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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 providing you with interactive financial calculators and tools, publishing original and objective content, by enabling users to conduct research and compare information for free and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website come from companies that pay us. This compensation could affect how and where products appear on the site, such as for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law for our loan products, such as mortgages and home equity and other home loan products. This compensation, however, does not influence the content we publish or the reviews you read on this site. We do not cover the entire universe of businesses or financial offers that may 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 started over 10 years ago as a digital content strategist, and she's since published in numerous prestigious financial publications 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 since the end of 2022. He is a fan of transparent reporting that allows readers to confidently get deals and make best choices for their finances. He is an expert in small and auto loans.









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The leasing of a car allows you to take a car on lease for a short period of time, without the obligation to purchase it. It's an excellent opportunity to buy a brand new set of wheels without having to commit financially. It's especially beneficial for those who drive less than 15,000 miles a year and don't have to worry about mileage overages. However, leasing can be difficult. To get the best deal it is best to prepare yourself with a couple of questions. 10 questions you should ask before leasing a car If you're contemplating leasing not settling for the first offer you see. Set yourself up for success by asking these questions first. 1. What is the due amount upon signing the lease? Before you sign a lease you should receive a detailed written statement of everything you must or may have to pay. Upfront payments could include security deposits as well as title fees, capitalized cost reduction as well as monthly payments due at the time of signing or registration fee. Knowing the total amount due at the time of signing off on the lease can help to avoid overspending. Plus, knowing the price breakdown can allow you to negotiate better. What you should take away from this is
The price you sign off on is typically higher than the sticker price that enticed you So, ask for the list of fees prior to signing.


2. What is the length of the lease? A leasing firm will tell you how many payments the lease will include and how much each one will be , and the time the payment is due. The most common lease terms are 24, 36, 48 and 60 months -- however, you could also come across odd terms, like 39 months. The odd-month deals are created to make it difficult for you to understand. If you are looking at leasing options, be aware that a lease with a longer term offers lower monthly payments, but you'll be paying more . What is the most important takeaway
Be aware of your options prior to signing a lease agreement and know exactly how your term will affect your monthly payment.


3. What type of lease am I signing and what happens after it ends? There are two types: Open-ended and Closed-End. For a closed-end lease the leasing company sets the total cost based on their estimate of the value depreciated by the vehicle. If your car depreciates more than expected during a closed-end lease, the only additional costs you're responsible for is the extra mileage as well as wear-and-tear costs. It is by far the most popular type of lease. If you sign an open-end or financing lease, the borrower will have to cover an amount that is the sum of the car's residual value and the actual value at the close term. If the car's value decreases more than anticipated, you could face a hefty charge at the expiration period. In both cases, be sure to 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 better plan your payments.


4. Can I buy the car at the expiration term of lease? If you want to then, you might have the option to purchase it at the residual value or purchase price option that is included in the lease contract. However, before making a purchase, you should evaluate the residual value against the value of the vehicle's retail value to find out if you're getting an excellent deal. Also, evaluate the car's condition to determine whether it's in good condition and hasn't depreciated significantly. It could be that buying out isn't worth it unless you're dealing with significant wear and tear costs or penalties for exceeding the mileage limit. What's the most important lesson to take away
The lessor may allow you to purchase the lease before the term ends, but you should run the numbers to confirm it is financially feasible.


5. Is the value residual of the vehicle? A vehicle's residual value is the amount it's estimated to hold at the end of the lease. The leasing companies decide on what the value of residual is, however you can get an estimate on . Knowing this figure is useful as it's an important factor in determining the monthly payment. The higher the residual value in comparison to the vehicle's initial cost, the lower your monthly payment. Furthermore, some automobile makers and lessors offer subsidized residual values as a to make your monthly payment less expensive. For example, if your car is valued at $20,000 and should be worth $15,000 by the expiration of the lease, you'll have an amount that is lower than if you choose a $20,000 car expected to be worth $10,000. In the second situation the lessor must recuperate a greater proportion of the car's worth and thus will be charging you more. Important takeaway
Knowing the residual value of a car can help you figure out the type of car and which type of financing is best for you.


