Leasing a car is just like getting a car on a loan. The only difference between the two is that a car leasing company will offer lower interest rates.
Also referred to as “lease factor” or “money factor”, paying this amount of money does not make you the owner of the car. Instead, it only means that you are only borrowing the car when you lease it. Remember, car leasing is not a form of financing.
Car companies charge different interest rates because when you agree to a lease, the company goes to purchase the chosen car. As such they will be the registered keeper of the car until the end of the contract.
The most important concern when leasing a car is the number of miles that you will drive annually. According to research findings, a majority of Americans drive a total of 13,476 miles annually.
The best car leasing company rates are offered by companies that are associated with major car manufacturers like Honda, Toyota, and many others. As car makers come with “deep pockets”, then they can encourage better rates by reducing the monthly lease rates that they offer.
Car Leasing Rates Depend on Your Credit Score
Car leasing rates are not a “one size fits all” solution. A majority of the time, company lease rates are dependent on your credit score. Those with a prime score of 680 to 700 are bound to get the best lease rates.
However, those with lower scores tend to pay higher rates than their counterparts and may even be denied a car lease altogether. As such, it is always best to be aware of your score before seeking a car lease. Do not let your dealer surprise you with this information.
Evaluating Company Lease Rates
So, how do you know if you are getting the best company lease rate? Well, the easiest way to determine this is by comparing the rate on offer for people with good credit scores.
For instance, if the car company is offering a 0.025 lease money factor then multiply it by 2400 to determine your respective interest rate.
Even if you are shopping for a specific type of car or model, when you visit a number of dealers, you will find out that they offer the same lease rates for the exact same car.
Enjoying Better Company Lease Rates
While car lease rates are dependent on the company as well as your credit score, you can still make a large down payment to reduce the lease.
Your dealer will always advise you on how to go about this. Secondly, ask whether you can make a security deposit to gain better rates. The good news is that you will get this money back at the end of the lease.
To get the best car lease rates, it is important to do your due diligence and shop around. Visit different dealers and ask the right questions so that you will end up paying rates that you are most comfortable with.