Three Things You Must Do Before Leasing a Car
Leasing offers some great advantages in comparison to buying, like lower monthly payments and flexible credit requirements. Read on for three things you need to do before you sign a car lease:
1. Check your credit
Your credit rating plays a key role in the lease deal you are able to get. Drivers with better credit will qualify for better rates. You should check your credit score before you start shopping, and clear up any errors that reflect negatively. Even if your credit is less than perfect, it’s best to be informed before you head to the dealership.
Qualifying for a car lease is often easier than for a loan, experts say. That means that even drivers with imperfect credit are likely to qualify for a lease than for a purchase.
2. Know your cash flow
One of the perks of leasing is that you pay less each month than you would if buying the car. The average monthly payment at the end of 2013 was $420 per month, and most lease terms were in the 24- 36-month range.
If you were to purchase a new Volkswagen Jetta, you could expect an average monthly payment of $389, but you may be able to lease the same vehicle for an average of only $287 per month. However, keep in mind that you have to return or purchase the car when the lease is up.
3. Don’t just shop for a car, shop for a lease
Unlike car loans, which are offered by a variety of institutions, most leases are controlled by the car manufacturer. Therefore, if your preferred brand isn’t offering a good lease deal, you should consider other makers.
Also keep in mind that the company offering the lease financing will look at your income/debt ratio as well as the lease-to-value ratio, which refers to the amount financed in comparison to the value of the car. You may be required to put additional money down or have a co-signer for the lease.
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