One can learn car leasing the hard way or avoid the hardships by diligently doing their homework on car leasing. It is simple in concept, but complex in practice. Conceptually, you can lease a car, use it for the period of the lease and return it or buy it for the residual price. However, it is easier said than done. The lease agreement is to be negotiated hard at every step and written down in the agreement. The deal you land up with is credential to the negotiating process:

1. A car is leased for personal or business use

One advantage of car leasing is you can have any car you desire to drive or own. You can enjoy a new car every 3 to 4 years at low investment. In certain conditions, car leasing is a win-win situation for both.

2. Lower monthly payments

The lease amount is the difference between the original price and the residual price at the end of the lease period. The monthly lease amount is usually less than the loan repayment amount. The sales tax is only on the lease installment and not on the whole price as is the case in the loan. This reduces the amount of investment. The car can be purchased at the residual price at the end of the lease period if so desired. The person leasing earns an income by repeatedly leasing the car he owns. Manufacturers incentivize the sales, generally on cars that are due for replacement, redesign or slow-selling vehicles. Manufacturer-subsidized deals are even more cheaper as the lease starting payment, monthly installment or both may be reduced.

3. Test your negotiating skills

The condition of the lease is set forth in a lease agreement. Each condition of the agreement is negotiated, agreed and written down. There is an option to terminate the lease before the agreed date. This invariably entails a hefty fee as pre-closure would cause loss to the leasing party. The period of lease is probably the only condition set without much trouble. The mileage one can drive in a year is also decided. Generally, 10,000 miles per annum is common. It is not uncommon to settle 12,000 to 15,000 miles per annum with a higher lease amount. Another condition is to wear the vehicle to suffer every year. Exceeding the annual mileage and wear will invite a usually heavy fee.

4. Low maintenance

If the lessee is to carry maintenance it is important to insist on a manufacturer’s warranty valid for both the allowed mileage and term of the lease. One should also keep all the bills for the maintenance as proof of having carried out all the recommended work. Lessors insist on very high insurance, in case the car is totally lost the gap between what the lessee owes the lessor and the residual price could be huge and a Gap Insurance would be handy. The economics of car lease should be carefully worked out before one decides to lease.