Before trying car leasing in the U.S., it is essential to do the necessary homework on the subject rather than burn one’s fingers by jumping into it headlong. Car leasing is a simple affair in concept and complex in practice. In concept, one takes a car for either personal or business use for a fixed time of day 2, 3, or 4 years for an agreed upon amount of money normally paid in monthly installments.

Here are some key factors to consider prior to signing a car lease:

1. Signing a lease agreement

Usually, the lease amount is the difference of original price and the residual price at the end of the lease term. This needs lesser investment and one can have any car of choice including the latest or a car one wishes to possess. At the end of the period, the car is to be returned to the leasing company or one can purchase it for the residual value that is negotiated and specified in the agreement. The lessee has the advantage of simply returning the used car and has no concern of selling it on its residual value. He has the advantage of getting a new car every 3–4 years as the case may be.

2. Taxes

Leasing is a win-win situation for both the buyers and the sellers. The lease amount is lesser than the car loan would be. Any sales tax would only be on the monthly installment than on the entire purchase price as in loan. For a business lessor, there are tax benefits. The lessor earns an income by repeated leasing from the car he still owns and can also sell it later. Many manufacturers offer incentives on new cars to boost sales of slow-moving cars and those are due for design changes or replacement. These manufacturer-subsidized deals reduce the starting initial payment, monthly installments or both.

3. Negotiating a lease

The conditions of the car lease are set forth in an agreement called the lease agreement. Practically every clause is negotiated and settled. The lease agreement one manages to get is a tribute to one’s negotiation skill. Generally, there is an early settlement fee which is the additional money one has to pay for pre-closing a car.

4. Mileage

The miles one can drive during a year is set forth in the agreement and excess miles driven invite a fee. The permissible mileage is normally negotiated. The normal mileage of 10,000 miles per annum can be negotiated to 12,000 to 15,000.

5. Car maintenance

Car lease agreement normally specifies the wear allowed and if it is breached, a fee would be involved. The matter of maintenance is to be settled and specified in the agreement. In case the lessee is to do the maintenance the car should carry manufacturers’ warranty both for the lease term and allowed mileage.

6. Vehicle insurance

Most lessors insist on a high level of insurance. Gap insurance to cover the difference of what the lessee owes the lessor and the residual value of the vehicle is beneficial if ever the vehicle is wrecked. The economic viability needs to be evaluated before deciding on leasing. A car lease is not a fit all glove.