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Leasing a 40k Car

Leasing a 40k Car

Leasing a 40k Car

A few years ago, my lease on my old car expired. I had a choice to make: I could come up with 6 months of rent and buy a new car, or I could figure out how to extend my lease. For me, the latter was the obvious choice.

Lease

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The agreement that you’ll sign outlines the length of the lease, your monthly payments, the maximum number of miles you can drive per year, and other terms. When the lease ends, you’ll typically have the option of purchasing the vehicle or simply returning it. If you return the car, the dealer will expect it to be in good shape. If it has any damage beyond the expected wear and tear, you’ll have to pay more money to cover it.For example, let’s say you leased a car with an annual mileage maximum of 12,000 miles and a three-year term. After your lease ends, you return the car with 40,000 miles—4,000 over the agreed-upon limit. If your contract states that you’ll be charged 20 cents per mile over the limit, then you will have to pay $800 in extra mileage charges.The latter concern is important because new cars depreciate the moment you drive them off the lot. And whereas a lease allows you to get a new car every few years, those purchasing a new car will likely hold on to it for much longer, its value dropping with each passing year until it’s time for a trade-in. Allyson Baumeister, a member of the Texas Society of Certified Public Accountants, says:

A lease is a contract allowing a party to convey property to another party for a specified time, usually in return for a periodic payment. A car lease allows a person to drive a car for a fixed period of time as they make a down payment as well as monthly lease payments until the lease ends. It can help to think of a car lease as a long-term car rental; while car rentals generally last for as little as a day or even just a few hours, car leases average between two and four years. Many leases allow the purchase of the leased vehicles through a purchase option agreement at a specified price once the lease ends. It is important to note that choosing to add such an option at the beginning of a lease will add a small amount to the monthly lease payment. Most car leases can be found at dealerships or private car dealers. Money Factor—This is the interest rate expressed differently and used specifically in the context of car leases. Lessors use the money factor as a way to determine lease rates that correspond to each lessee's credit history. They generally work very similarly: the poorer the credit history of the lessee, the higher their money factor, and the pricier the lease. To get the money factor, divide the APR on the lease by 24 or 2400, depending on whether it is expressed as a decimal or percent. (Source: www.calculator.net)

 

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