(a) What is leasing?
Car leasing was designed to make cars more affordable to consumers. As prices on cars have risen, the ability for consumers to afford a loan has decreased. Car leasing allows companies to reduce the monthly payments on a car by only requiring the buyer to pay for the cost of the car during the time they are using it. It’s very similar to renting – you don’t own anything, you are just paying for the right to use something. Unlike buying, you never actually own the vehicle and you have to return it to the leasing company at the end of the lease period. However, if you choose to own the vehicle you should pay the specified residual value at the end of the contract. The idea of leasing first became popular in the 1990′s when cars became too expensive to buy for many people. Leasing allows a person to drive a brand new car and make lower monthly payments, thus making the “new car experience” more accessible to more people.
(b) From whom do I lease?
When you write a lease, you are typically entering into an agreement with a leasing company or a bank that has a leasing program.
(c) Which Terms Do I need to be Familiar With?
There are 4 terms that you must be familiar with in order to understand how a lease works: