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Questions to ask before leasing a car Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive tools and financial calculators as well as publishing unique and impartial content. We also allow users to conduct research and compare data for free - so that you can make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies that pay us. This compensation could affect how and where products appear on the site, such as such things as the sequence in which they appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other home lending products. But this compensation does affect the content we publish or the reviews that you read on this site. We do not contain the entire universe of businesses or financial offers that may be open to you.



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6 min read published September 30 2022
Written by Allison Martin Written by

Allison Martin's career began more than 10 years ago as a digital content strategist. She's been featured in a variety of top 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 is a fan of clear reporting that helps readers confidently land deals and make the most appropriate choices regarding their finances. He is an expert in auto and small business loans.









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The leasing of a car allows you to rent a vehicle for a few years without the need to purchase it. It's an excellent way to get a new car without having to commit financially. It's especially beneficial for those who clock in under 15,000 miles a year and won't risk mileage overages. But leasing can be complicated. To get the best deal you must come to the table prepared with a few questions. 10 questions to ask before taking out a lease on a car. If this is something you're contemplating leasing not settling for the first offer you see. Get yourself set for success by first asking these questions. 1. What is the due amount when I sign the lease? Before signing a lease, you must receive a comprehensive written statement of everything you must or may have to pay. The upfront payments may include security deposits and title fees, a reduced capitalized cost, monthly payments paid at the time of signing, or registration fee. Knowing the amount due when signing the lease helps to avoid overspending. Also, knowing the cost breakdown can allow you to negotiate better. The most important thing to remember
The amount you pay on usually is more expensive than the price you were enticed by So, ask for a list of fees first.


2. What is the length of the lease? A leasing firm will tell you how many payments the lease covers and how much each one will be and when the payments are due. The most popular lease conditions are 24 36, 48, and 60 months, but you may also find strange terms, such as 39 months. Some odd-month deals may be created to make you confused. When looking through the lease options, remember that a longer lease will provide lower monthly payments, but you'll be paying more . What is the most important takeaway
Weigh your options before signing a lease agreement and understand exactly how your term will affect the monthly installment.


3. What type of lease am I signing and what happens when it ends? There are two types: open-end and closed-end. In 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 the term of a closed-end lease, your only additional costs you're responsible for is the extra mileage as well as wear-and-tear costs. The most typical kind of lease. In an open-end , or finance lease, you be required to pay for an amount that is the sum of the residual value and its actual price at the close term. If the vehicle depreciates faster than you anticipated, you could face a hefty charge at the close term. In both instances, make sure you read the fine print to ensure you do not get surprised by any extra lease-end payments. Key takeaway
Knowing the kind of lease you're signing helps you plan better for your payments.


4. Can I buy the car at the expiration period of my lease? If you'd like to buy the car, you could have an option to purchase the car at the residual value or purchase price option included in the lease agreement. Before you do, make sure to compare the residual value to the value of the vehicle's retail value to decide if you're receiving an excellent bargain. Also, assess the vehicle's condition to find out whether it's in good working order and hasn't been significantly depreciated. It could be that a buyout isn't worth the effort unless you're faced with steep wear and tear charges or penalties for over the limit of mileage. What's the most important lesson to take away
The lease may permit you to buy out the lease before the term ends however, you must run the numbers to verify that it's financially sensible.


5. What is the residual value of the car? The residual value of a vehicle is the amount it's estimated to hold at the expiration of the lease. Leasing companies determine the residual value, however you can obtain an estimate . Knowing this number is helpful since it's a crucial aspect when determining your monthly installments. The greater the value of residual in comparison to the vehicle's initial cost, the lower the monthly cost. In addition, some automakers and lessors subsidize residual values as a to make your monthly payment more affordable. For example, if your car is valued at $20,000 and is expected to be worth $15,000 at close of the lease you'll have an amount that is lower than if you choose an $20,000 vehicle that is expected to have a value of $10,000. In the second case the lessor must recover a higher percentage of the car's value and therefore will charge you more. Key takeaway
Knowing the value of a vehicle's residual can help you figure out the type of car and which kind of financing is the best for you.


