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Questions to ask before leasing a car Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and original content. We also allow you to conduct your own research and compare information for free to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation can affect the way and when products are featured on this website, for example, for example, the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our mortgage, home equity, and other products for home loans. However, this compensation will not influence the content we publish or the reviews you see on this site. We do not contain the vast array of companies or financial offerings that could be open to you.



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6 minutes read. Published September 30, 2022
Written by Allison Martin Written by

Allison Martin's work began over 10 years prior to that as a digital content strategist. She's been featured in a variety of top financial media outlets such as The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.







Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate from late 2022. He values the clarity of his reporting, which helps readers confidently land deals and make the best choices for their finances. He is an expert in auto and small business loans.









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A car lease lets you take a car on lease for a short period of time, without having to buy it. It can be a great way to get a new set of wheels without committing fully to a financial commitment. It's especially beneficial for those who drive less than 15,000 miles a year and won't risk mileage overages. But leasing can be complicated. For the best price it is best to be prepared with a couple of questions. 10 questions you should ask before taking out a lease on a car. If this is something you're thinking of not settling for the first offer you get. Get yourself set for success by first asking these questions. 1. What is the amount due at the time I sign the lease? When you sign a lease, you will receive a thorough written list of all you are required or likely to pay. The upfront payments may include security deposits and title fees, a capitalized cost reduction, monthly payments paid at signing or registration fee. Knowing the total amount due at the time of signing off on the lease can help you avoid spending too much. Additionally, knowing the cost breakdown can assist you to negotiate better. What you should take away from this is
The payment you sign off on usually is more expensive than the price that attracted you So, ask for a list of fees first.


2. How long will the lease last? A leasing firm will tell you how many payments the lease will include as well as how much each installment will be and when the payment is due. The most popular lease terms are 24 36, 48, 36 and 60 months, however, you could also come across strange terms, such as 39 months. Certain odd-month leases could be designed to confuse you. If you are looking at lease options, keep in mind that a longer lease offers smaller monthly payments, however you will . Key takeaway
Consider your options prior to agreeing to a lease term and understand exactly how your contract will impact the amount you pay each month.


3. What kind of lease am I signing and what happens when it ends? There are two kinds of leases: Open-ended and Closed-End. For a closed-end lease the leasing company sets the total cost based on their estimate of the depreciated value of the vehicle. If your car depreciates more than anticipated during a closed-end lease, the only costs you're accountable for are the excess mileage as well as wear-and-tear costs. This is the most common type of lease. If you sign an open-end or finance lease, you have to cover an amount that is the sum of the vehicle's residual value and the actual value at the expiration term. If the car's value decreases more than you anticipated, you could have to pay a substantial amount at the end period. In both cases, be sure to read the fine print to ensure that you do not get surprised by any additional end-of-lease fees. What you should take away from this is
Knowing the type of lease you're entering into allows you to better plan for your payments.


4. Do I have the option of buying the vehicle at the expiration of the lease? If you want to , you may have an option to buy it at the residual value or purchase price option that is included in the lease contract. Before you do, make sure to compare the residual value to the value of the vehicle's retail value to determine if you're getting an excellent bargain. Also, assess the vehicle's condition to assess if it's in good shape and hasn't depreciated significantly. There's a chance that buying out isn't worth it unless you're dealing with significant wear and tear charges or penalties for exceeding the limit of mileage. Key takeaway
The lease may permit you to buy out your lease when the expiration date comes around, but you should run the numbers to verify that it makes financial sense.


5. How much is residual worth of the car? The residual value of a vehicle is the value it is expected to have at expiration of the lease. The leasing companies decide on the residual value, but you can get an estimate . Knowing this figure is useful as it's an important element in determining the monthly payment. The greater the value of residual in comparison to the vehicle's initial cost, the lower the monthly cost. Furthermore, some automobile makers and lessors offer subsidized residual values in order way to make your monthly payments more affordable. For example, if your car is valued at $20k and will be worth $15,000 at end of the lease, you'll have less of a monthly payment than if you choose the $20,000 car that will be worth $10,000. In the second case the lender must recover a higher portion of the value of the vehicle and thus will be charging you more. The most important thing to remember is
Knowing the residual value of a car can help you figure out the kind of car and kind of financing is the best for you.


