When it comes to leasing a car, there are pros and cons on each side of the fence. Some people feel like they’re getting a lot for their money when they lease, while others would rather own their car outright. No matter which side of the debate you fall on, it’s important to be well-informed about what goes into a car lease agreement. In this blog post, we’ll discuss the basics of car leases and give you an Excel calculator to help you crunch the numbers yourself!
What Is An Auto Lease?
An auto lease is a contract between you and a dealership in which you agree to pay for the use of a vehicle for a set period of time. The length of most car leases is between two and four years. At the end of your lease term, you will have the option to purchase the vehicle for its residual value or return it to the dealership.
Pros Of Car Leases
There are a few reasons why leasing a car might be the right choice for you:
-Lower monthly payments: When you lease a car, you are only paying for the depreciation of the vehicle during your lease term. This results in lower monthly payments than if you were to finance the purchase of a car.
-Flexibility: Leases typically last for two to four years, which is shorter than the typical auto loan. This means that you can upgrade to a newer model more often if you lease.
-Fewer repairs: Since leased vehicles are usually under warranty for the duration of the lease, you may not have to pay for repairs during that time.
Cons Of Car Leases
Of course, there are also a few drawbacks to leasing a car:
-You never own the vehicle: At the end of your lease term, you will have to return the car to the dealership. If you decide that you want to keep the car, you will have to pay the residual value.
-Mileage restrictions: Most leases come with mileage restrictions, usually between 12,000 and 15,000 miles per year. If you go over this limit, you will have to pay a fee for each additional mile driven.
-Repair costs: Even if your vehicle is under warranty, you may have to pay for repairs if the damage is caused by normal wear and tear.
Is It Better To Lease Or Finance A Car?
The answer to this question depends on your individual circumstances. If you are someone who likes to drive a new car every few years, leasing might be the better option for you. However, if you want to own your car outright and don’t mind higher monthly payments, financing might be the way to go.
To help you make this decision, we’ve created an Excel calculator that you can use to compare the cost of leasing vs. financing a car.
Click here to download the calculator!
How Do You Calculate A Car Lease Payment?
Figuring out your car lease payment is simple with the Excel calculator linked above. However, if you want to do the math yourself, here’s how:
-First, you’ll need to determine the depreciation fee, which is the difference between the car’s purchase price and its residual value.
-Next, you’ll need to calculate the money factor, which is a measure of interest.
-Finally, you’ll multiply the depreciation fee by the money factor to get your monthly lease payment.
Keep in mind that there are other fees that may be included in your lease agreement, such as a security deposit, acquisition fee, and first month’s payment.
Frequently Asked Questions
What Is A Typical Car Lease Payment?
The average car lease payment is around $400 per month.
Can I Get Out Of A Car Lease Early?
Yes, you can get out of a car lease early, but you may have to pay a termination fee.
Can I Lease A Car With Bad Credit?
It may be difficult to lease a car with bad credit but its not impossible. You may have to put down a larger security deposit or make higher monthly payments.
Is It Better To Lease A Car For 24 Or 36 Months?
The answer to this question depends on your individual circumstances. If you think you may want to upgrade to a new car sooner, leasing for 24 months may be the better option. However, if you want to keep the car longer, leasing for 36 months may be a better choice.
What Is A Good Interest Rate (APR) For A Lease?
The average interest rate (APR) for a lease is around 5.00%.
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