Leasing is a method of financing a vehicle that offers lower monthly payments than are possible with conventional financing. Leases are designed to pay off the depreciation portion of the vehicle. A lease is often presented to a consumer as only paying for the portion of the car that you use. At the end of the lease term, you return the car to the leasing company unless you make other arrangements.
Equity
A person who leases a vehicle does not build equity in the vehicle. As a result, the lessor of a vehicle does not have any ownership interest in the vehicle, as the leasing or finance company considers the payments that a lessor makes to be rent. Even without ownership interests, a lessor may be able to make money at the end of his leasing term.
Refund of Mileage
If you purchase over 15,000 miles per year to use with your lease, the leasing company may give you a refund for the miles that you do not use. If this is possible, the terms of the buyback of any unused mileage will be defined clearly in the original lease agreement. If the contract does not specifically allow for a leasing company buyback of unused miles, the leasing company will probably not refund any mileage.
Leased Vehicle Purchase
All leases have a residual value. This is the price that the leasing company will sell a vehicle for at the end of the lease term. The actual value of the vehicle may be more or less than this residual value. If the vehicle is worth more than the residual value, or your purchase price, it may be worth purchasing the vehicle, particularly if you like it. If the vehicle is worth less than the residual, you may still want to purchase it, but realize that you are probably overpaying for the vehicle. The leasing company may be willing to sell the vehicle for closer to its market value if you ask.
Right of Purchase Transfer
If the leased vehicle is worth more than its residual value, you may want to attempt to sell or transfer the right to purchase the vehicle to a dealer or other individual who is interested in your car. Basically, you have an option to purchase a vehicle at below market price, and if you are not interested in exercising this option, someone else probably is. This is a good way to negotiate a purchase or lease on a new vehicle to replace your expiring lease.
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