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Author: Keioni Lenis Article source: http://www.articledeshboard.com/. Used with author's permission.
Auto finance is now different. It is now populated with all sorts of choices to help you get that auto of your dreams. Auto lease deals are one of the most popular.
Auto leases are very like auto rental agreements. The biggest difference is the contract lasts much longer.
With an auto lease you don't own the auto. The lease company purchases the vehicle. You lease it from the leasing company. At the end of the lease agreement you simply return the vehicle. As long as the vehicle is in good condition and hasn't exceeded your mileage limits that's all there is to it.
As you don't own the vehicle the lease company can sell it at the end of your contract. Your payments therefore depend on the difference between the buying price and the selling price. Lease companies spend a lot of time and effort to ensure they have a good idea of exactly how much each vehicle in their fleet will be worth at the end of the lease agreement.
Here's how it works. You negotiate a contract to buy a new auto for $24,000. You enter into a contract for the lease company to buy the auto and then lease it back to you. The contract is for 36 months with 10,000 miles per year mileage allowance. The lease company assesses the likely residual value to be $12,000. The actual cost to the lease company is $12,000 plus expenses and profit margin.
As you are only paying finance charges on part of the value of the auto ($12,000+costs in the above example) your monthly payments are lower. Even better, as the auto lease company owns the auto you don't have to pay a large deposit.
The result is that you can drive a new auto for low upfront cost and relatively low monthly payments. The downside is that you never own the vehicle and may have nothing to show for all your payments at the end of the agreement.
Most lease packages include an option to purchase at the end of the contract. Residual values are normally pretty conservative. So, provided you return the auto in good condition and inside your mileage limits the odds are that it will be worth more than the pre-defined residual value. You than have 3 options: 1. Buy the auto for the agreed residual value 2. Part exchange the auto and use the extra value as the deposit on your next lease vehicle. 3. Give the keys back and get on with your life
Most people seem to take the trade in and enter into another lease contract.
Just in case this all makes auto leasing look very attractive you should note that in the long run leasing almost always will be a bit more expensive than buying through an auto loan. While lease companies have to compete to keep their prices attractive they still do have to make money. In the end auto lease companies have to pay enough to make the auto leasing business profitable.
Auto leases work really well for people with stable lives. It is virtually impossible to get out of a lease contract early and excess mileage charges can be heavy. For the right people auto leasing is a great way to be able to drive a new auto every 3 years or so.
Save hundreds of dollars on your next new auto. Auto leasing lets you drive a new car for less than you might think. For help and information on obtaining the auto loan or auto lease that is right for you visit www.autoloan.jklblog.com
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