The vehicle leasing industry has recently experienced a huge boom in the UK and as a result of that, there are car leasing special offers everywhere. However, lucrative marketing doesn`t always mean that the lease you are about to take is the best option available to you. Therefore, be sure to ask the following three questions first, before taking the lease on your new car.
What is the Special Offer?
As mentioned, there are car leasing special offers mentioned by dealers all the time in their ads, so your first question should be regarding what that special offer is exactly and how it stands to benefit you. For example, the car leasing offers promoted by Vantage Leasing aren`t limited to slow-selling models only but popular, in-demand vehicles in every category are included in the special offers section as well. Go through the fine print and see if everything is in order. Two common tricks to look out for are excluded taxes and fees in the offer ad and steep drive-off charges.
Is the Residual Value of the Car Worth the Lease?
Residual value refers to the estimated financial value of the car at the end of the lease period. It can either be defined as a percentage of the original value of the car at the time of the lease, or in clear monetary denomination in the agreement. What makes this important is the fact that your base monthly payments on the lease will only be calculated after subtracting the residual value from the original value of the car, and then dividing the remaining amount by the number of months for which the lease is being taken. There will be additional amounts added to the installments in accordance with taxes and the agreed upon rate of interest. This means that if the dealer is offering a good residual value on the car, it is a good lease for the customer. Anything below 45% might not be worth it, but 55% is about the highest residual value that you can expect from a dealer on any car.
What is the Exact Rate of Interest?
A common practice by car salesmen is to make the interest rate seem insignificant by converting it into money factor, which is mentioned in decimals. For example, a 3% rate of interest might be mentioned as 0.00125 by the dealer to make it seem more trivial than it is. If you want to do the math by yourself and calculate the interest in percentage, simply multiply the mentioned money factor by 2,400 on your calculator to get it.
There is usually a scope for negotiation when it comes to the rate of interest on the lease, so don`t be shy to barter a bit, but keep in mind that a lot depends on the credit score because a low credit score will attract high interest rates, while someone with a score of 750 or higher will enjoy the lowest rates.
Aside from these three, there are of course other questions that need to be asked before signing on the deal as well. What is the drive-off fee? Is the contract transferable? What is the limit on the mileage? Although leasing a car isn`t as expensive as buying one, it is still a big investment, so asking all the questions you need to or want to makes perfect sense, therefore, don`t hesitate to add a few of your own to this list as well.