Car Leasing Basics
What is a car lease?
An auto lease is a creative financing structure that allows you to drive a car that you probably couldn't afford to purchase. The way an auto lease works is you are basically paying the difference between the purchase price of the car, and the price of the vehicle at the end of the term. So if a vehicle is $2000 and its payoff price is $1000, all you're paying for is the $1000 in between.
What is the standard length of a car lease?
A car lease is generally anywhere between two to four years.
What are the advantages of leasing a car?
With regards to auto leasing, there are many advantages to leasing a car. First among them is it allows you to drive a newer car, a fresh car, latest design much more often. As the term of the lease is usually three to four years, you are going back into the market much more often than you usually do if you are just purchasing a car. Another advantage of leasing a car is that it allows you to drive a vehicle that you probably couldn't afford to purchase outright. This is because you are only paying the difference between the cost of the car today and the cost of the car at the end of the leasing term, this allows those payments to go down so you are actually paying less for more car.
What are the disadvantages of leasing a car?
Can I lease a car with bad credit?
Leasing has been used on many customers with less than stellar credit as a way to get them into the vehicle that they couldn't qualify to purchase. Because you're not buying the vehicle outright, you're only buying the particular term you're going to be driving it, the rules are a lot more lenient.
Can I put "0 money down" on an auto lease?
Because your only paying for the defined period of ownership of the vehicle, their much more flexible by nature. Quite often the manufacturer will allow zero percent, or zero down on a vehicle in order to start of the lease. In this case, the manufacturer is kicking in a little additional, usually referred to as a cap cost.
What are "closed" and "open-end" leases?
A closed-end lease refers to what most consumers would have for their car. A closed-end lease is when the gap between the purchase price of the vehicle new and the identified resale value at the end of the term is locked into stone, so that you know exactly what that gap is, and your monthly payments reflect that difference. An open-end lease leaves that eventual resale value open and that can fluctuate negatively or positively. An open-end lease would be used much more in the business or fleet line situation, not necessarily for consumer use. A open-end lease is a bit dangerous for consumers if the value of the vehicle has decreased over time, and at the end of the term you actually owe more than you expect.
What is a "single payment" lease?
With regards to auto leasing, a single payment lease is essentially paying all the money that represents the gap between the price of the vehicle new, and the price of the vehicle at the end of the term all at once in one single payment. This single payment lease allows the buyer, or the lessee, to avoid the monthly payment schedule as they are just paying it all up-front. Then they can drive the vehicle free and clear until the end of the lease term.
What is a "multiple payment" lease?
A multiple payment lease is one that is paid in monthly installments over the complete term of the lease.
