Many individuals expect to buy their new car or truck outright. Purchasing isn't the only option available to those who want a new car, as dealers typically offer lease options as well. Leasing a vehicle can be significantly different than buying one, so interested individuals should learn about the key concepts of leasing.
How Leasing Works
An auto lease can be likened to a middle step between buying and renting. You do not own the vehicle, but you do have exclusive use of it during the period of the lease. Once the lease period ends you can return the vehicle and lease a new car or truck.
Lease Period
A typical lease lasts for two to four years. The lease period may be open to negotiation.
Lease Payments and Costs
Monthly payments are required during the lease period; these payments are often lower than what you would pay for an auto loan on the same vehicle. An up-front payment is typically required at the beginning of the lease, which includes the first month's payment, taxes, a security deposit and other costs. Early-termination and end-of-lease charges may also apply, depending on whether your lease is complete when you turn the vehicle back in to the dealer.
Liability and Responsibility
The dealer that you lease a car or truck from retains ownership of the vehicle, though you are responsible for maintaining insurance coverage on it as mandated by law. In most cases you will be held responsible for any damage that occurs to the vehicle, though some dealers may offer a damage waiver as part of the lease if you agree to a higher monthly payment or pay an additional fee at the beginning of the lease.
End-of-Lease Options
When the lease period ends you are required to return the vehicle to the dealer, at which point you can generally exercise one of three options. You can choose a purchase option, buying the vehicle you've been driving at a reduced price. You can also continue your lease, receiving a new vehicle and beginning a new lease period. If you don't wish to continue your relationship with the dealer you can also choose to cancel the lease after turning in the vehicle.
Limitations
Leased vehicles often come with limitations. Mileage restrictions are often placed on a leased vehicle, resulting in additional fees at the end of the lease if you exceed the mileage limit. Restrictions on general wear and usage may also be in place, resulting in additional charges when you return the vehicle if it shows signs of wear beyond normal use for its mileage.
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