How to Lease a Car with the Option to Buy

Saturday, January 01, 2005
Related Tags: car | price | miles | leases | dealership
 

Instructions

Things You’ll Need:

  • Calculator
  • Step 1:
    Assess your needs: For people who drive many miles each year, or who want to keep a car for many years and want the option to sell later, leasing a car is not the way to go.
  • Step 2:
    Determine how many miles you drive annually. Different manufacturers have different yearly allowances on mileage, which helps determine which car you choose. Many leases now are for only 10,000 miles per year, whereas they used to be 15,000. The extra charge for mileage can be substantial, often 20 cents per mile over the allowance, and when you're driving to work every day, that adds up quick. Often you can purchase extra miles up front, but this cost changes the lease expense.
  • Step 3:
    Decide how long you'll want the car, keeping in mind that a longer lease makes for smaller payments.
  • Step 4:
    Calculate how large a deposit you can put down up front and how much you can afford to pay monthly. Bankrate.com and other sites offer auto lease payment calculators so you can find out how much you'll have to pay. Factors include manufacturers suggested retail price (MSRP), final negotiated price, down payment, usage tax, length of lease, and new car lending rate.
  • Step 5:
    Find a reutable dealership that leases the kind of car you want, in your price range. Take a test drive. Have the dealer explain warranties offered on the car, servicing and fees for overmileage, wear and tear, and early-out for quitting the lease. Always ask if taxes are included in the quoted fee. Make sure you understand everything you can be charged for before you sign the contract.
  • Step 6:
    Ask how a buyout at the end of the lease works. You don't have to decide just yet whether or not you will buy out.
  • Step 7:
    Negotiate the lowest possible lease price (capitalized cost) to keep payments low. Cars with higher residual values have lower lease costs.
  • Step 8:
    Consider getting gap coverage insurance, which is usually included but may not be on your policy. If you don't have it and the car gets stolen, it can cost more than the price of your lease.

What to Look For:

  • Reputable dealership
  • Warranty period
  • Extra charges
  • High residual value
  • Gap coverage insurance

Tips & Warnings

  • For peace of mind, keep your lease's length within the car's warranty period.
  • Ask if you can transfer the lease to someone else at some point. This is not legal in some states. See How to Transfer Your Leased Car.
  • If you plan to buy the car at the end of the lease, you often pay more than if you had bought the car in the first place.

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