Yahoo Autos How Much Does It Cost to Lease a Car?
If you're thinking about leasing a car for the first time, you may have a lot of questions about how much you should expect to spend. Leasing a car is a lot like financing one, except that the types of fees you'll pay are different.
Additionally, you won't own the vehicle when your lease ends. Instead, you'll return the car unless you choose to buy it.
Leasing a car can be tricky, especially if you don't know how much to expect to pay. You may find yourself asking, "How much does it cost to lease a car?" You can expect to pay a variety of fees in addition to your monthly rental agreement fees.
The cost to lease the car depends on several factors, and the fees can be higher than you'd expect. When you have a realistic idea of the cost, you can show up for lease signing with an accurate idea of what you'll pay.
Leasing a car offers many benefits. For instance, you can get behind the wheel of a new car every few years without taking out an auto loan. If you prefer to drive new cars and don't care about vehicle ownership, the cost of leasing a car may very well be worth it.
Not interested in leasing? Easily compare auto loan rates below.
How Do Car Leases Work?
The first thing you need to know about leasing a car is that you don't own the car. You are paying to borrow the car for a specific amount of time. You pay a fee to use the car each month, but you also pay a set of fees when you sign a lease agreement.
Your lease will include stipulations about how many miles you can drive each year and what kinds of wear and tear damage the dealership expects to see by the end of the term.
When you get to the end of your lease term, you have the option to return or buy the car. If you return the car, the dealership will sell the car to somebody else. In this scenario, it's important that you return the car in good condition.
It should have no damage beyond wear and tear. If other damage does exist, you'll pay the cost to cover those repairs. You can choose to buy the car at the end of the lease, which means the condition of the car won't matter.
What Is the Cost to Lease a Car?
The average car lease costs $487 per month. In comparison, the average car payment for a new car is $548. This means that it may be cost-effective for many families to lease cars if they want to get behind the wheel of a brand-new model. Monthly lease payments are determined by the anticipated value of the car when your lease term is over. This is why your lease term typically covers just the depreciation of the vehicle over the course of the time you use it.
The cost of leasing a car is about much more than the monthly payments you make. A car lease includes fees you should understand before you sign the paperwork. Even though your monthly payments might be around $400, you'll probably need to pay fees at the lease signing.
For instance, you might have $3000 due at signing before you can bring your car home. If your lease lasts three years, this means the cost of your lease is $3000 plus thirty-six payments of $400. At this point, the cost of your lease is $17,400.
Still, this doesn't factor in the costs of every fee you'll need to pay. You may also pay more in insurance, extra mileage charges, wear and tear expenses, and more. Even if you choose to buy the car at the end of your lease, you may find that the money you've already spent on the car doesn't matter.
You don't have equity in the car, so the money you've spent on the vehicle doesn't help you cover keeping the car. If you want to keep the vehicle, you could end up spending a lot more than you expected.
Is It Really Cheaper to Buy a Car?
In some cases, financing a car is a more affordable option for a family. Even if you have the same monthly payment of $400 at thirty-six months, you'll own the car at the end of the term. You can also put a down payment on your loan, which helps reduce your monthly payments.
If you have good credit, you can potentially get a lower monthly payment with lower interest. When you pay off your auto loan, you then have the option to trade or sell your car.
How Does the Dealership Determine Your Monthly Payment?
Your monthly payment depends on several factors. The main difference between a monthly car loan payment and a monthly lease payment is that the lease payment is not based on the value of the car. Instead, your lease payment is based on the anticipated value of the car by the end of the lease term.
So, this means that the monthly lease payment takes into account the depreciation of the vehicle during the term of the lease. Your monthly payment is also based on several other factors, including:
Lease Term
The lease term is the length of time you agree to lease the car. If you have a shorter lease term, you may end up paying more each month but less in the long term. If you have a longer lease term, you might end up paying less each month but more over the course of the term.
Mileage Expectations
When you sign your lease, you'll see that there is a specific mileage you can drive each year. For instance, many leases assume that you'll be driving about 1000 miles per month for a total of 12,000 miles over the course of the year.
If you drive more than this, your monthly payment might go up. If you exceed this mileage by the end of your term, you may owe the dealership more money when you turn in the vehicle.
Taxes and Fees
Taxes and fees are also part of your monthly lease payment. Taxes vary significantly based on where you live. States, counties, and cities have different tax rates, and you'll see this reflected in your lease paperwork.
Down Payment
You can also provide a down payment at the beginning of your lease term. This is a lot like putting money down when you finance your loan. The more you put down, the lower your monthly payments should be.
What Are the Upfront Car Lease Costs?
When you sign a lease, some fees are due upfront. This means you'll be paying fees before you drive away with the car.
In many cases, the upfront leasing costs are higher than the upfront costs of buying a car. These are some fees you can expect to pay before you leave the dealership:
Down Payment
In your lease, you might see the down payment referred to as a capitalized cost reduction fee. It varies based on several factors, including the dealer, location, and the car's value. While some dealerships don't require any down payment, some payments can be thousands of dollars.
First and Last Monthly Payments
The dealership may require that you put down the first and last payments. For example, if your monthly payment is $400, you can expect to pay a total of $800. To cover your payments if you default on the lease, they could add an additional security deposit.
Acquisition Fee
The acquisition fee is an administrative fee for processing the lease paperwork. It also covers things like verifying auto insurance coverage and checking your credit report. This fee can cost several hundred dollars. The dealership may include documentation fees here as well.
