Archive for January, 2009
These days, change comes as often as it gets especially for a family. Time seems to fleet for young couples as they first drive away to their honeymoon in a sports car and as they switch their two-seater car for a station wagon to accommodate the coming family member nine months later. A family’s essentials often change, including their auto needs, as different chapters of their lives unfold before them. Different family situations require different approaches and through car leasing, varying solutions are within grasp even for a modest household. Car leasing offer flexible and sensible solutions to families just starting out or to those who have several members big enough to start their own soccer team.
New couples won’t need to spend any money trying to get rid of their two-seater Honda Accord. Since car leasing has a usual term of two to three years, newly married couples can use this as their transition period to help them embrace parenthood better. Once the lease ends, they can easily start a new one and then drive out from the car dealer’s office in a family SUV. When the eldest is old enough to drive, the parents can first pick a sedan and three years later switch to a brand new convertible since for most teens fitting in is a big thing. In this day and age, with all the new gadgets and technology flashing in your TV screen, keeping your teens happy is not a small matter. Without the flexibility of car leasing, families with more than one teenager would potentially be buying a lot of cars, as well as trying to sell them or trade them in at the end of their useful lives (the cars of course, not your teens). Car leasing keeps your style conscious teens happy while keeping your budget intact.
All the reputable auto leasing companies are well aware of family dynamics, and they can help you figure out your best car leasing stratagem whatever the situation is. You may just be surprised at how convenient and affordable it can work out.
The first question that a car dealer would ask is, “How much are you going to pay for the down payment?”. This question is crucial since this will have sweeping effects on your budget. The down payment you make affects more than the monthly payments you’ll make and can cost you several thousand of dollars if you don’t make the right decision. In this post we will be discussing the ideal down payments to be made both for car buying and car leasing so that you in turn can maximize your money.
Down Payment for Car BuyingRemember that when you are organizing the financing nuts and bolts of your next car, look not only at the financial cost as well as your long-range financial picture. It is ideal that you maximize the power of your money and retain as many options as possible.
A wise down payment when buying a car is at least 20%. Putting down 20% at the time of purchase has effectively paid the car’s depreciation for the year upfront and is ideally considered a wise move. This means that the car buyer is not paying more on the loan that what the car is actually worth.
Smart money managers, who make a 20-percent down payment, have more freedom to make a change in the car they drive. During the second year, when the car depreciates at a much slower rate, they would begin to build equity in their car. During a trade-in, they would actually get a positive credit toward the new car.Down Payment for Car Leasing
The strategy for car leasing is a direct opposite of buying since there is no down payment required. In car leasing, the down-payment is called”cap cost reduction”, the higher amount you paid on your “cap cost reduction” the lower becomes the monthly payment. Although this seems to be a good option, it is not entirely recommendable and practical. Just imagine, if a buyer gets into a serious accident and the car is totaled in the first few months of the lease, the down payment then is completely lost.
So, in leasing a car, opt to make higher monthly payments than putting the money down on the car. You can go one step further and roll the “drive-off costs,” which would normally be paid upfront, into your monthly lease payment. Drive-off fees are the related fees required to drive your car off the lot: security deposit, acquisition fee, etc.
Car leasing may sound clear-cut however there are details that lessees should pay attention to. Below is a quick checklist when opting to lease your next car.
- Shop around. For every dealer and manufacturer is a different car lease rate that can be negotiated to fit accommodate your needs.
- Always read the fine print. Make sure to orient yourself ahead of time about all the hidden charges associated with your car lease, i.e, security deposit, registration fees, and lease-end services fees. A “Special” deal won’t be as special if from the low monthly payment of $199, you’d be paying twice the amount for the “partially declared” charges.
- Lay down a closed-end lease. If at the end of the lease, the value of the car is less than the residual value, the lessor will owe the lessee the difference. However if the actual value is more, then the lessee has the option to buy the car for the fixed residual value or pay the lessor the difference instead.
- Canvas for insurance rates for the kind of coverage required by the lessor. The car lease agreement may require higher liability limits and lower deductibles than you currently carry, and both will increase your insurance premium.
- Choose cars to lease that tend to hold their value well. The sexiest cars are not always the best buys in the world of leasing.
- Negotiate the price of the vehicle before moving to car lease negotiation. Before discussing the car lease details, make sure to have set the car’s selling price first hand. Doing so will prevent the vehicle’s selling price from influencing the lease negotiation.
- Increase the mileage limit before you enter into the lease, if you feel that you’ll surely exceed it. Buying an additional mileage over the term of the lease is less expensive than paying for the excess at the end.
- To avoid lease-end wear and tear charges, maintain the car well during the lease period. Make sure to regularly have the leased car tuned-up. Lessors will not think twice in charging the lessee for perceived poor treatment.
