Auto Lease Deals Are One Of The Fastest Growing Areas

Category: Finance.

Auto finance is now different.

Auto lease deals are one of the fastest growing areas. It is now populated with all sorts of options to help you purchase that vehicle of your dreams. An auto lease is a long- term rental agreement- terms typically start at 24 months with 36 and 48 months much more common. With lease agreements you never actually own the vehicle. Auto lease agreements do have a few twists to watch out for though. The whole concept is that you are renting the use of the vehicle for the duration of the lease contract.

The charges to you are based on the difference in purchase price and this residual value. As the lease company gets the vehicle back at the end of the lease they will be able to sell it at the pervading market value. Lease companies pay very close attention to the prices for second hand vehicles to ensure that this residual value is as accurate as possible. The lease company does some sums and tells you that if you take out a 3 year deal with a 12, 000 mile per annum mileage limit they will guarantee a residual value of$ 8, 00The net cost to the auto leasing company is$ 12, 000 plus administration charges( setting up the deal and selling the vehicle at the end) and finance charges. So, suppose you find a vehicle for$ 20, 000 purchase price. As you are only paying finance charges on part of the value of the vehicle( $12, 000+ costs in the above example) your monthly payments are lower. Not only do you get lower monthly payments but your upfront deposit is certain to be lower too.

Even better, as the auto lease company owns the vehicle you don t have to pay a large deposit. At the end of lease you have 3 options: Buy the vehicle for the agreed residual value Part exchange the vehicle and use the extra value as the deposit on your next lease vehicle. The most common option taken by auto lease customers seems to be to part exchange and use the difference as the deposit on the next vehicle. Give the keys back and get on with your life. Now for the sanity check. To manage their risks auto leasing companies put tight constraints on the deals they offer. Auto leasing deals are not for everyone.

Leases are for fixed period and it is practically impossible to exit a lease early. Nevertheless, if you want to drive a new vehicle, can guarantee to keep the vehicle for the full term of the lease, and can stick to the mileage limits in your agreement, leasing can be a great choice. Calculation of residual values is highly mileage dependent so you may find any excess mileage payments are expensive.

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