What Does That Mean Again? – Leasing Edition
Picture this: you slowly pull into the Mungenast St. Louis Honda parking lot, admiring all the shiny, beautiful Honda’s surrounding your vision. You’ve already read our past blog post, Pros & Cons of Buying vs. Leasing a Vehicle, and decided that leasing a vehicle is the right choice for you. Once you park and enter the showroom, you’re captivated by the new car smell and so many alluring Honda’s, you can’t decide which one you want to hop in first. But then, you realize one thing: you haven’t been to a car dealership in years, and you don’t know a thing when it comes to leasing a vehicle. However, we’re here to tell you that that’s okay! The team at Mungenast St. Louis Honda is here to help you with every step along the way. Nevertheless, it’s great to have a little knowledge about modern car-leasing terms or what the process could look like, so you don’t feel like you’re walking into the showroom blind!
- Length of Lease: lease terms usually range between two to four years, and the Mungenast St. Louis Honda team is here to help choose the right lease term for you. It’s important to choose a length of the term and mileage cap that fits your lifestyle, so you don’t end up paying more for late payment fees, mileage overage fees, etc.
- Gross Capitalized Cost: the total cost of the vehicle plus any taxes, fees, add-ons or negative equity from a trade-in value.
- Residual Value: the estimated value of the vehicle at the end of the lease. This is predetermined by the manufacturer before the lease even starts. If the residual value is on the higher end, you will end up paying less to lease the car since it will be worth more at the end of the lease.
- Capitalized Cost Reduction: anything that lessens the lease loan amount. This could include any manufacturer or dealership rebates, a trade-in allowance, a down payment, etc.
- Adjusted or Net Capitalized Cost: the total amount being borrowed for the lease.
Gross Capitalized Cost – (Residual Value + Capital Cost Reduction) = Adjusted or Net Capitalized Cost.
- Due at Signing vs. Down Payment: due at signing (sometimes referred to as Lease Inception Amount) is the amount of cash due at the time a car lease is signed, while down payment refers to only part of the ‘due at signing’ cost. A ‘due at signing’ cost includes all the charges that require an up-front payment, such as taxes, official fees, deposits, first month’s payment, and down payment. A down payment is the money financed at the beginning of the lease, that could be used to lower monthly payments. Unless you are approved for a zero-down lease deal, down payments are often a required part of the ‘due at signing’ cost. If you plan on buying the vehicle at the end of the lease, a higher down payment is recommended than if you do not plan on buying the vehicle at the end of the lease.
- Closed-End Lease: most leases fall under closed-end leases. The lessee has the option at the end of their lease (typically 36 months) to either buy the vehicle (for the Residual Value, the price that was set at the beginning of the lease) or return the vehicle without any further liability or costs.
- Wear & Tear: it’s important to keep up with regular maintenance on your vehicle including oil changes, tire rotations, and any repairs, so you won’t end up paying for it in the end. Besides the fact that it will keep your vehicle running smoothly, it could also prevent you from being charged by the manufacturer for the cost of any repairs or increased depreciation if you don’t end up buying the vehicle at the end of the lease.
- Mileage Overage Fee: milage overage fees can range from anywhere between $0.15 to $0.30 per mile over. To avoid overage fees, it’s recommended to choose a higher mileage option at the beginning of the lease, limiting how often you drive, or by purchasing the vehicle at the end of the lease.
- Acquisition Fee: also called a financing fee, this fee covers the expenses of obtaining a credit report, verifying insurance coverage, etc. and usually ranges from $500 to $1,000 depending on the vehicle.
- Ending Your Lease Early: While ending a lease early may not be suggested because of early termination fees, it’s still possible to find a way to end your lease early, without it costing you a fortune. The team at Mungenast St. Louis Honda can work with you to figure it out, whether it be transferring your lease through websites like SwapALease and LeaseTrader, or finding another way.
As always, you can contact the Mungenast St. Louis Honda team to answer any questions and help you with every step along the way. We always have your best interest in mind and will work with you to find the lease that makes the most sense for you. A lease shouldn’t be considered a “prison sentence” or something you are stuck with, so whenever we see a chance to get a customer out of a lease early, or even a chance to lower monthly payments, we do so. Our goal is to match you with the right vehicle, lease length, and payments that will keep you satisfied for years to come. If that’s not the case, our team will do everything in our power to make it so that is the case. Head on over to our Finance page to learn more or apply to finance a lease today!