The idea of leasing first became popular in the 1990's when cars became too expensive to buy for many people. Car leasing was designed to make cars more affordable to consumers. As prices on cars have risen, the ability for consumers to afford a loan has decreased. Enter car leasing. Lease Definition A lease
definition is a contract that is typically entered into by a lessee
(the individual who will be driving the given vehicle) and a lessor
(the individual or company that actually owns the vehicle). The
lessee is agreeing to pay for the use of the vehicle over the period
of the lease. Payment are determined by depreciation, which is the
value that the vehicle is expected to lose over the term of the
lease. The lessee also assumes financial responsibility for any
damage done to the vehicle over the period of the lease. At lease
end, the lessee must return the vehicle to the lessor, unless the
lessee decides to purchase the vehicle at lease end. The Net Capitalized Cost is the total
cost of your vehicle after negotiation with the dealer. Be sure you
are calculating this cost versus the original price of the vehicle. Please note that when you extend your
term to 48, 60, or 72 months (or whatever term you set with your
leasing company) your Residual amount will change, which affects
your monthly depreciation. Because a car tends to depreciate at a
slower rate after a few years, your residual amount will not drop as
far, and therefore your depreciation will not be quite as great for
the entire term of the lease. (Translation: Your payment will be
lower in a longer-term lease.) Car leasing allows companies to
reduce the monthly payments on a car by only requiring the buyer to
pay for the cost of the car during the time they are using it. A car
lease is very similar to renting - you don't own anything, you are
just paying for the right to use something. Unlike buying, you never
actually own the vehicle and you have to return it to the bank at
the end of the lease. Leasing allows a person to drive a brand new
car and make lower monthly payments, thus making the "new-car
experience" more accessible to more people. In addition, leasing can
offer tax breaks for certain occupations. There are 6 terms that you must be familiar with in order to understand how a lease works:
What is a lease assumption? A lease assumption allows one person
to assume an in-process lease from another person. For example, if
your neighbor had 18 months left on his car lease, and you wanted to
take over his lease, you would simply assume his lease and start
making the payments each month for the remaining 18 months. At the
end of the term you would turn the car into your leasing company
just as you would if you had leased the vehicle new. The process
itself is relatively easy to understand and can provide a great deal
of benefit and financial incentive if you use a lease assumption to
your advantage. For the Buyer (the person assuming a
lease) you are able to take over an existing lease with no money
down and with a shorter lease term than you would normally have to
take on if you were to write a whole new lease. In most cases it is
difficult to even find a “short term” lease these days with the
average lease term ranging over 36 months. Assuming a lease can save
you thousands of liri and only require a short term lease agreement.
In many cases, Sellers (those looking to hand over their leases) are
willing to offer Buyers incentives in the form of cash or other
terms that are exciting to Buyers. We have seen cases where Sellers
are willing to write checks as large as LM15,000 to walk away from
their lease obligations! The incentives offered are typically in
proportion to the size of the lease and the intentions of the
Seller. Approaching the end of your lease
produces a number of options for you to choose from. You can turn
your vehicle in, re-lease the vehicle, buy it out, or even create a
loan based off the residual price. Of course if you cannot wait
until the end of your lease, you can consider terminating your lease
early, which means you are turning over your lease before the lease
term expires. |