Leasing offers an attractive and affordable means of driving a new car every few years. However, leasing involves a number of contractual obligations, so it may not be for everyone. Leasing rather than financing or paying cash has become a popular method of acquiring a new car or truck. It’s easy to see why.
“TOP 10” REASONS… Why Everyone Should Lease a Honda!!!
10. Drive More Cars, More Often For Less Money.
9. You Have A Minimum Guaranteed Future Value, Which Means No Resale Risk.
8. GAP Insurance Included With All American Honda Finance Leases.
7. Up to $1500.00 Excessive Wear Waiver Included With All American Honda Finance Leases.
6. High Mileage Drivers Save Money.
5. Large Sales Tax Saving In California.
4. Reduced Maintenance Cost.
3. More Options And Less Obligations.
2. Less Down Payment.
1. Lower Monthly Payment.
Some advertisements tempt with promises of “zero down” and low monthly payments on two- or three-year leases. Often, you can lease a more luxurious car for the same monthly payment you would have if you were financing a lower-priced car. This helps explain why leasing grew in popularity during the 1990s. Even now, leasing is projected to continue to account for about one-third of total vehicle sales in the years to come. What is leasing really all about?
Leasing is paying for the use of a car, rather than paying for the car itself. The bottom line is that your lease payments cover the cost of the vehicle’s depreciation over the length of the term of the lease instead of the vehicle’s actual purchase price. You (the “lessee”) are expected to maintain the car during the lease, but when the lease is over, you can either return the car or exercise the option to purchase it. Conceptually, that’s how it works. But in practice, there are a number of factors to consider before you decide whether or not leasing is appropriate for you.
Leasing isn’t for everyone, but for those willing to accept certain limits, leasing offers an attractive and affordable means of driving a new car every few years. If you’re interested in leasing, you should make sure you’re comfortable with some of the basic aspects. Ask yourself the following questions:
- Do you become easily bored with a car after only a couple of years of use? Do you feel the need to drive a new car every two or three years?
- Is driving a new car more important to you than actually owning one? Are you comfortable with continuous car payments, year in and year out?
- Do you maintain your car regularly, keeping it in good condition at all times? Are you comfortable with keeping your car the way it left the dealership, feeling no need to modify it to suit your personal tastes?
- Do you drive a consistent number of miles each year? Are you comfortable selecting and following an annual mileage limit?
- Do you have a legitimate business use for your car? Do you plan on claiming your lease payments as a business expense?
If you answered “yes” to two or more of these questions, then leasing may be right for you.
It may sound like a dream, but leasing makes it possible. Since the amount a vehicle depreciates over a two- or three-year lease is less than the cost to finance that vehicle over the same period, monthly lease payments can be very affordable, and considerably so in many cases. This allows consumers to use the money they save for other things or to lease a more expensive vehicle than they could normally afford to finance for the same monthly payment. To arrive at this monthly lease payment, a leasing institution (the “lessor”) combines the vehicle’s estimated depreciation over the lease period with the interest being paid by the lessor to finance the car, plus assorted dealer fees. Most leases can be initiated without a down payment (known as a “capitalized cost reduction,” in leasing terms). Again, because lease payments are based on a smaller amount of money than if the vehicle is financed, less money is needed up front to initiate a lease. A down payment may be utilized in some instances to lower monthly payments to an especially attractive figure; however, this counters one of the main benefits of leasing, which is getting a new car with little money down.
The short lease periods available are very attractive to consumers who like the idea of driving a new car every two or three years. It also helps keep maintenance costs down by avoiding the high cost of maintenance and repairs that an older vehicle with high mileage often requires. Since most manufacturer warranties cover vehicles for at least the first two or three years with the exception of required routine servicing, most serious maintenance costs get absorbed by the manufacturer anyway. Beware: those who may be thinking of terminating a lease early should think twice, since there are severe penalties for early lease termination.
