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Leasing Basics: Rethinking What You Think You Know About Leasing
A lot of people shy away from leasing a vehicle, but in reality, leasing a vehicle can be an incredible opportunity. Consider it a different way to own a car—instead of paying for a whole car, you can pay for just the usage. Many financial experts agree: you should own appreciating assets and lease depreciating assets. And as we all know—vehicles are depreciating assets.
New Car, Less Cost
Leasing is great for anyone who would rather have a new car than a used car, for the same kind of payment. For example, a used $15,000 Honda Civic would cost about $325/month to finance on a five year note. Leasing the same car, but a brand-new model, would have a payment closer to $200/month. And unlike a regular financing arrangement, there’s no requirement to put money down. In fact, with Honda Financial, the maximum down payment on a lease is 20%.
Mileage
There are mileage limitations in place when leasing a vehicle—but what many people don’t know is that these are flexible. Limitations can range anywhere from 12,000 miles per year to about 49,000 miles per year. The most common lease term is 3 years/36,000 miles, but drivers can tailor it specifically to their own needs. The maximum allowable mileage on a lease agreement is 99,000 total miles for the contract term.
Maintenance
A common leasing question is: do I have to maintain the car? The answer is yes, you have to maintain the car according to the manufacturer’s recommendations—just as if you owned it. However, when leasing a car as opposed to buying it, there are some savings in maintenance costs. When leasing a vehicle, you’re driving it in the prime of its life—so you don’t have to worry about large expenditures for tires, brakes, etc. You’ll have to do a few oil changes, and of course pay for insurance, but overall you’ll enjoy a lower cost of operation. In addition, you’re driving the vehicle while it is under warranty so there’s no expense if there’s a breakdown or failure.
End of Lease Term
What happens at the end of the lease term? There are a few options: purchase the car for a pre-established value, turn in the car, or turn in the car and start a new lease. A lot of stories have circulated about bad situations at the end of leases, with lessees being charged hidden fees. With Honda Financial however, there are terms built into leases to protect people from these hidden costs. Honda Financial offers what are called closed end vehicle leases. This simply means that the end term residual value is predetermined and disclosed up front, so a buyer knows right away what they would need to pay at the end of the lease if they’d like to purchase the vehicle.
Other terms that can be built into the lease to provide additional protection include “gap protection” and “damage waivers.” Gap protection means is that if damage occurs to the vehicle, and the insurance company values the vehicle at less than the lease buyout obligation, the gap protection insurance will pay for the difference. Damage waivers offer a way to insure the lessee doesn’t have to pay for minor damage accrued to the vehicle throughout the lease. If there’s up to $500 worth of damage to the vehicle, damage waivers will cover this cost. Even better, this can be used for up to three separate incidents (meaning the total covered is up to three payments of $500 each, for a total of $1,500).
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The bottom line is that leases aren’t as scary as they might have seemed—they offer a variety of benefits, perhaps the best of which is that you can drive a new car for the price of a used one. Still have questions? Visit Honda Motorwërks in Downtown La Crosse to learn more about how a lease can fit your needs.
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