Pros and Cons of Leasing a Car - Disadvantages of Fleet Cars
This information aims at highlighting the Pros and Cons of Leasing a Car for you if you have planned to rent a vehicle recently. It’s a thoughtful notion to lease a car while planning your trip and save some money. There are also plenty of other reasons as to why you might need to lease a car from a fleet vehicle company, besides just tourism.
In America, 2 out of every vehicle are rented. The global car leasing market the key revenue generator in countries like USA, UK, and France. According to the forecast report 2020, the global car leasing market is expected to grow at CAGR 15% at a growth rate of 12.4% by the end of 2024. Gather some more insights into leasing a car pros and cons to help yourself as a concerned consumer.
Pros of Leasing a Car – The Advantages of Fleet Cars
Leasing a car is a suitable option for tours that last a few hours or weeks. You can easily rent a car from a fleet company with added benefits if you don't own a vehicle, are traveling out of town, or your car is under repair at the workshop. Some of the bets benefits of leasing a car are as follows.
1. Leasing a Car Benefits to Elder Citizens
Renting a car from fleet market is most beneficial for people in their 70s as they don’t have to worry about its safety and maintenance. Most fleet companies keep a range of newest cars with an updated safety system and comfortable seats. If you feel uncomfortable due to bad health, you can return the leased car by terminating the lease contract.
2. You can lease a car at a lower cost
You can save a lot by leasing a car for a temporary period or for as long as you need. Mostly, you will have no down payments to make for a leased vehicle. If there are some required, the tax would be easy to incur, adding no stress at all.
You may be liable to pay in cases of exceeding the allowable limit of mileage, terminating the lease before the stipulated time, or returning the car unrepaired after damage.
3. Less to Spend on Repairs
Lease companies buy vehicles covered by a manufacturer’s warranty. That makes it easier for you to save money for every major repair. You are responsible for little expenses incurred in keeping up the maintenance and state insurance according to your region.
4. Leased Cars have updated technology
Fleet companies make sure they have what customers need in order to maintain all the safety measures for a long tour. Upgraded equipment and up to date technology are the noticeable benefits of leasing a car. You don’t have to hustle with seating or tracking system while driving to remote places. Portable WiFi and Child Safety Seats are most common among the attractive offers that many fleet companies offer these days.
5. You only pay for Depreciated Value of Car
A lease period is usually one to 4 years, the amount paid during this fixed term is tied to the depreciation value depending on the manufacturing and the model. With timespan, you only have to pay for the depreciation of the car that occurs during the lease term.
6. You can own a leased car
You can purchase for the amount set by the lease at its end. Even if you need to finance the amount paid, it’s still lower due to the depreciated value of a leased car. Leasing a car and then purchasing it sounds like an idea as compared to buying a new one.
And, if purchasing it new, and you don’t like the car, it will have depreciated a lot, and you’ll still owe the full amount of the borrowed amount minus your payments. You can have more benefits of leasing a car by incorporating mileage into monthly lease payments to avoid paying a large sum at the end of the lease for high mileage.
Major cons of leasing a car – Leasing a Car Disadvantages
A leased car may not sound like a suitable option even after noticing the benefits, leasing a car disadvantage in the shape of the following concerns or pitfalls.
1. Fixed Mileage
Every leased car have a mileage limit usually ranging between 10000 and 15000 miles a year. If you hit over the range, that will result in a heavy rate of penalty.
2. Expensive for a long haul
For the first two to three years of a lease, you pay for using the car, after that it depreciates. By the end of the contract, you either have to get another car purchase one. In both cases, you’ll have to pay the monthly payments for an extended period. However, if you’ve bought a new car, you can stave off long-term payments once you’ve paid off the loans.
3. Lease Cancelation is Complicated
It’s difficult to rollback a signing process after lease if finalized. If you try to terminate it, you are accountable to pay for the penalties that are out of your knowledge.