6. Is there a wear and tear evaluation? require your lessor to tell you the method by which wear and tear will be evaluated upon returning the vehicle. When you are done with your lease, your car will be inspected for exterior damage like scratches, dents, and windshield cracks, as well as interior damage like stains. You will be charged for any damage that is excessive but you don't be charged to have the car inspected. The law also stipulates that standards for wear and tear are to be reasonable. The standards are determined by the amount of miles you traveled and the extent of damage to the vehicle. If your vehicle has superficial damage, the cost of the repairs before you make your assessment could be worth it. Key takeaway
Understanding 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 equivalent to the interest rate you'd pay for a brand new car. It's usually represented as the 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 accepted for a lease that has a factor of .0030, it's equivalent to an interest rate that is 7.2 percent. Your credit score is a major factor in the cash factor, therefore, before heading into the leasing office. You are not able to bargain on this amount since the lending institutions usually set the number. Key takeaway
A money factor is not the equivalent to an APR, but it can determine how much you'll pay in addition to your lease price.


8. What is the lease mileage allowance , and what happens when I exceed it? A lease mileage allowance is the number of miles you are allowed to drive without extra charges. Leases usually allow 12,000 or 15,000 miles prior to when fees kick in. Extra mileage charges can vary between 10 and 25 cents per mile. This can quickly add up. Understand your mileage allowance and try to anticipate the driving habits you will be using during your lease, as any long road trips might cost you. Although the miles allowance is often a negotiable number, changing it will have an impact on your lease payment. Key takeaway
Exceeding your lease mileage allowance will cost you.


9. What happens if I can't make a lease payment? While it is not a common practice to fall in debt on lease payments, it's crucial to know what can be the consequences if you don't make the payment. A default typically will occur in the event that you don't make more than three payments in the same row. In the majority of cases, not paying your lease results in negative impact on your credit score. However, every lessor deals with this differently. There are many companies that offer grace periods that you must inquire about prior to you sign the lease. It is also important to ask about a worst-case scenario in which you fail to pay. After a certain amount of time, the lessor can and often charge you an early cancellation fee. Before signing, you should know what the cost would be. Key takeaway
Each lender handles default in a different way Therefore, you should inquire prior to time what penalties can be expected.


10. Can the lease be extended? It is common to extend your lease by a few months at the same cost, but most lessors have a limit. If you're not sure whether you'll have for an extension of your lease inquire whether the extension will alter the terms of your original lease or bring potential new cost. Knowing these costs upfront can help you better plan as your lease's expiration date approaches. Along with possible lease extensions, ask about termination fees. Companies must disclose under what conditions the leasing company may request the return of their vehicle or alter the terms of the agreement. The most important thing to remember is
Inquiring about lease extensions ahead of time will ensure you aren't blindsided with charges if you want additional time at the conclusion of the lease.


Final considerations to keep in mind when leasing a vehicle 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. People who don't travel a lot and therefore don't have to exceed a lease's mileage limits could find leasing to be a cheaper option than buying an entirely new vehicle. You can get a new car every couple of years. If you are a fan of driving latest models with the most recent technology, leasing allows you to upgrade your vehicle every couple of years after your contract expires. The cons of leasing are that it comes with limitations which you can't get when purchasing a car. When leasing a vehicle, you'll have to limit the amount of miles driven. It is even more crucial to keep the car in good condition so that you don't incur additional costs at the time the lease expires. You don't build equity when leasing a vehicle. If you move between leases, you'll never build any equity in the vehicle. Before heading to an auto dealer to inquire about leasing questions, think about your driving habits to determine whether leasing is the best option for you. It's a good starting point to see potential savings. Next steps Leasing a vehicle is a significant commitment however, it's a good investment If you know what you're signing up for. Be prepared. Make sure you ask the right questions, and then read the details of the lease agreement to secure the best deal possible. Learn 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 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 clear reporting that helps readers confidently get deals and make most appropriate choices regarding their money. He specializes in small and auto loans.











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