- Remember that if a lessee decides to purchase the vehicle at the end of the lease, in the long run car leasing may end up being more expensive than a loan.
Business car lease, otherwise called “commercial car lease”, is a leasing concept wherein cars are leased for business use or purposes. Generally, this is a more convenient and inexpensive alternative than purchasing a car since businesses are offered a better way to manage their finances. Companies are not burdened with a large capital outlay and business car leasing offers a likely significant tax advantage at the same time. In general, all expenses associated with a lease can be deducted, including up-front costs, monthly payments, insurance, maintenance, and repairs.
Most business car lease are “open end” wherein the residual value is set low. Monthly payments will be higher however the tax benefits are greater. The business lessee is responsible for the differential amount between the car’s residual value and the lease-end market value; although this is now minimized due to the low residual value from open-end type of car lease.
Make a mental note that if the leased car is used both for personal and business reasons, the tax benefits is only applicable to the business related expenses.
Often when leasing is explained, most would say that renting and leasing are analogous. However it is not true; leasing and renting are two different things; here’s why.What is Car Renting?
Car rental basically answers only short term or temporary auto needs such people who are currently in a business trip or those who are in a holiday vacation.
Cars for rent are wholly owned by the rental company. The auto rental company, handles the maintenance and repair, and also carries the basic insurance. Customers, in turn, agree not to damage the car, to buy the gas, to purchase an additional insurance if necessary, and to return the car within the agreed time.
Car rental rates can vary widely since this can be based on a daily or weekly fee which can have an unlimited mileage or not (additional mileage is an additional cost). Same cars are rented over and over again unlike car leasing wherein the car needs to be disposed.What is car leasing?
Unlike car renting, car leasing is actually another form of financing. A car leasing company only gets involved once the customer decides that he wants to finance his next car via leasing. The car leasing company then buys the car from the car dealer at the price agreed (with the client) and then loans it back to the customer which in this case is the car.
Since the lease company has invested money in the vehicle, due interests will be paid by the lessee. The leasing company also expects to be paid for the residual value of the car as the lessee makes use of it. When the lease ends, vehicles are returned to the company although the lessee has a purchase option at the end of the term.The difference of leasing and renting
- Leasing is a form of financing and renting is not.
- Lease terms begin at 24 months while renting can be a day or two.
- A customer’s credit report is important in order to acquire a lease while in renting it isn’t.
- Leasing appears on your credit report just like a loan and renting doesn’t. If there are any default in payments, this will appear in your credit score.
- In rental, your choice of vehicles is only available from the auto selection of the rent-a-car companies, while in leasing you can pick the car your heart desires.
- Ending the rental early is fairly easy by just returning the car. Ending a car lease, on the other hand can be pricey since there are several fees that a lessee must settle.
- Renting can come out more expensive than car leasing if the length of time is the same
Car lease plans are growing more popular since they prove to be quite favorable for any man’s budget. Even at this critical time, driving a brand new car won’t be a hindrance if you happen to find yourself a good car lease plan. In this post, we will look at some reasons why a car lease plan is a considerable option for your next car purchase.What is car leasing?
A car lease plan is basically renting a car over a specific period. You’re required to pay for an initial payment as a deposit and then you will pay an agreed amount per month till the lease term ends.
You don’t own the car at any point and at the end of the lease you simply hand it back to the leasing company (although, often there is a purchase option). Most lease plans last for two or three years, although you can arrange a car lease for 12 months or even less.Why avail a car lease plan?
No big cash payments required
The biggest upside to car leasing is that it doesn’t require a significant cash outlay as opposed to purchasing your car through a loan. The upfront payment is often equivalent to two months of the monthly rental.
Businesses benefit from car leasing, particularly, since they can treat the monthly payments as a part of the operational costs rather than a capital expenditure. Businesses can also reclaim the VAT associated with the leasing costs, while the VAT on new car purchases cannot be reclaimed.The car will always be under warranty
Most car manufacturers offer a three year warranty and most lease terms runs up to that time which makes your car under warranty until the end of the term; as long as the lease is for three years, of course (which most are, actually).Keep up with the latest auto trends
Car leasing is occasionally more of a personal and lifestyle choice rather than a financial one. If you like driving around in a new car every two to three years then leasing is definitely a good option for you. Since you don’t own the car, you won’t have to worry about trying to sell it in order to buy a new one. All you have to do is turn the car back in to the leasing company and then choose your car.Offers buying flexibility
Car leasing allows you to defer the buying decision and still get the chance to use the car. Think of your car lease plan as a test drive, if the car is indeed good then you can purchase it after 36 months or simply turn in the keys and just walk away if it isn’t.