How to Lease a Car with the Option to Buy

Leasing a car is a little like long-term renting. It's a great option if you want a new car but have little capital, or if you want a fancier car than you can afford to buy. Monthly payments are significantly lower than when you buy outright, but the number of miles you can put on the car is restricted. Is leasing the right choice for you? Read on.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Calculator

1. Assess your needs: For people who drive many miles each year, or who want to keep a car for many years and want the option to sell later, leasing a car is not the way to go.

2. Determine how many miles you drive annually. Different manufacturers have different yearly allowances on mileage, which helps determine which car you choose. Many leases now are for only 10,000 miles per year, whereas they used to be 15,000. The extra charge for mileage can be substantial, often 20 cents per mile over the allowance, and when you're driving to work every day, that adds up quick. Often you can purchase extra miles up front, but this cost changes the lease expense.

3. Decide how long you'll want the car, keeping in mind that a longer lease makes for smaller payments.

4. Calculate how large a deposit you can put down up front and how much you can afford to pay monthly. Bankrate.com and other sites offer auto lease payment calculators so you can find out how much you'll have to pay. Factors include manufacturers suggested retail price (MSRP), final negotiated price, down payment, usage tax, length of lease, and new car lending rate.

5. Find a reutable dealership that leases the kind of car you want, in your price range. Take a test drive. Have the dealer explain warranties offered on the car, servicing and fees for overmileage, wear and tear, and early-out for quitting the lease. Always ask if taxes are included in the quoted fee. Make sure you understand everything you can be charged for before you sign the contract.

6. Ask how a buyout at the end of the lease works. You don't have to decide just yet whether or not you will buy out.

7. Negotiate the lowest possible lease price (capitalized cost) to keep payments low. Cars with higher residual values have lower lease costs.

8. Consider getting gap coverage insurance, which is usually included but may not be on your policy. If you don't have it and the car gets stolen, it can cost more than the price of your lease.

Tips & Warnings

• For peace of mind, keep your lease's length within the car's warranty period.
• Ask if you can transfer the lease to someone else at some point. This is not legal in some states. See How to Transfer Your Leased Car.
• If you plan to buy the car at the end of the lease, you often pay more than if you had bought the car in the first place.

[michael]

on 1/19/2007 You know far to little about leasing to be giving your mother advise, muchless the public. Many leases offer incentives which make it possible to own the cheaper through the lease than if you financed or even paid cash. Please learn more or stop giving advise.

[michael]

on 1/19/2007 The information in this article is not only flat wrong on many leases but actually misleads the consumer. You CAN own a car cheaper through some leases than you can if you finance it or even pay cash. You haven't nearly enough specific information to be advising the public. Either learn more or stop it.