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How Does a Car Lease Work?

How Does a Car Lease Work? Photo

©Depositphotos/Mangostock

When it comes to obtaining a car, most people tend to be confused about leasing and renting. These two are the top choices of those who needs an auto immediately but cannot purchase one. Depending on how long you will use it, renting and leasing is both not a bad decision. You just have to go for the right choice. To guide you along, here are some facts worth remembering.

Difference Between Leasing And Renting

Car Renting

Car renting is the best choice for those who want to use theor auto for a short span of time. It can be for a family vacation or for driving around town with your friends. Most cars for rent are owned by rental companies. They’re also responsible for maintaining it and ensuring that’s it’s safe for their customers.

The rates of renting a car depend solely on the company. It can be weekly based or daily based. Some companies are also very strict when it comes to mileage and would require an additional mileage rate. Some companies on the other hand do offer unlimited mileage.

Furthermore, the method of computing these rates is not usually disclosed to the people. This is because car rental companies have different computation schemes and they also have discount schemes that highly affect the main rate.

Car Leasing

By contrast, car leasing is a way of financing a vehicle. It can be very similar to loan financing. A lease company will finance an auto and they are to be paid with interest. Because the money to be financed depends on the car – whether it’s a new model or not – the interest rate also varies. Aside from the auto, such rate also depends on the company. Technically, not all car lease companies have similar interest rates but there’s a formula used to be the basis of the computation.

Unlike rentals, you cannot swap the car until the leasing term has ended. Such term can start at 24 months and not just a couple of days distinct in the rental terms. Factors like income, debt and credit scores are all important when leasing a car. It also appears as your typical credit report.

How Does Leasing Work?

Leasing basically means paying for the car’s devaluation. You are responsible for financing the difference between the current value of the car, and its new value after the leasing contract ends. If for example, an auto is worth $30,000 today, and it lost its value to $20,000 after the leasing contract you will have to finance or pay for the $10,000. Most contacts range from 2 years to as long as 5 years depending on the lease company.

If you don’t want an upright payment for such as huge amount, you can check if the leasing company offers other payment methods. There are some corporations that are open for monthly payment with the requirement to pay an initial down payment. Aside from that, you can also purchase the car and pay for it’s entire amount of $30,000 during the leasing term. Again, this can be a monthly payment with an initial down payment.