It's difficult to rollback a signing process after a lease is finalized. If you try to terminate it, you are accountable for paying for the penalties that are out of your knowledge. You can sell a purchased car anytime on your own terms. On the other hand, it's not possible to do so with a lease contract.
4. Bad Credit biggest of cons of leasing a car
You can’t rent buy a car on lease with a bad credit score. Costs to incur during a lease are higher than a loan as you never have to pay off the principal amount. Also, every leasing company these days ensures for your healthy credit score and stable financial status.
5. You never know about Fees that companies charge
One way or the other, leasing companies have their own methods to keep up their profits. You have to pay the acquisition fee and disposition fee both at the beginning and the end of a lease. It’s also mandatory to pay the wear and tear fees while turning in the leased car, be careful of a small ding or scratch while driving.
What is a Car Lease?
A lease is a contract in which a lessor conveys the use of cars to customers for a specified period in exchange for payment of money.
Leasing a car is different than financing, which refers to purchasing a vehicle to own it. However, with renting a car you don’t own it, you can use it for a period until the contract ends. Unless your lease contract has the option to purchase the vehicle at the end of the contract period, you must return it to the lessor.
How does leasing a car work?
Expenses and taxes are always the primary concern for customers while leasing a car; it can get a little complicated. On the other hand, it's essential to possess a good basic understanding of the terms and conditions laid forth by the dealers. Some common terms are:
1. Manufacturer's Suggested Retail Price (MSRP)
This cost, also known as the sticker price, refers to the full price of the new vehicle. This amount may rise in the case when a specific model is in high demand. Otherwise, you can talk MSRP out with the dealer.
2. Capitalized Cost (Cap Cost)
Capitalized Cost is the final base price that you obtain post the negotiation from the MSRP. Since this amount is the final Cost to wrap up leasing the deal, it also refers to "lease price."
It's an amiable move not to disclose your intention of leasing a car to the dealer until you reach the negotiated Cap Cost. If the dealer tries to tell that sticker price is unchangeable, don't fall victim to such words. The Cap Cost is always negotiable.
3. Residual Value
Residual Value is the wholesale Value of the vehicle estimated by the lessors at the time of writing the lease based on a vehicle's historical resale value data.
Depreciation is the difference between the value of the new car and its residual value. In other words, it's the value of a car's current condition, which has lowered over time with use. This value is one of the significant parts of monthly lease payments.
5. Lease Rate
Interest Rate is also known as Money Rate, which is used to determine the second significant portion of your ease payment. The lessor determines the interest rate after they purchase a car from the agency to rent it to you. This interest rate is also dependent on how good your credit score is.
6. Mileage Allowance
Mileage allowance is the maximum number of miles that you can drive the leased car per year. The standard mileage allowance for a lessee ranges typically from 10,000 to 15,000 miles a year. If you exceed the mileage allowance, you'll be accountable to pay the additional fee per mile.
7. Lease Term
This term refers to the length or period of the lease. A standard lease term can be 2, 3, or 4-years long, and can also be as short as six months or as long as 5 years depending on your needs. The lease term is generally stated in terms of months.
8. Purchase Option Agreement (POA)
POA gives you an option to purchase the vehicle at the end of the lease period if you want. You can take this at the beginning of the lease by adding a small amount to the monthly payment. The selling price is also mentioned in the lease upfront, which turns out the same as the leased car's residual value.
9. Upfront Fees
Upfront fees include down payment, taxes, license fees, acquisition fees, and security deposit. Upfront charges may or may not be limited to these fees.
10. Penalties or Additional Charges
As specified by penalty, these charges will include default charges such as:
- Late payments.
- Early termination fees for terminating the lease before the stipulated period.
- Disposal fees in case you decide not to purchase the vehicle at the end of the lease period.
- Wear-and-tear charges covering for damages to a leased car during the leased period.
Can you lease a car with bad credit?
