Leasing a car doesn’t have to be complicated

The terms used in car leasing vary from those used in buying a car, but the process works much the same way. You work out your best price with the dealership and then do a little paperwork to determine how much it will cost you. While buying a car is usually the cheaper way to go, some drivers may prefer to lease in order to drive a new car every few years.

More below.

Purchasing an automobile may be preferable to leasing

In part one of this article about leasing cars, we discussed an overview of the leasing process and introduced a few terms that you should know that come into play when discussing a lease. In addition to the capitalized cost, the capital reduction and the excess mileage fee, there are some other things that you should know. Here are a few more things that will be helpful to know when you visit a dealership:

• Origination fee - Sometimes also known as an acquisition fee, this is fee means the same thing that it does when you see it on a home loan - extra profit for the dealer. Often amounting to several hundred dollars, it consists of nothing more than a fee for the privilege of leasing a car. You may wish to inquire as to whether the fee can be dropped. The dealer may or may not go for it, but it never hurts to ask.

• Disposition fee - Most leases allow you to either walk away from the car at the conclusion of the lease or pay to buy the car outright. Some leases include a “disposition” fee, which is essentially more dealer profit that charges you for walking away from the deal. We don’t recommend signing leases that include such a fee; if you see it on the lease, you should ask to have it removed. If the dealer says no to that, you might wish to consider shopping a bit more.
• Early termination fee - This one can be the killer, as it can amount to thousands of dollars. If you take out a lease, be prepared to stick with it until the term runs out. If you want to or need to turn the car in early, you will pay a substantial penalty for doing so. In some rare cases, the penalty may even be the sum of all remaining payments due on the lease. You may be thinking, “I don’t see why I would terminate the lease early, so I won’t worry about that.” Be aware that if you get involved in an accident and the car is totaled, you are, in effect, terminating the lease early. Watch out. And make sure that you have adequate insurance on any car you are leasing, including “gap” insurance, which protects you in the event that the amount owed on the car exceeds the car’s value.

While the advertised low rates for leases are certainly appealing, potential lessors need to realize that the above fees can come into play and if they do, leasing could be an expensive venture. Experts agree that the least expensive way to drive a car is to buy it and keep it until it doesn’t run anymore. Leasing will certainly cost more than that, but if you want to drive a new car every couple of years and don’t mind always making a car payment, leasing may work for you.

If you own a car, van or truck, you must cover your investment. Vehicle insurance may be pricey, but why pay a lot if you don't have to? InsureMe can submit a quick estimate from an insurance company in your area at a price that is competitive.