Questions to Ask Before Leasing A Car

Leasing allows you to rent a car for a period of time without having to buy it. Without making a significant financial commitment, it can be an excellent way to receive a new vehicle. 

Drivers who travel less than 15,000 miles annually and don't want to take a chance on mileage overages would especially benefit from it. Yet, leasing might be challenging, but this simple breakdown of How to Lease a Car will guide you through the process. You should have a few questions ready to ask in order to negotiate the best price.

It’s important to take your time and not rush the leasing process. Don’t be afraid to shop around for the best deal – dealerships always have some wiggle room, so be sure to prepare some questions. Here’s what to ask when leasing a car...

1. How Much Do You Have to Pay upon Signing a Lease?

You should get a thorough written breakdown of everything you'll need to pay before signing a lease. A security deposit, title fees, capitalized cost savings, monthly payments made at signing, and registration costs are examples of upfront payments.

You can avoid overspending if you are aware of the amount needed at lease approval. Also, being aware of the total cost of leasing a car might improve your negotiating position.

Key Point – Ask for a list of fees first because the payment you approve will often be greater than the sticker price that drew you in.

2. What is The Length of The Lease?

The leasing provider will inform you of the number of payments included in the lease, the amount of each payment, and the due dates. The most typical lease durations are 24, 36, 48, and 60 months; however, you may also come across unusual ones like 39 months. Certain odd-month offers can be intended to mislead you.

When comparing the different leasing choices, keep in mind that when leasing a car, although a longer lease gives cheaper monthly payments, the total cost will be higher.

Key Point – Before signing a lease, consider your alternatives and make sure you know how your term will affect your monthly cost.

3. What Kind of Lease are You Entering Into, and What Happens When It Expires?

Open-end and closed-end leases are the two types of leases. In a closed-end lease, the leasing business determines the final cost based on their estimation of the depreciated worth of the vehicle. 

Even if your car depreciates more than expected while on a closed-end lease, the only additional costs you'll have to pay are wear-and-tear charges and excess mileage. The most typical kind of lease is this one.

You will be required to pay the discrepancy between the vehicle's residual value and its actual worth at the end of an open-end or finance lease. You can be hit with a large fee at the conclusion of the lease if the car depreciates more than you anticipated.

Read the small print in both situations to avoid being taken by surprise by any additional end-of-lease charges.

Key Point – Knowing what type of lease you’re signing helps you to better plan for your payments.

4. After Your Lease Expires, Can You Purchase the Vehicle?

You may have the option to purchase your vehicle for the residual value or purchase price option specified in the lease agreement if you wish to keep it after the lease expires. To find out if you're getting a decent deal, though, compare the residual value when leasing a car, to the car's retail worth before continuing.

Inspect the car's condition as well to see if it's in decent shape and hasn't suffered much depreciation. Unless you're facing significant wear and tear charges or penalties for exceeding the mileage cap, you could discover that a buyout isn't worthwhile.

Key Point - When the lease period is up, the lessor might let you buy it out, but you should do the math to make sure it makes sense financially.

5. What is The Car's Remaining Value?

The anticipated value a car will still have at the end of the lease is known as the residual value. Although you can find an estimate by doing some research, leasing firms decide on the residual value. Being aware of this figure is beneficial because it plays a significant role in calculating your monthly payments. Your monthly payment will be cheaper the higher the residual value in relation to the original cost of the vehicle. Also, as an incentive when leasing a car, certain dealers and lessors subsidize residual values to lower your monthly payment.

A $20,000 car that is predicted to be worth $15,000 at the conclusion of the lease, for example, will have a cheaper payment than a $20,000 car that is anticipated to be worth $10,000. In the second case, the lessor will charge you more since they need to recover a greater portion of the car's worth.

Key Point – Understanding a car's residual value enables you to choose the best sort of vehicle and finance for your needs.

6. Will a Wear-and-Tear Assessment Be Conducted?

According to leasing regulations, your lessor must inform you if and how wear and tear will be taken into account when you return the vehicle. The vehicle will be inspected for exterior damage, such as dings, scratches, and windshield cracks, as well as interior damage, such as stains, at the conclusion of your lease. You won't be required to pay for the inspection, but you will be charged for any excessive damage.

Additionally, the legislation mandates that wear-and-tear criteria be acceptable. The requirements are dependent on the distance you traveled as well as any damage to the car. It might be worthwhile to pay for touch-ups before your examination if your car has minor scratches.

Key Point – You can be better prepared for potential end-of-lease fees by understanding how wear and tear is calculated.

7. What exactly is the money factor?

The total amount of costs you'll have to pay for the leased car is the term "money factor." It is comparable to the interest rate on a brand-new automobile. Typically, it appears as a little decimal. The yearly percentage rate you are paying for the lease can be calculated by multiplying it by 2,400. To give you an idea, a lease approval with a money factor of .0030 is similar to a 7.2 percent interest rate. For a further breakdown, check out this article on how much it cost to lease a car.

