Leasing a car is the only option available for many people who want to buy a car but do not have the money to make a full payment. Leasing then appears to be a good option through which people can obtain possession of a car by making simply a down payment, which typically comes to around 20% of the price of the car, and obtain a lease on the remaining amount. Under the terms of the lease, they can then make monthly payments until the lease expires—in other words, the amount is paid in full.
Is Leasing the Same as Ownership?
However, since a lease is different from an outright purchase, the car has to be returned after the expiry of the lease. In some cases, you can get a new lease on the same car and go along with the monthly payments once again. Or you can take a lease on a new car. The leasing arrangement is thus similar to renting a car for a specific duration and the lease payments are similar to rental payments.
Things to be Careful About
However, there are some aspects of a leasing arrangement which deter some people from using this option. It is important to be aware about these aspects in order to make an informed decision and to avoid being surprised by things that emerge later on. One of the things that must be kept in mind is that a lease is basically a kind of rental. So although you get to use the car and keep it in your possession, technically you do not become the owner of the car. The owner is the leasing company and at the end of the lease you will have to return the car to the company. This also means that you cannot sell the car to any other person since you are not the owner.
Penalties in a Car Lease
A lease agreement will include several penalties that you may be forced to pay. If you go for a lease on your car, then be sure to take out the time and read about all these penalties before you sign the agreement. You could be liable to pay a penalty if you drive the car for more than the number of miles specified in you lease agreement, or for not maintaining the car in a reasonable way. Some people ignore or underestimate these terms only to be rudely awakened when the leasing company sends a fine to their address. While the car is under a lease, you need to take very good care of it in order to keep it in good condition and avoid wear and tear beyond the normal extent.
Retiring a Lease
Some people mistakenly believe that they will be relieved of making monthly payments if they wind up the lease in a single go. In other words, they might decide to return the car before the maturity of the lease. In such a case, the leasing company will impose a fine. This is similar to when the bank charges you an additional fee if you returned the borrowed amount before the maturity of your loan.