6. Is there a wear and tear evaluation? You should ask your lender to inform you whether and what method the wear and tear of your vehicle will be evaluated when you return the vehicle. At the end of your lease, the vehicle will be inspected for exterior damage like scratches, dents and cracks, and internal damage such as stains. The car will be assessed for any excessive damage but you don't be charged to have the car inspected. The law also says that standards for wear and tear must be reasonable. The standards are determined by the amount of miles driven and the extent of damage on the car. If your vehicle is in the process of undergoing minor damage, paying for touch-ups before your assessment may prove worthwhile. What you should take away
Knowing the way wear and tear is evaluated will allow you to prepare for any payments at the end of lease.


7. What is the money factor? The "money factor" is the sum you'll have to pay in finance charges for the vehicle you lease. It's equivalent to the rate of interest you'd be paying for a brand new vehicle. It's typically represented as the small decimal. Multiplying it by 2,400 will reveal the annual percentage rate you're paying for the lease. For example, if you're granted a lease with a factor of .0030 that's the interest at 7.2 percent. Your credit score is a major factor in the cash factor, therefore, before you go to the leasing office, you should be aware of your credit score. You are not able to discuss this number since the lending institutions usually determine it. Key takeaway
A money factor is not the same as an APR, though it does decide how much you'll be charged on top of your lease price.


8. What is the lease mileage allowance , and what happens if I go over it? A lease mileage allowance is the number of miles you may drive without facing extra charges. Leases usually allow 12,000 or 15,000 miles prior to when charges begin to accrue. The fees for excess mileage vary from 10 to 25 cents per mile. This can quickly add up. Understand your mileage allowance and be aware of the driving habits you will be using during the lease period, since lengthy road trip could cost you. The miles allowance is usually a negotiated number, changing it can affect your monthly payment. The most important thing to remember is
Exceeding your lease mileage allowance is going to cost you.


9. What happens if I'm not able to pay my lease? Although few plan to fall behind on their lease payments, it's crucial to know what can occur if you fail to make a payment. Typically, a default will occur if you fail to make three or more installments in consecutive days. The inability to pay your lease usually leads to and negatively affects your credit score, but every lessor handles this situation differently. Many companies have grace periods, which you should ask about before making a commitment to the contract. It is also wise to inquire about a worst-case event in which you are not able to pay. After a specific period of time, the lessor can and, in many cases, charge you an early end-of-term fee. Before you sign, be sure to know the price. Important takeaway
All lessors handle default differently So, make sure to inquire prior to time what penalties could occur.


10. Is the lease able to be extended? It is common to extend your lease by a few months at the same cost, but many lessors are limited. If you're not sure whether you'll need the lease to be extended, you should inquire whether extending it will change the terms of the original lease or result in new cost. Knowing these costs upfront can help you better plan when your lease's end approaches. In addition to potential lease extensions, inquire about termination fees. Companies must disclose under what circumstances the leasing company can require the return of the vehicle or can change the terms of the contract. The most important thing to remember is
Ahead of time will ensure that you aren't blindsided with charges if you want additional time at the conclusion of the lease.


The final considerations to keep in mind before leasing Leasing vehicles could be an excellent option for drivers interested in driving the most modern vehicles available without having to purchase an automobile. Here are a few pros and cons to bear in mind when . Pros Leasing can be cost-effective. Drivers who aren't very active and don't need to go over a lease's mileage limits could find leasing to be a more cost-effective option than purchasing the new car. You can purchase a brand new car every couple of years. If you are a fan of driving latest vehicles with the newest technology, a lease permits you to upgrade your vehicle every couple of years when your contract ends. The cons of leasing are that it comes with limitations which are not present when you purchase cars. When you lease a car you'll be subject to limits on the number of miles you travel. It's also essential to keep the car in good condition to avoid paying additional charges at the time the lease expires. There is no way to build equity when leasing the vehicle. If you jump between leases you'll never build any equity in the vehicle. Before visiting 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 start to determine the potential savings. Next steps Leasing a vehicle is a major commitment, however it's an investment that can be repaid If you know the risks involved. Preparation is key. Be sure to ask the right questions and read the specifics of a lease agreement to get the best deal. Learn more


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Written by

Allison Martin's career began more than 10 years ago as a digital media strategist. She's published in numerous prestigious financial outlets 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 the clarity of his reporting, which helps readers easily get deals and make best choices for their financial situation. He is a specialist in small business and auto loans.











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