New Car Leasing: The Complete Guide

William E. Metzger established what is believed to be the first car dealership in the United States back in 1898.

Despite the fact that cars have been for sale for over a century, leasing a car in NH as we know it today, has only been available since the late 1960s. Still generally new in concept, misconceptions and false information about new car leasing have been shared over the past several decades, giving the practice a poor reputation.

Rather than buy into these overshared misunderstandings, gain insight and clarity by exploring our complete guide to leasing a new car.

Choosing a Vehicle: More Complicated Than Traditional Financing

One of the first things that car shoppers should be aware of, is that choosing a vehicle to lease, should be approached differently than choosing a vehicle to finance.

As a general rule of thumb, leasing tends to be more complicated than traditionally financing a new car. Cars, trucks, and SUVs that have a high resale value history, are generally good options to lease. High resale values typically equate to high lease residuals, which in turn, make for the best lease deals overall.

The second consideration when deciding which new car to lease, is to avoid vehicles with a large number of recalls or safety problems. A brand new version of a model with a past history of recalls and problems, will likely deliver the same headache as its predecessors. The point of leasing a new car, is to find a vehicle that holds its value well.

Cars that aren’t known for high resale value and dependability, typically end up costing lessees more than higher quality counterparts.

Just as most people do before purchasing a new vehicle outright, car shoppers who are looking to lease a new vehicle should know what they want, before arriving in the dealer showroom. Research models that you like ahead of time, and find out how they stack up when it comes to resale value and recalls of past models. Be prepared by knowing as much as you can about the car you want, ahead of actually showing up to negotiate your lease deal.
 

Lease Payments: Read the Fine Print for the Real Deal

Speaking of negotiating a lease deal - there are plenty of things to keep in mind if you want to come out with the best possible payment structure.

First of all, understanding what a new car lease actually means, will do wonders when it comes time for negotiating. As a general rule of thumb - don’t lease if you don’t understand it. Despite the common misconception, leasing a new car is not like renting an apartment or another vehicle. Regard new car leasing as another method to finance a new car. The main difference between the two, is that when you lease a new car, you are only paying for the vehicle’s depreciation value over the period of time it's in your possession. This is figured by taking the difference between the car’s original MSRP value, and the residual value at the end of a lease agreement. Smaller differences in this simple equation, mean smaller lease payments and a more beneficial deal.

Now that we have a basic understanding of how lease payments are calculated, let’s take a look at the actual components of a lease agreement. Under federal law, vehicle lease contracts are required to contain certain sections that detail facts and figures disclosed to the lessee. Some of these include:

• Monthly payment amount

• Other charges

• Total number of payments

• Amount due at signing

• A description of how the monthly payment was determined

• Early termination statement

• Wear and tear explanation

• Finance charge total

Despite these regulations being in place, dealerships are not required by law to include the actual amount of a trade-in, the agreed-upon price of the leased vehicle, or if the calculated monthly payment figure is even accurate. Because these contracts are written at the dealership, mistakes can be made, and are often overlooked or missed by lessees until it’s too late.

Once you sign on the dotted line, there is no turning back. Read through your lease contract prior to signing, and bring an extra set of eyes with you for added insurance.

Other areas in your lease agreement to pay attention to, are required auto insurance coverage, excessive wear and tear penalties, excessive mileage penalties, and early termination fees. Take your time and read over each of these sections carefully to avoid unfortunate surprises down the road.

Lease Miles Per Year: What You Need to Know

It is true that leasing a new car isn’t the same as renting it, but it’s also true that the vehicle you lease, does not actually belong to you. All vehicle lease contracts outline mileage restrictions, as well as monetary repercussions if those restrictions aren’t adhered to.

Before you head into a dealership to lease a new car, take time to figure out how many miles you drive in a year, and calculate the annual average you will need in your new car leasing agreement.

Penalties for exceeding the maximum annual mileage amount in a lease contract can range from $0.20-$0.30 per mile - and sometimes even more. If you know you will need a higher annual mileage allowance, negotiate it into your lease contract, before you sign.

Options at the End of a Car Lease

As a general rule of thumb, have an idea of what you want to do with your leased vehicle, after your contract expires. For some people, the reason for leasing is to drive a new vehicle every three years. For others, the point of leasing is to eventually purchase the vehicle at the end of the lease agreement.

As important as it is to prepare for the start of a new car lease, it is also just as important to properly prepare for the end of a vehicle lease agreement. Lessees are able to choose from one of these four options at the end of their lease contract:

• Return the vehicle: This option is available for drivers who no longer want to drive the same vehicle, and aren’t interested in leasing another one.

• Extend the lease: This option exists for drivers who enjoy their current leased vehicle, and aren’t interested in negotiating a new car lease when their contract expires.

• Purchase the vehicle: Leasing a new car is a great way for a driver to see if a vehicle they like, is one they want to own. For drivers who end up falling in love with the new car they leased, this is a great option.

• Upgrade the vehicle: A common practice among new car lessees, this option allows drivers to turn in their leased vehicle after their contract expires, and upgrade to a brand new model for a new lease contract.

Whatever you end up deciding to do at the end of your lease agreement, it is essential that you keep these tips and considerations in mind, prior to signing a new car lease contract.