When Does Leasing a Car Make Sense?

Unlike buying a car, with a lease, you are effectively renting the vehicle from a dealership for a set period of time, at the end of which you return the vehicle. Again, the lease period varies on your agreement, but it is usually counted in years, rather than months.

When you sign a lease, you often pay a deposit, and then regular monthly installments for the length of the agreement. Those costs are calculated by the dealership, who will consider a number of factors, including the market value of the vehicle and its estimated depreciation over the time it will be in your possession.

As the driver of a leased vehicle, you will have several responsibilities, including securing appropriate insurance and overseeing any necessary repairs throughout the term of the agreement. A car subscription with FINN also allows you access to a new car, but your monthly payments include comprehensive insurance and maintenance. And at the end of your six or 12 month term, you can choose another new vehicle so you can continue adventuring.

While leasing can be a more affordable alternative to car ownership, there are still other things to consider. From understanding vehicle depreciation to the implications of excessive wear, here are some factors to think about before signing your lease.

The lease approval process

Typically speaking, many dealerships require drivers to have a credit score of 700 or higher to be approved for a car lease. If your score is below that bracket, you may find a FINN car subscription is a more suitable option, as the minimum required credit score is 640.

Monthly payments 

After an initial down-payment, you will make monthly payments for the term of your lease, so it’s important to consider whether that’s something you can fit into your budget. Remember, these fees can be tied to interest rates, so be sure to check with the dealership for the specifics of your arrangement.

Alongside your monthly car payments, you should also factor in other associated costs that may not be included automatically. Some lease arrangements may include vehicle maintenance, but non-warranty repairs are usually the responsibility of the driver. Additionally, you will require appropriate insurance coverage, which is an added cost and typically provided by a third-party. 

With a FINN subscription, the cost of the car, maintenance, and insurance are all included in a single monthly payment.

Mileage allowance

Consider how much you will use your car, and whether the lease will provide you with enough mileage. Conversely, maybe you’re not driving too frequently, in which instance you could be paying for mileage that you don’t use. 

Dealerships use various methods to calculate excess mileage fees, but as a driver you can expect to pay between $0.15 and $0.30 for each additional mile over your originally agreed allowance. Certain other factors could also impact your mileage fees, including the make of the vehicle, and whether any additional maintenance is required because of the overage.

Lease duration 

When choosing a lease, pay attention to the length of the agreement. While a longer lease may offer lower monthly payments, the vehicle will be your responsibility for the duration of the contract. This means you will have to maintain the car to the dealerships standards, including paying for any non-warranty repairs.

Residual value

From the time you first pick up your leased car to the day you return it, it will have lost some of its initial value. This is typically referred to as residual value, and the dealership will have factored in the vehicle’s expected depreciation when calculating your lease payments. However, any unexpected damage to the car will impact the residual value, so you should endeavor to maintain the condition of the vehicle as best you can while it is in your possession.

Maintenance and repairs

As part of your lease agreement, you will be expected to maintain the vehicle to a specific standard. This means ensuring the car is serviced regularly and that any necessary repairs are carried out. Again, as a lease-holder, you will bear the cost of any non-warranty fixes, and you may also be liable for excessive wear charges at the end of contract term.

When your lease comes to an end, you will settle any additional charges, such as surplus mileage or excess damage fees. Many dealerships will also give you the option to buy the vehicle outright for its residual value, or offer you a new lease arrangement for another car. 

Of course, it is up to you what you want to do at this point, as you may also want to explore a car subscription - particularly if you’re interested in a new vehicle.

If, however, you choose to wrap up your lease before the stipulated end date, you may have to pay an early termination fee. This cost is typically calculated as a percentage of the remaining lease payments, though the amount may vary depending on the term of your lease agreement. Because of this, it’s important that you are fully aware of the lease terms when signing up.

Those that want the benefits of enjoying a new vehicle without the upfront financial commitment may find a lot of benefit from leasing a car. Needless to say, those drivers will also have the responsibility of maintaining and paying for that vehicle for the duration of the lease agreement - including any extra costs such as maintenance and excess mileage fees.

With a FINN subscription, drivers can also drive a new vehicle, but with a commitment period of as little as six months. And with a minimum credit score much lower than many dealerships, getting on the road couldn’t be simpler.