A car contract is an agreement between you and an auto dealership. It’s typically called a lease purchase, and it’s important that you understand it before signing the agreement. It does provide some benefits than buying a car.
Let’s explore the difference between signing a contract and buying a car.
The first difference is the down payment. Contracting a car usually requires a lower down payment than buying one. Some plans do not require one at all.
Your car is always brand new when you lease it. In fact, you get a new model car every time. After the vehicle has been driven for a few years, you can return it to the dealer and get another one.
In a contract, you are only paying for the time you are using the car rather than buying it, so you will never be in a position where you owe more than what the vehicle is worth.
However, there are some disadvantages. When you’re leasing a car, make sure you clarify any vague terminology in the contract. Read the fine-print because some dealerships charge you extra for mileage and “excessive wear and tear.” Make sure these terms are defined.
If you have the need to end a lease early, expect to pay termination fees. These can be excessive, so read your contract carefully before you committing. Any customization to a leased vehicle that would alter it in a permanent way is not allowed under a lease.
Always remember that when you lease a car, you are essentially renting it for a specific period of time, and you will never own it as long as you have a contract.