Lease a car type
Open-ended lease – In this option, you will need to buy the car when the lease contract ends. It is suitable for those who want a low monthly payment amount low for first couple of years and don’t mind paying the increased payments after the lease contract ends. You will be the owner at the end…. basically, it gets refinanced.
Closed-ended lease – In this type, the lessee returns the car after the leasing contract ends. There are some situations where people like to choose to lease a car.
Logical reasons to lease a car
In some situations, there is logic to leasing rather than financing the full sticker price. It can turn out to be a sensible solution in multiple scenarios.
When interest rate is interesting….
The interest rates widely differ based on the brand, model year, and even on the leasing or buying terms. Generally, leasing involves high rates than purchase. At times, the lease rates can be the same, which makes the situation interesting.
If the purchasing and leasing become the same financing option in terms of interest rate the difference is just the balance you have at maturity.
When you are in a habit of changing wheels often….
Leasing has advantages over buying when a driver is in the habit of changing wheels every two to three years. When you purchase the car then you will be taking new debt every time and struggle with the depreciation sting. In leasing, it costs less for lease-repeat.
When you are tight on budget….
Low monthly payments make a huge difference between buying a new vehicle or not to those on a limited budget. The driver can even save more on the estimated mileage allowance for a year if they expect to drive less. In this way the buy-back or residual value increases. It lessens the monthly payment amount and security deposit.
When lease works as an insurance policy
If the new vehicle does not fulfill your expectations or got in a collision and needs repair, then you will feel happy that you chose to lease a car option. If you had purchased the car outright, you would incur a loss on resale because of the damages.
As a lessee, you don’t need to feel concerned about resale when you turn the keys back to the lessor. Technically, you know the cars worth at the end of the contract in the leasing option.
When you consider car leasing evaluate your car needs….
Determine the miles you drive a year. It helps to estimate the mileage allowance that affects your monthly payment. If you drive more than 1000 miles a week then leasing is not a good choice. Alternatively, if you use a car to drop your kids or visit the mall to pick groceries then leasing is a great option.