Leasing a car is where you'll be required to maintain your Good Credit. You can also lease a vehicle with bad credit, but that will be more expensive and include a lot of legwork.
Your excellent credit score is the determinant of how you are to pay your bills timely as predicted by one or more credit reporting agencies.
Your credit score is based on the information in your previous credit reports. The credit score ranges between 300 and 850, where the lowest figure indicates a bad credit and 680 or more signifies that your credit score is healthy, and you are eligible to lease a car.
How to Improve your Bad Credit to Lease a car?
It does take some time to correct errors and improve your bad credit score to lease a car. Closing down your credit card accounts right away wouldn't be a good idea at this point of time. Paying the due amount and not using your credit card for purchases is better for an approach to keep the accounts running.
Different credit card companies provide your credit score (some websites also do it by taking your personal information). You can also ask your bank to present to you the credit scores letting you deduct a small fee.
Lessor may also look into your employment status and records to see whether your income method is stable or not, so keep it clear in advance.
What to Consider while Leasing a Car?
1. Choose the type of car you want for personal use or business use. Whether a convertible, sedan or an SUV.
2. Choose your models considering the price range, gas mileage, dependability, safety features low insurance premiums, and technological upgrades.
3. Take each car for a test drive and evaluate different functions and characteristics of each vehicle, considering comfort, looks, braking, safety system, and endurance.
4. Make a comparative statement of every car that is worth cracking a deal. Investigate which car fits your budget easily.
5. Before locking any deal with the dealer, make sure to talk about the prices and taxes first, so you don’t have to doubt you are charged more than the usual fee.
6. Negotiation is crucial for you to be aware that many dealers won’t disclose the rules and methods to make profits out of your deal. Your monthly installments are defined by what you and the dealer negotiate on.
7. Give yourself more to time to dig every possible information that salespersons try to hide from you. More often, dealers will try to push you close the deal keeping you blindsided.
Is leasing a car a good idea?
Leasing a car is doubtlessly less complicated than buying one. However, in order to get the best deal on the car you want, you must need to be sharp and investigative. Leasing a car is beneficial when you have a limited money at hand, want the luxuries of an expensive car without purchasing, and have a fixed mileage to cover.
What are the best cars to lease?
Lease deals change every month and will never be the same. Best cars to lease are the ones with low monthly payments. Depending on the model and build year, depreciation of a vehicle value keeps changing. You are advised to keep a close eye on the automaker’s website to get the best car leasing deals. Here are the Top 20 cars to lease.
- Acura TLX: $299/mo (36 months)
- Cadillac XT6: $499 per mo (36 months)
- Chevrolet Equinox: $199/mo (39 months)
- Chevrolet Silverado: $363/mo (36 months)
- Chrysler Pacifica: $354/mo (36 months)
- Ford Edge: $269/mo (36 months)
- Honda Civic: $189/mo (36 months)
- Honda CR-V: $320/mo (36 months)
- Jeep Gladiator: $209/mo (36 months)
- Kia Niro: $169/month (34 months)
- Kia Sportage: $179/mo (24 months)
- Mazda CX-30: $205/month (36 months)
- Mazda CX-9: $324/mo (36 months)
- Mercedes-Benz GLC-Class: $479/mo (36 months)
- Mini Cooper: $229/mo (36 months)
- Nissan Murano: $249/mo (36 months)
- Subaru Outback: $249/mo (36 Months)
- Toyota Corolla: $149 /mo (24 months)
- Toyota Tacoma: $259/mo (36 months)
- Volkswagen Jetta: $149/mo (24 months)
Attention: This data is based on March-April 2020 reports. The monthly payment is subject to change every month, depending on state taxes, depreciation, lease rate, and leased car model. Please visit the automaker’s website for more.
Given a leased car protects you from significant investments such as maintenance and repairs, you can take these advantages of leasing a car in a way suiting your travel needs. If you have a job that requires roaming/moving from state to state, you should go for a leased vehicle to cut your expenses.