Because cars are so expensive, you may not have the financial availability to buy one. Even with a loan, buying a car may be difficult as you still need some liquidity to make the down payment. To overcome this limitation, there’s the option of taking a car lease.

Advantages
Here are four important benefits of a car lease:

• Lower Monthly Expenses
  When compared to the monthly installments payable on your auto loan, the lease amount is significantly lower. The lease payments are calculated on the depreciated value of the car over the lease period and not the entire value of the car.
• Affordable Maintenance
  The vehicle enjoys warranty for the entire lease period, which means you need only regular maintenance for the car. Additionally, you do not have to worry about any mechanical or other major issues as the warranty will cover such expenses during the entire period.
• Better Models
  When you buy a car, you will be limited in your choice due to financial constraints. Most leased vehicles have zero or minimal down payment and no upfront sales tax, which means you may be able to afford a better and more expensive model.
• Choose a New Car Later
  Generally, cars are leased for a period between two and four years. At the end of this period, you may simply sign the lease on a new car without the need to sell your old vehicle before purchasing the new car. You do not have to undergo the cumbersome resale procedure and drive your new leased car, leaving all the hassles to others.

Key Terms
Although there are several benefits of a car lease, understanding a few terms will be helpful.

• Capitalized Value
  The capitalized value is the price of the vehicle. It is recommended you negotiate this value to as low as possible. For most vehicle-sponsored leases, the capitalized value is fixed and non-negotiable. Discounts such as festive offers from manufacturers are known as cap cost reductions.
• Residual Value
  This is an expert’s value of the car at the end of the lease period. A higher percentage of the capitalized value is beneficial as a lower residual value implies that you have to pay more toward the cap cost. Different models depreciate differently over the years and the best deals are available on vehicles that depreciate at lower rates offering higher residual values.
• Money Factor
  Leasing companies may easily use a specific rate of interest while calculating the monthly lease rental. But they often use what is known as money factor to represent the interest component, including your monthly payout. You may use an online calculator to convert the money factor to a simple rate of interest.

While leasing has several benefits, it is important you take your time to research and find the best deals with knowledge of these industry terms.