4 useful leasing strategies you weren’t aware of
Many drivers are aware of how car leases work, but they may not realize just how intricate they can get. If you’re strategic about how you create your lease, you could end up saving a significant amount of money over the lifetime of the contract.
Here are four leasing strategies you may not have realized existed:
Extend your lease month-to-month
Just because your lease is about to expire, doesn’t necessarily mean you’ll need to determine whether to buy the car outright or find a new one right away. Many dealerships will allow you to extend the lease month-to-month if you’re unsure about your decision.
This allows you the flexibility to do further research on vehicles on the market and gives you more time to decide whether you’d like to purchase the vehicle outright.
Sign a single-payment lease
If you have an influx of cash and prefer to lease instead of finance, you should inquire about signing a single-payment lease.
Of course, this strategy will avoid the burden of having to pay a set amount each month and, in most cases, you’ll be able to get a lower interest rate using this strategy. This strategy can be useful for young drivers who likely don’t have much of a credit history.
In an ideal world, you could trade-in your current vehicle and a little cash to pay for the single-payment lease.
Gap insurance covers you for the difference between the market value of the vehicle and the amount remaining on your loan should you get into an accident. Since you generally pay less on a monthly basis in a lease, it’s a very good idea to get gap insurance, as you could otherwise end up owing thousands of dollars if your car is totaled or stolen earlier in the lease.
Unless you’ve made a significant down payment up front, getting gap insurance is a smart decision.
Make a bigger down payment
If you’ve only ever financed vehicles in the past, you may have noticed that your down payment didn’t make a huge difference on your monthly payment.
However, since you’re only paying the difference between the price of the vehicle and the value at the end of the contract in a lease, making a bigger down payment makes a lot more sense.
For example, say you’re considering buying a vehicle worth $25,000. If you make a $2,500 down payment, you’re only paying 10 percent of what you owe if you finance. However, if the residual value of the vehicle is $12,500, a down payment of $2,500 would equal 20 percent of what you owe and have a much greater effect on your monthly rate.
Trading-in your old vehicle also has a greater effect when you lease, since it’s essentially used as a down payment.