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Leasing a vehicle
What will you learn in this lesson? - Explain the advantages and disadvantages of leasing a vehicle - Explore costs related to leasing a vehicle
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Items we use can have a lifespan beyond a single owner. Just like hand me downs or library books, vehicles can be used by multiple people over time.
Think back to a time when you used something for a long period of time and then returned it. This could include hand me down clothing, a borrowed book, or a rented tool. What were the advantages or disadvantages of temporary possession?
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When you lease a vehicle, you are basically renting it for an extended length of time. During the lease period, you make monthly payments. Your monthly payments cover the vehicle's depreciation, interest, taxes, and fees. Unlike purchasing a vehicle, you are not working towards vehicle ownership. Instead you are paying for the privilege of using it. You will return the vehicle to the lessor at the end of your lease term. A lease: a written agreement between two parties in which the owner of an item allows use of it for a specified period. Lessor: the owner of an item Lessee: the individual that leases the item
Leasing a Vehicle
~Lower Monthly Payments: When you lease a vehicle, you are only paying for the vehicle's depreciation, interest, taxes, and fees. This makes the monthly payments lower than buying a car. ~Newer Vehicle: A typical lease term is 2 to 3 years. At the end of the lease term, you can begin a lease on a brand new vehicle. This means you will always have access to the latest features and technology. ~Lower Repair Costs: Leased vehicles are usually covered by the manufacturer's warranty for the entire lease. If anything goes wrong during the lease, the warranty will cover the cost. You will not have to worry about expensive repairs.
Advantages of Leasing a Vehicle
~Mileage Restrictions: A vehicle lease agreement typically comes with a mileage limit. This varies from lease to lease, but the typical mileage limit is between 12,000 and 15,000 per year. If you drive over this limit, you may be charged an extra fee. ~No Ownership: Unlike purchasing, you will not own the vehicle at the end of the lease. Some lease agreements offer and option to purchase the vehicle at the end of the lease. ~Wear and Tear Charges: The lessor of the vehicle expects the vehicle to be returned to them at the end of the lease in good condition. If there is damage or excessive wear to the vehicle, they may impose a fee to cover the costs to repair the vehicle.
Disadvantages to Leasing a Vehicle
Drag to order the advantages and disadvantages of leasing a vehicle from most important to least to important
A standard lease agreement includes terms and conditions. Some of the terms and conditions are: ~Length of the lease agreement: Lease term is the length of time the vehicle will be leased. Average lease is 24 to 36 months ~Mileage allowance: Most leases limit the number of miles that can be driven. Excess mileage is any miles driven over what the lease allows. Limit is typically 12,00 to 15,000 miles. ~Wear and tear ~Insurance Requirements: A lease agreement will require you to maintain comprehensive and collision insurance. You may also purchase GAP insurance which covers the difference between the value of a leased vehicle and the remaining amount owed on the lease if the vehicle is totaled or stolen
Lease Agreements
Vehicle Lease Agreement
When leasing a vehicle, you should prepare for the upfront costs of agreeing to the lease:
~First month payment ~A refundable security deposit ~Other fees for licenses, registration, and title ~A capitalized cost reduction, which is similar to a down payment ~A processing fee ~Destination charges ~State and or local taxes ~Monthly payments ~Insurance premimums
Signing a Lease will Include:
When you return the vehicle you may have additional expenses such as: ~A turn in fee to clean the vehicle ~A charge for extra miles ~A charge for excess wear
At the end of your lease term, you will need to decide what to do with the vehicle. Options: ~Return the vehicle: Return the vehicle to the lessor and walk away ~Purchase the vehicle: If you like the vehicle you may have the option to buy it and the end of your lease term ~Lease a new vehicle : You can start another lease for a new vehicle
End of Lease