How Does Leasing a Car Work?May 23rd, 2019
Leasing a car allows you to drive a new car for a period of time without buying the vehicle itself. This means you have the ability to drive the car for a duration of your choosing, after which you can return the vehicle and lease a brand new car. You aren't tied down to one vehicle but rather have the freedom to lease and return cars as you please.
Signing the Lease Agreement
Start to finish, completing the lease agreement for a new vehicle will generally take less than an hour, during which time the Finance Manager will determine your payment. This is based on the value of the vehicle you’re looking to lease, the current rate of interest, the length of the term, and your credit score.
The term and the payment schedule are both determined by the customer and what works best for them. At most dealerships, the minimum term is 12 months and the maximum is 96 months. Once the term is set, dealerships generally allow you to choose from four types of payment schedules: weekly, biweekly, monthly, or bimonthly.
Usually, dealerships offer leases and financing through a specific financial institution. The Finance Manager that operates out of the dealership usually works for that financial institution and is the person that will create and walk you through your lease agreement.
Returning the Vehicle
Once you have made all of your payments, you either have the option of purchasing the vehicle by paying the vehicle’s depreciated resale value or you can return the car and look for a new vehicle. If you do choose to return your leased vehicle, ensure you bring all items that came with the car to the dealership when you return it. This includes:
- All keys and remotes
- Your owner’s manual and any maintenance records you have
- If applicable, the vehicle’s inspection report
- All receipts from completed repairs, if you’ve had any done
- If you have any, lock-nuts for the wheels
- Any tools, wheels, seats, etc. that came with the vehicle
In order to return a leased vehicle, the car must be in good condition. If there is excessive wear and tear, you have the option to either get the repair done yourself or have the dealership repair the vehicle and send you the bill for the parts and labour required to fix the damage.
The dealership’s staff will also check your mileage when you return a leased vehicle. In your lease there is a pre-defined number of kilometers you’re allowed to put on the vehicle each year, at the end of the term, they check to ensure your odometer is lower than the mileage you were allowed for the term. If you do exceed your mileage limit, there’s a fee you must pay, which is usually 8 – 12 cents per kilometer.
If I drive more than 24 000 km, can I still lease a vehicle?
When discussing the option of leasing a vehicle with customers, a common response we get is that since they drive over 24 000 km per year, they can't lease a vehicle. What they don't know is that it's actually less expensive to lease a vehicle than it is to finance one since you never actually own the vehicle, the dealership you leased the car from does. For example, let's take a look at the 2019 Hyundai Elantra, which has an MSRP of $16 999. To finance this vehicle for 48 months at the current rate (0%), the payment would be $180 biweekly. On the other hand, to lease the exact same car for 48 months at the current rate (0.99%), the biweekly payment would be $119. This means leasing a vehicle not only allows you to lease and return cars as you please but also can be less expensive. To calculate payments on a specific model, you can take a look at our payment calculator here.
Choosing between leasing and financing a vehicle is an important decision. Usually, we tell our customers that if they plan on keeping their vehicle for seven or more years than financing is most likely the better option for them. On the other hand, leasing can be a great option if the customer plans on driving the car for less than seven years, or if the customer is interested in having the newest gadgets or features in their vehicle.
Leasing a vehicle can be a great option if you're in the market for a new vehicle but don't want the hassles associated with owning a car. At Ajax Hyundai, and at all Drive Autogroup dealerships, we have a great selection of new vehicles that can be leased. Click the button below or give us a call at 905-427-0111 for more information on our new vehicles or our leasing options.