When visiting the leasing office, try to raise your credit score using these simple steps, because it has a big impact on the money factor. This price is normally established by lending institutions, therefore you can very rarely negotiate it.

According to Statista’s report on the Average credit score of new car loans and leases in the U.S. 2015-2022, the average credit score of borrowers with new car loans in the United States increased by 15 points from 2015 to 2022. 

In the first quarter of 2022, their average credit score was 728, while that figure amounted to 713 points in 2015. Leases had on average higher risk scores than loans throughout the timeline. However, Credit Score requirement differs from dealer to dealer. 

Key Point – A money factor, which determines how much you'll spend in addition to your lease payment, is not the same as APR.

8. What is the mileage allowance and what happens if you go over it?

A mileage allowance is basically the number of miles you can drive on a lease without incurring additional costs. Most leases allow 12,000 or 15,000 miles before incurring costs. The cost of excessive travel can quickly mount up and can range from 10 to 25 cents per mile.

During your lease, be aware of your mileage allowance and make an effort to plan your driving habits to minimize potential costs. Even though the number of kilometers allowed is frequently adjustable, changing it will affect your payment.

Key Point – Going over your lease mileage allowance can cost you a lot of money when leasing a car. So make sure you keep a careful eye on it.

9. What if you are unable to make a lease payment?

Even though very few people intend to skip a lease payment, it's crucial to know what can happen. A default typically happens if you miss three or more payments in a row.

Every lessor handles this problem differently, but often not paying your lease results in extra fines and hurts your credit score. Before signing the lease, you should inquire about any grace periods offered by the company.

It's a good idea to inquire about the worst-case scenario in which you default. The lessor may reclaim the car after a predetermined period of time and, frequently, impose an early termination fee on you. Find out what that cost would be before signing.

Key Point – To find out what penalties might apply when leasing a car, ask your lessor in advance as each one handles defaults in a different way.

10. Can you extend the lease?

Whilst most lessors have a cap, you may typically ask to extend your lease for a few extra months at the same price. Even if you're not sure if you'll need to extend your lease, find out if doing so would alter its conditions or result in additional expenses. You can make better plans as the end of your lease nears if you are aware of these expenditures in advance.

Discuss possible lease extensions and termination costs. Businesses are required to state the conditions under which the leasing company may amend the terms of the agreement or demand the return of the vehicle.

Key Point – If you need more time when your lease expires, you can avoid being caught off guard by asking about lease extensions in advance.

So these are the main questions to ask when leasing a car, and by doing so, you can often come away with a much better deal. You don’t have to ask every single one of them, but try to work in as many as possible when leasing a car.

For drivers looking to experience the newest vehicle features without making a significant financial commitment, leasing a car can be a suitable option. These are some advantages and disadvantages to think about while thinking about leasing an automobile.

Advantages

• It may be more affordable to lease. Leasing may be a lot more cost-effective choice than buying a new automobile for drivers who don't drive much and won't go over a lease's mileage restrictions.

• Every few years, you can upgrade to a new car. A lease gives you the option to upgrade every few years when your contract expires if you enjoy driving the newest cars with the most recent technologies.

Disadvantages

• When you lease a car, you have more restrictions than buying. You will have mileage restrictions while leasing a car. Maintaining the car in good condition is even more crucial to prevent additional charges after the contract expires.

• Leasing a car doesn't help you accumulate equity. Jumping from lease to lease will prevent you from accumulating any equity in your car.

You may decide that leasing a car is too much hassle, or maybe you don’t want to buy a car and watch it depreciate in value over the next few years. Nevertheless, there is another way to get your hands on the latest cars without all the hassle – a car subscription service like FINN.

With FINN, you make a simple one-off payment each month that covers the cost of the car and any maintenance or insurance fees as well. Its a much more fluid process and allows committing for a lesser period, typically 6-12 months,

There are also no hidden upfront payments or down payments, and we’ll even deliver the car for free in certain areas of the US.

If leasing is your preferred choice, you should now be aware of questions to ask when leasing a car in order to help you secure a better deal. By asking the right questions and keeping an open mind, you remove the potential risk of signing up for a lease agreement you don’t fully understand the cost of. 

Don’t be afraid to ask questions or explore other alternatives, every dealership will differ slightly in its approach – so being knowledgeable is well worth it. 

If you decide that there is simply too much hassle involved with leasing a car or buying one outright, then consider the modern approach of a FINN car subscription. It's a totally new way to get your hands on the last vehicles out there, and you only need to pay a fixed monthly fee which includes insurance and maintenance costs.