Luxury vehicle leasing isn’t difficult, but there are some things to consider.

Leasing can be a great option if you are looking to drive a higher-end car.

We explore the basics of luxury vehicle leasing and what you need to know.

What Is Leasing?

Leasing is borrowing a vehicle for a length of time, usually three years or less, in exchange for a monthly fee. Some agreements include the option to purchase the car at the end of that period. 

Depending on your circumstances, a lease may be the best option, whether because you are working away from home and flying frequently or because you want the joy of driving a new car for less. This holds true, especially for luxury vehicles. After running the numbers, some might be surprised that leasing a luxury car is the same or less per month as financing a traditional sedan.

Is Leasing The Best Option For Me?

Below are questions that can help you determine whether you should consider financing or leasing.

Are you planning to keep the vehicle for more than three years? If so, financing is a better option.

Do you keep your vehicles in excellent condition inside and out? If so, leasing might be a good option for you.

Is having a bumper-to-bumper warranty important to you? With leasing, you will always be under full factory warranty.

Is your annual mileage less than 15,000? If you think you will exceed this, financing is likely the better option.

What Are The Advantages?

The monthly payments are usually lower than when financing, which can make luxury vehicles more attainable for consumers. Lease payments are based on the vehicle’s depreciation during the period for which you borrow it rather than on its value.

Another advantage is that leased luxury vehicles are always under factory warranty for the duration of the lease. If anything serious happens to the drivetrain during the lease, it’s covered by the manufacturer’s warranty. Unlike a pre-owned luxury vehicle that is out of factory warranty, you won’t assume any cost if there is a major mechanical issue.

Otherwise, your leased luxury vehicle will only need the standard maintenance recommended by the owner’s manual (and even that might be complimentary for a certain timeframe and mileage, depending on the manufacturer).

Leasing can be a more affordable way to obtain a luxury vehicle.

What Are The Disadvantages?

One disadvantage of luxury vehicle leasing is that you must return it after three years of monthly payments and the effort of keeping it in good condition. You never truly own it, which might be a letdown if you have enjoyed driving the vehicle. There are also mileage restrictions and arguably little room for aftermarket customizations.

If you add accessories to a current model, they are not guaranteed to fit a future vehicle you lease (i.e., there might be a styling change or a redesign by the time your lease is up). Keeping the accessories on the vehicle when you turn it in will not yield any extra money either, so it’s best to remove them.

Another disadvantage could be the amount of money spent, especially for those who lease several luxury vehicles in a row rather than purchasing one and holding onto it. You could end up spending more money over time than someone who finances a vehicle to acquire it.

How Much Does Leasing a Luxury Car Cost?

The cost of leasing a luxury vehicle depends. The bigger the down payment, the lower the monthly payments. If you accept a zero-down offer, you can expect higher monthly payments. You must also remember that the dealership will check your credit score and payment history before approving your lease.

Is a Leased Vehicle Deposit Refundable?

The terms and conditions of the lease determine whether the deposit you pay when leasing a luxury vehicle is refundable. Some agreements state that deposits are not refundable. Make sure you read the fine print before signing any papers.

Make sure to read the fine print before signing any papers and taking the keys.

What Documents Are Required?

If you decide to lease a luxury vehicle, you generally will need to take various documents and certified copies thereof to the dealership. In most cases, the following documents are required:

Insurance card.

Proof of residence.

Valid driver’s license.

Your two most recent pay stubs.

Trade documents such as registration forms.

List of references (this cannot include members of your household).

What Terms Should I Know About?

There are several terms in most luxury car lease agreements that you need to understand. They include:

Manufacturer’s Suggested Retail Price: The full cost of the new car is the manufacturer’s suggested retail price, commonly referred to as the MSRP. Knowing the difference between the MSRP and the invoice price may help you save money on a new vehicle.

Capitalized Cost: This is also known as the vehicle’s value at the start of the lease, plus any additional fees like tax, title, and license.

Depreciation: The vehicle’s decrease in value during the period for which you lease it. This is a crucial factor in calculating monthly payments.

Residual Value: The luxury vehicle’s wholesale value once the lease is concluded.

Lease Rate: The interest rate is also known as the lease rate or the money factor.

Mileage Allowance: The maximum number of miles for which you can drive the car in a year. In most leases, this ranges between 10,000 and 15,000 miles. You will be subject to a fee if you exceed the limit.

Penalties and Charges: In most leases, penalties and charges are imposed for late payments, terminating the contract early, and unreasonable wear-and-tear.

How Do I Return a Vehicle?

You should do your best to return your leased luxury vehicle in as good a condition as possible. Usually, you would return it to the leasing agency or dealership from which you leased it. However, most leases let you return the car to a different branch of the agency or another authorized dealership for the vehicle brand.

Luxury Vehicle Leasing Summary

Leasing may allow you to drive a luxury vehicle at a much lower price than if you were to buy it. It also reduces your potential maintenance costs and will enable you to trade for a brand-new car every few years.

Original article: Luxury Vehicle Leasing: How It Works & What You Need To Know