At the end of the lease, you have the option of returning the vehicle to the lessor, extending the lease, or purchasing the vehicle. If you choose to return it, some basic requirements must be met: 1) The vehicle must be in good shape (as determined by the lessor) and free of excessive wear and tear. Any evidence of rough or abusive treatment will result in repair costs being charged back to you. 2) The vehicle must be returned as delivered. Any performance modifications or aftermarket parts and accessories that were installed by the lessee during the lease must be removed and the vehicle returned to the same condition that it was in when it was first leased. 3) Total mileage must not exceed the annual mileage cap set by the lease. If the vehicle has more miles than the leasing agreement stipulates (the normal mileage cap is usually 15,000 miles per year), you may be charged anywhere from 10 to 25 cents per mile for miles over the mileage cap. It pays to stay within the mileage limits.
If your lease includes a purchase option, you may choose to purchase the vehicle at the end of the lease. In evaluating this option, another set of factors must be considered, the first of which is the vehicle’s lease-end value, or residual value. With the more common closed-end lease, the residual value is actually calculated at the lease’s inception. This ensures that you pay a predetermined amount regardless of the vehicle’s actual market value. If the market value is higher than the residual value, then you’re getting a good deal. If the residual value is less than the market value, the lessor, not you, absorbs the loss. Regardless of market value, you pay the same.
Leasing may sound straightforward, but it is important to pay attention to the details. Here’s some advice that will help make leasing your next vehicle a little less mysterious and intimidating:
- Shop around. Different dealers and manufacturers will offer different lease rates and are willing to negotiate for your business.
- Read the fine print. Find out ahead of time about all hidden charges, i.e. destination, security deposit, registration fees, lease-end service charges, etc. Make sure you know the full story behind the “special” advertised price of $199 a month.
- Stipulate a closed-end lease. If the actual value of the car at the end of the lease is less than its residual value, the lessor pays the difference. Conversely, if the actual value is more, you have the option of buying the car for the fixed residual value, then selling it at a profit.
- Check on insurance rates for the level of coverage required by the lessor. The lease agreement may require higher liability limits and lower deductibles than you currently carry, and both will increase your insurance premium.
- Choose vehicles to lease that tend to hold their value well. The sexiest cars are not always the best buys in the world of leasing.
- Negotiate the price of the vehicle before negotiating a lease arrangement. This prevents the selling price from influencing lease negotiation. Go into the lease negotiation with the selling price already set.
- To avoid lease-end excess mileage charges, increase the mileage limit before you enter into the lease. Buying extra miles over the term of the lease is less costly than paying for the extra miles at the end.
- To avoid lease-end wear and tear charges, maintain the vehicle well during the lease period. Lessors will not hesitate to charge you for perceived ill treatment.
- Remember that if you decide to purchase the vehicle at the end of the lease, in the long run leasing may end up being more expensive than financing in the long run.
If you’re thinking about leasing a Honda, Unicars Honda offers a loyalty lease advantage. Our team is more than happy to offer additional information and guidance, so visit our dealership today to learn more about the leasing process.
Buying vs. Leasing
You own the vehicle and get to keep it at the end of the financing term unless you choose to sell it. The bank or lender holds the title until the Honda vehicle is paid off.
You do not own the vehicle. Honda Financial Services (the lessor) owns the vehicle. You get to return it at the end of the lease unless you choose to buy it then.
Monthly payments are usually higher because you are paying for the entire purchase price of the vehicle, plus interest, other finance charges, and taxes.
Monthly lease payments are usually much lower because you only pay for the portion of the vehicle that is being used during the term.
You may drive however many miles you want. However, the higher mileage can create a lower trade-in or resale value.
Lease payments are based on a predetermined amount of miles. Often between a 12,000 or 15,000 mile-per-year lease. You may also purchase additional miles and pay a higher lease payment. If you exceed the mileage limit you will be billed when you turn the vehicle in to Honda.
This is your responsibility. There are no limits or charges for excessive wear on the vehicle.
Maintenance & Repair
This is your responsibility. But your Honda will most likely be covered under the original factory warranty for the entire duration of the lease (depending on the predetermined amount of miles yearly) and may not reach the mileage requiring major services. Leases also limit the amount of wear to the vehicle.
When you finish paying off your vehicle (usually after 4-6 years), the Honda is yours to trade-in or keep.
End of Term
At the end of the lease, you have several choices. You can purchase your Honda at the predetermined price (the residual value), return it to Honda and take care of any end-of-term obligations, extend the current lease, or use the leased Honda as a trade-in for another vehicle.