Looking to lease a car? 4 questions to ask your dealership when you do
Getting key queries answered will ensure you make a financially savvy decision
Dubai: Choosing whether to lease a car more or less comes down to one’s priorities or interests. For some drivers, it is purely a matter of money, while for others, it’s more about better terms and non-monetary perks. Regardless of your choice, it’s vital to weigh these commonly mistaken distinctions.
“When considering whether to lease a car, it's essential to ask the right questions to your dealership to ensure you make an informed decision,” explained Atif Asgar, a Dubai-based automotive analyst specialising in retail pricing, financing, and insurance coverages, before listing out a few of them.
“Are you better off owning a depreciating asset like a car than paying rent on one? Are you willing to take on the tasks of comparing and acquiring the right insurance; renewing the registration annually with either option; or find a maintenance package and take the vehicle for regular maintenance?”
Questions to ask when leasing a car
1. What is the monthly lease payment, what is included in that payment?
Ibrahim Riba, a senior salesman at a car dealership based in Abu Dhabi, explained that aside from much advertised monthly leasing price, there are other financial metrics you need to enquire about that are just as important.
“The monthly leasing price is often the only advertised or broadcasted figures at car rental agencies. But that doesn’t paint a crystal clear picture for your finances. Also understand the breakdown of your monthly payment, including taxes, insurance, and any maintenance fees, when seeking the terms.
“Your monthly payment will depend on the car’s price, the lease term (typically 24-36 months), and the down payment, she said, when noting the answer to be expected. “It will include taxes, maintenance fees, and basic insurance. Some leases may offer a "zero down payment" with higher monthly dues.”
2. What is the length of the lease, and what are the mileage limits?
While it’s a standard practice to be informed about the length of the lease, Asgar explained that “just as important it is to have them clarify the term of the lease and the annual mileage limit, as ‘overages’ can be costly,” before going on to add the kind of response you can expect.
“‘Overages’ refers to the extra charges that a car lessee must pay if they exceed the agreed-upon terms of the lease. In the context of car leasing, overages typically apply to mileage or wear-and-tear. Overages are vital to consider when leasing a car to avoid unexpected costs at the end of the lease term.
“In the UAE, the average car lease length typically ranges from 2 to 5 years, with 3 years being the most common. On mileage limits, most car leases in the UAE allow for 20,000 to 30,000 kilometers per year. Exceeding the mileage limit results in additional charges, with fees varying on company and model.”
3. What is the residual value of the car at the end of the lease?
Asgar and Riba both stressed that when leasing a car, an often-overlooked is the ‘residual value’, which is the estimated market value of the car at the end of the lease term, as this value affects your monthly payments.
“The residual is often estimated at around 50-60 per cent of the car's original value. Keep in mind that higher residual values often mean lower payments. This also boils down to whether there are any fees for wear and tear or damage at the end of the lease?,” noted Riba.
“While normal wear and tear is generally acceptable, if there is excessive damage (like scratches, dents, or interior stains or tears), you may be charged extra fees. Some leases offer wear-and-tear protection packages, which is most often a worth investment, in my experience.”
4. Can I buy the car at the end of the lease, and at what price?
Dealerships are increasingly offering a lease-to-own option that allows borrowers to make installment payments on a vehicle over a pre-determined period of time. Once all the car payments have been made, the borrower (the lessee) assumes ownership of the vehicle.
“While most leases allow you to buy the car at the end, the buyout price is often the residual value mentioned earlier,” said Asgar. “However, check if the dealer is offering any discounts or incentives to buy it, and also if there are early termination fees to either your leasing or lease-to-own agreement?
“While early lease termination usually results in penalties, such as paying off the remaining lease balance or fees that can range from a few hundred to over a thousand dollars, some dealerships offer early buyout options to avoid this.”
Key takeaways? By asking these key questions, the experts further agree that you’ll not only better understand the total cost and commitment for leasing a car, it will allow you to make a well-informed largely-financial decision based on your circumstances or needs.
Bottom line? While leasing is more time and cost-efficient for many, as such contracts could be cheaper than monthly rental as it is for a longer period of time, this kind of contract also may come with a distance restriction and additional payment for crossing the restriction.