Leasing Part Three: What You Should Consider Before the Lease Expires

Now that you've learned how to work your best deal on a lease and if leasing is a viable option for you, its time to determine some of the ramifications of leasing.

Leasing Beyond the Warranty

Once you've decided on leasing now its time to determine how long you're planning on keeping the vehicle. On the average most new car warranties run from 3 years or 36,000 miles to 4 years or 48,000 miles. Since most people prefer having a relatively maintenance-free vehicle, leasing is a great option during the lease period. Why would you lease a vehicle beyond the basic new car warranty? Most people prefer having a relatively maintenance-free vehicle during the lease period. When we asked Raj Sardaram, the industry leasing expert to the automakers, about his thoughts related to automakers offering a four-year or a five-year lease, here is what he had to say, “I think it's great! However, the value begins to depreciate significantly in four to five years.” Unlike Sardaram, we believe if you're leasing a vehicle for more than three years, you need to reassess why you're leasing - unless there is an obvious tax advantage.

The Lease Is Ending: Refinance or Turn-In

Depending on your lease contract you may have a few options or you may not have any based on the wording. As long as you maintained the lease vehicle with relatively few dents and dings and stayed within the mileage, you can typically walk away from the lease unless there is a disposal fee written into the contract. Or based on your credit, you could keep the vehicle and refinance the residual value.

To us, it only makes financial sense to refinance a lease vehicle: if the buy-out cost is less than a simarly equipped vehicle being sold on the used car market. Now, you're probably asking yourself how you would find that out. Check the classified section of your local newspaper or with several dealerships in your area to determine the current value of your vehicle. If your vehicle is being  sold for $2,000 to $3,000 less on the used car market than the residual or your buy-out, you should try to renegotiate your residual with the finance company or strongly consider purchasing another vehicle.

Bad Credit and Refinancing:

God forbid during the lease period that you were delinquent on those monthly lease notes as well as other financial obligations due to a financial hardship, you will have problems securing future financing for any vehicle. If you can't locate any source of funding to refinance the residual balance of the lease vehicle, where do you turn to? You could possibly seek a cosigner, find alternate transportation or if you're really desperate, enlist the services of a buy-here, pay-here dealer. Had you financed the vehicle from the onset you wouldn't have to worry about being securing financing again. In light of the current economic status of most families, this is something to consider

So before you place yourself in the driver's seat and sign the dotted line of the contract, evaluate the total cost of leasing or financing the vehicle and read the fine print. As Judge Mablean Ephriam of Divorce Court says, “Before you leap, look deep.” Hence, the same message also applies to leasing.

To read Leasing Part One, When Is It Right for You? .. click here.
To read Leasing Part Two, Roadblocks and Negotiations ..click here.