Leasing a car, rather than buying a car with a car loan, is the best way to buy for some people. It is especially good for people who don’t put lots of miles on their car, don’t have lots of cash for a down payment, and can’t afford a high car payment. There are two different kinds of car leases, though. You can get a regular closed-end lease or an open-end car lease. Here’s the difference between the two car leases and how to get an open-end car lease.
The difference between closed-end and open-end car leases
When you get a closed-end car lease, you agree to a monthly payment until a pre-determined date. On this pre-determined date, you return the car. Done deal. You will have to pay the bill for extra mileage and wear, though.
When you get an open-end car lease, you agree to pay monthly payments until a pre-determined date. When that date comes to pass, you buy the car. The price you will pay at that point is determined when you sign the lease. This can work in your favor or against you. If you take good care of the car, you could get a really good deal on a used car. If you don’t take good care of it, though, you could end up overpaying for a used car.
How to get an open-end car lease
Step 1: Know your credit score. It is difficult to lease a car if you have a bad credit rating. If your credit is 680 or above, you shouldn’t have a problem. You may still be able to lease a car if your credit is low, though.
Having a good co-signer can help or you might have to pay a higher interest rate and down payment.
Step 2: Locate dealers who lease cars. Most new car dealers do. Compile a list of these dealers and determine which ones sell cars that you are interested in.
Step 3: Do some shopping. Determine exactly which vehicle you want. Try to stick to cars that hold their value well. You can find out online on sites like Edmunds.com and Kelly Blue Book which cars tend to retain their value the longest. Do the research so you don’t end up having to pay a fortune for a car that’s not worth it.
Step 4: Make arrangements for car insurance. Have the car insurance provider set up your account ahead of time. All you will have to do is call from the dealership with the make, model, year, and Vehicle Identification Number (VIN) of the car you buy.
The dealer will not let you leave with the car until he or she knows you have insurance.
Step 5: Ask the dealer if he or she can write an open-end lease. Find out before you even take a car out for a test drive. If the dealer tells you he or she can’t write an open-end lease, take your business elsewhere.
Step 6: Negotiate the price of the car. After you decide on a car, negotiate the price. Every car dealer expects you to. The price on the windshield is only a suggestion, which is why it is called the Manufacturer’s Suggested Retail Price or MSRP.
Step 7: Pull together as much money as you can for a down payment. The bigger the down payment, the lower the interest rate and the better the deal.
Step 8: Negotiate the terms of the open-end lease. Yes, this can and should be negotiated, too. Negotiate the duration of the lease, interest rate, and final price.
Don’t forget, you will be “buying” the car in two increments – lease payments and the price of the used car at the end.
Step 9: Complete the paperwork. Read the lease agreement, and any other forms that you sign, carefully, before signing. Take your time. This is a big investment.
The dealer can wait until you completely understand every word of the lease agreement.
Step 10: Call your car insurance provider and have him or her fax proof of insurance. That’s it. Get your keys and drive carefully.
Leasing a car lets you drive a newer model without the same financial commitment as buying the same car. Leasing isn’t for everyone, so be sure it’s the best decision for you before you decide to get either a closed or open-end car lease.