
Future Value
Future or residual value is the amount the lessor expects the car to be worth at the end of the lease. A high future value means the lessor expects the vehicle to depreciate slowly.
Disposition Fee
Some companies charge this fee at the end of the leasing period. It helps them prepare the vehicle for sale.
Create a Budget
The next step is setting a budget based on your financial capabilities. Look at your needs and determine how much you can comfortably afford per month. You’ll need to factor the following charges into your final budget:
Gap Insurance
Gap insurance covers the amount you still owe the lessor after getting a car totaled or stolen. It covers the difference between a car’s residual and market values. You don’t have to pay the difference out of pocket.
Comprehensive Insurance
This insurance covers various incidents, from theft to fires. Most lessors will need you to buy this cover before letting you have the car.
Collision Insurance
Collision insurance covers repairing or replacing a car after an accident. Unlike comprehensive insurance, it only covers collisions with objects and other vehicles.
Wear and Tear Coverage
This coverage is beneficial if you’re a frequent driver. Remember, the more you drive, the more the car will wear and tear. Paying this coverage upfront can save you from paying too much at the end of the leasing period.
Find an Auto Dealer
Visit auto dealers to find out what they have to offer. Treat leasing as you would buying — look at different vehicle makes and models and ask to test drive them. Dealers are willing to accommodate lessees’ needs to a reasonable extent. Shop around before settling on any specific dealer.
Negotiate Contract Terms
You can negotiate the purchase price if you intend to buy the vehicle after the lease. Negotiate mileage limits, maintenance, and insurance charges before signing your agreement.
Read the fine print to determine whether the lessor offers an open-end or closed-end deal. An open-end agreement requires you to pay the difference between the car’s residual value and market value at the end of the lease. A closed-end deal doesn’t involve extra charges unless there’s excessive wear and tear on the car. Negotiate for what seems most reasonable for you.
Discover Auto Lease Deals
The first step when applying for auto lease deals is understanding the terms you’ll find. Set a reasonable budget and look for cars you can afford from various dealers. You can hire an auto leasing company to find and deliver the ideal vehicle. After that, negotiate contract conditions to get the best possible deal.
