Financing For A New Car

There’s two ways to get financing for new car – leasing and buying. We’re just gonna talk about one of the more popular ways of financing for a new car, leasing.

Just like a lease you would sign for an apartment, the auto lease is a contract that allows you to use the car for a set period of time. Most leases last from 24 months to 36 months, although longer leases are available.

When you decide with your local dealer that you want to lease a vehicle you have to take care of a few up front costs like the first payment (lease payments are made in advance) plus a security deposit (that’s usually refundable), any license and title fees, as well as any inception fees (fees charged by the leasing company for administrative expenses). Depending how the lease agreement is structured, you may have to include money for a down payment (called a capitalized cost reduction). The purpose of the down payment or cap cost reduction is to lower the monthly lease payment.

Leasing advantages over buying

1. Lease payments are usually lower than finance payments because you’re only paying for that portion (2-3 years) of the vehicle you are using.
2. Provided you are within the mileage requirements (written in the lease) with normal wear and tear, you can walk away from the vehicle when you’re done, after paying the termination fee (often waived if you re-lease from the same lender).
3. You never have to worry about how much the vehicle will be worth at the end of the lease. The bottom could fall out of the market and you still don’t have to be concerned about negative equity.
4. If you like what you’re driving, you have first rights to purchase it at the end of the lease for an amount written into the lease contract.

Lease Disadvantages

1. You don’t own the vehicle and will never have any equity in it unless you decide to buy it at the end of the lease.
2. Ending a lease early can be difficult. Early termination charges and penalties can be almost as expensive as making the remaining payments.
3. Most leases are written for 12,000-15,000 per year (with some as low as 8,000 to 10,000). Higher mileages can be written into the contract at its inception, but if your overall driving exceeds the total number of miles written into the lease, the penalties can be steep (.15 to .35 per excess mile).
4. Any modifications to the vehicle that were not there at inception need to be removed and any damage needs to be repaired before the vehicle is turned back in, otherwise the leasing company can charge you for the repairs.

Auto Loans may be the way

If you don’t like the idea of leasing a new car, your best option is to get vehicle financing from one of our network dealers.

Tags: car finance, car financing