June 11, 2012
It is well known fact that many people are opting for vehicle leasing solutions every year but anyway only a small percentage clearly understand how automobile leasing really works. The problem is that automobile leasing is commonly misunderstood to the point that it is often believed to be a scam or fake offering from bad car dealers.
It is true that vehicle leasing is actually a pretty simple concept and one that has been around in the commercial business known for a pretty long period of time. Anyway, consumer leasing of vehicle has only been popular not for a long period of time. As automobile prices grow up, the interest in automobile leasing solutions increases because it offers more affordable possibility to drive the automobile that a client would not otherwise be capable to afford.
Vehicle leasing is a solution to finance the utilizing of an automobile over a particular period of time. It’s quite similar to automobile renting, but not absolutely the same issue. With automobile leasing, you pay for several things. First of all you need to expected depreciation in cost of the automobile over the duration of the automobile lease, based on the general amount of miles you need to drive. Secondly you are to finance charges that include the interest on the money that the van leasing company needs to spend when buying a vehicle. In general leasing company is “lending” you the costs they have spent for the vehicle. Therefore the longer you drive your automobile, the longer their money will be tied up and will not be used for some other purposes, and the more you will need to pay in finance charges.
It is true that in the case you just pay interest on a leased automobile, van leasing contracts are actually like interest-only residence mortgages, which have been gaining their great popularity in the last several years. You will not be required to pay any on the principal to reduce the cost you owe. You will have just to pay the loan organization for the utilizing of their money. This is an idea vehicle leasing solution.
But, in real life, van leasing solutions are a little bit different than this “ideal” leasing facility. All automobiles depreciate in their value from the moment they are started to be driven off the dealer’s lot. The truth is that the more miles they are driven, the less money they are becoming worth. Therefore in the end of your leasing contract they will considerably depreciate in their value.
Still over the life of the automobile lease, you must, generally, not just pay interest as it is described above, but pay for the money that was lost in the process of vehicle of depreciation which happened in the duration of your automobile leasing contract.