9.2.4 Leasing a Vehicle

9.2.4 Leasing a Vehicle

Today We Will: Explain the advantages and disadvantages of leasing a vehicle. Explore costs related to leasing a vehicle.

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What is Leasing?

When you lease a vehicle, you are renting it for an extended length of time, usually between 24 and 36 months. During the lease period, you make monthly payments. Your monthly payments cover the vehicle's depreciation, interest, taxes, and fees. Unlike purchasing a car, 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 is a written agreement between two parties in which the owner of an item allows use of it for a specified period. The owner of the item is called the lessor. The individual that leases the item is the lessee.

Pros and Cons of Leasing

Lease Agreements

Common Terms & Conditions

Length/Term of the Lease

Mileage Allowance

Early Termination

Insurance Requirements

Question #1

Leasing Example

MSRP: $31,000 Lease Term: 36 months Annual Miles: 15,000 Monthly Payment: $486 Total Payments: $17,496

Horizon Vantage XR

When Marquiz signs his lease, he may have to pay: - his first monthly 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

Question #2

Suppose you are leasing a vehicle. You are ready to sign the lease agreement but will also need to make sure you have enough to pay the fees due at signing. The following are the fees you will need to pay up front: first monthly payment: $278 a refundable security deposit: $500 other fees for licenses, registration, and title: $165 a capitalized cost reduction (down payment): $1,100 How much will you owe when signing the lease agreement?

Question #3

End of Lease Options

Return the vehicle to the lessor and walk away, assuming you have met the terms of the lease agreement.

If you decide that you like the vehicle, you may have the option to buy it at the end of your lease term.

If you enjoy the flexibility of leasing and want to continue driving a new vehicle, you can start another lease for a different vehicle.

Question #4

Match the term related to leasing a vehicle with its description.

Question #5

Lesson wrap-up

Today, we learned to: Explain the advantages and disadvantages of leasing a vehicle. Explore costs related to leasing a vehicle.

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Thursday: Assignment - Deciding on a Vehicle Friday: Knowledge Check - Investing

A lease agreement will require you to maintain comprehensive and collision insurance coverage throughout the lease term. In addition, you may also need to purchase GAP insurance. Guaranteed Auto Protection (GAP) insurance covers the difference between the value of a leased vehicle and the remaining amount owed on the lease if it is totaled or stolen

This limit is generally between 12,000 and 15,000 miles per year. This limit is because driving more miles reduces the value of the vehicle. You will be charged a fee for excess mileage.

A vehicle lease term can be between 2 and 5 years, but the average lease lasts 24 and 36 months. The length of a lease affects your monthly payment. The longer your lease, the lower the monthly payment.

This means that you would be charged a fee if you break the contract by ending the lease early.