6. Is there a wear and tear evaluation? You should ask your lender to inform you if and how wear and tear will be evaluated when you return the vehicle. When you are done with your lease, the car will be inspected for any damage on the exterior, such as scratches, dents and windshield cracks, as well as internal damage such as the presence of stains. The cost will be assessed for any damages that are excessive but you don't be required to pay for the inspection. The law also says that wear-and-tear standards should be reasonable. The standards are based on the number of miles you drove and any damage done to the vehicle. If your car has minor damages, getting repairs prior to your assessment might make sense. Key takeaway
Knowing the way wear and tear is assessed will help prepare you for any end-of-lease payments.


7. What is the"money factor? What is the "money factor" refers to the total amount you'll pay in finance charges for the vehicle you lease. It's the same as the rate of interest you'd be paying for a brand new vehicle. It's typically represented as a small decimal. Multiplying it by 2,400 will show the annual percentage rate you are having to pay for lease. For example, if you're granted a lease with a factor of .0030, it's equivalent to an annual interest charge of 7.2 percent. Your credit score has a significant impact on the money factor, so before heading into the leasing office, you should be aware of your credit score. It is not easy to bargain on this amount since lending institutions typically determine the number. Key takeaway
A money factor isn't the identical to an APR though it does determine the amount you'll have to pay on top of the lease payment.


8. What is the lease mileage allowance and what happens if I go over it? The lease mileage allowance is the amount of miles you can drive without having to pay any additional costs. Leases usually allow either 12,000 or 15,000 miles prior to when charges begin to accrue. Extra mileage charges can range between 10 and 25 cents for each mile. This adds up quickly. Be aware of your mileage allowance and be aware of your driving habits throughout your lease. Any long road trips might cost you. Although the miles allowance can be negotiated number, changing it will affect your monthly cost. Important takeaway
If you exceed your lease mileage allowance, it is going to cost you.


9. What happens if I'm not able to pay a lease installment? While few people plan to be behind on lease payments, it's important to know what can be the consequences if you don't make the payment. In general, default will occur if you fail to make three or more payments in consecutive days. The inability to pay your lease usually leads to and negatively affects your credit score, however each lessor approaches this issue differently. Many companies have grace periods, which you should inquire about prior to signing the lease. It is also important to ask about a worst case scenario in which you fail to pay. After a set period of time, the lender can frequently demand an early cancellation fee. Before signing, you should know what that price would be. Important takeaway
Each lender handles default in a different way Therefore, you should inquire ahead of time to know what penalties could occur.


10. Is the lease able to be extended? It is common to extend the lease by several months for the same price, though the majority of lessors have a limit. Even if you are unsure whether you'll need the lease to be extended, you should inquire whether the extension will alter the terms of the initial lease or result in new cost. Knowing these costs upfront can aid you in planning as your lease's expiration date approaches. In addition to possible lease extensions, ask about termination fees. Businesses must be clear about the circumstances the leasing company can demand their vehicle back or can change conditions of the agreement. It is a key takeaway
Asking about lease extensions ahead of time will ensure that you don't have to pay for extra costs should you require additional time at the conclusion of your lease.


The final considerations to keep in mind before leasing Leasing a vehicle can be a good choice for those who want to drive the most modern vehicles available without having to purchase a car. Here are a few pros and cons to bear in mind when . Benefits of leasing can be affordable. People who don't travel a lot and therefore don't have to exceed the limits of their lease's mileage might find leasing to be a cheaper option than buying the new car. You can purchase a brand new car every couple of years. If you like driving the most modern vehicles that feature the latest technology, leasing allows you to upgrade every few years once your contract is over. Cons Leasing comes with restrictions that which you can't get when purchasing cars. If you lease a car, you'll be subject to limits on the miles traveled. It's also essential to maintain the vehicle in good shape so that you don't incur additional costs after the lease ends. You don't build equity when you lease an automobile. If you switch from lease to lease, you won't be building any equity in your vehicle. Before you visit an auto dealer to inquire about questions about leasing, consider your driving habits to determine if leasing is right for you. A is a great beginning point to evaluate savings potential. The next step is leasing a car. is a big commitment, however it's an investment that can be repaid if you know the risks involved. It's important to prepare. Ask the right questions and study the specifics of a lease agreement to ensure you get the most favorable deal. Find out more


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Written by

Allison Martin's career began more than 10 years prior to that as a digital content strategist. She's published in numerous prestigious financial publications including The Wall Street Journal, MSN Money, MoneyTalksNews , Investopedia, Experian and Credit.com.



Edited by Helen Wilbers Edited by

Helen Wilbers has been editing for Bankrate since the end of 2022. He values clear reporting that helps readers confidently get deals and make most appropriate choices regarding their financial situation. He is a specialist in auto and small business loans.











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