How to Do a Lease-Option on a Car

If you need a particular type of vehicle for only a few years, or can’t afford the high payments for a luxury vehicle, you may want to consider a lease option. The idea behind leasing a car is that you are only paying for the use you get from it. This amount is based on the car’s depreciation. For example, if you buy a car, you may pay $20,000. If you lease it, and at the end of the lease it’s resale value is $14,000, you will pay $6,00 over the life of the lease.

Difficulty: Moderately Challenging

Instructions

Instructions on Lease Optioning A Car

1. Decide if you need a vehicle for long-term or short-term. Many people lease cars to present a certain type of image for their job, and will not necessarily need or want to drive it forever.

2. Consider your budget. If the car you want is too expensive, leasing rather than buying can drop your monthly payments from between 30-60 percent. This is handy if you want to have a newer model car every few years.

3. Read the contract. Many auto lease-options carry penalties for exceeding a certain amount of mileage, which can cost you a considerable amount when your lease is over.

4. Choose a lease term that lines up with the manufacturer's warranty. If the warranty runs out during your lease, you could be responsible for repairs, so make sure you are covered for the term of your lease.

5. Plan ahead. If you are going to keep the car after the lease is over, consider other options. A lease-option can save you money in some ways, but converting a lease to a purchase will ultimately cost you more.

Tips & Warnings

• It is a good idea to verify that you have gap insurance on an auto lease. This covers the cost of replacing it with a brand new vehicle in case it is totaled in an accident.
• Don’t lease if you think you won’t be able to complete the contract. This can severely damage your credit rating and early termination fees will apply.