Documents You Need When Leasing a Car
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Leasing a new car is an appealing option when it's time for a new vehicle.
Leasing usually offers lower monthly payments than traditional financing and allows you to drive a brand new vehicle for a period of time before turning it back in.
In some ways, a lease term is similar to a loan term – you still have monthly lease payments for some time – but with some caveats that restrict your driving habits and require you to keep the car in good condition.
What documents do you need to lease a vehicle? Automotive transactions involve a good amount of paperwork, and getting it right the first time can save you time and hassle down the road.
Let's look at the things you need to lease a car and what you'll have to bring with you when signing the papers.
The basics of leasing a car
Leasing a vehicle is a lot like renting a place to live. You agree to the use of the property for a set time and price and promise to meet certain conditions along the way.
Like renting a house or an apartment, at the end of a lease, you return the car to the owner, also referred to as the lessor.
Also akin to renting an apartment or house, you have to keep a leased car in good shape and drive it under normal conditions while it's in your care. At the end of your lease, if you return a vehicle with excessive wear, you might be subject to additional charges.
Many elements go into deciding your monthly payments on a car lease contract. The cap cost, money factor, mileage limit, and residual value are specific terms that require your attention.
On a vehicle lease, the capitalized cost, also known as the cap cost, is one of the most significant aspects affecting your monthly payment. The cap cost is the sum of money you and the lessor agree to as the vehicle purchase price. The cap cost affects all of the other elements of your lease, and obtaining a good one helps you in the long run.
A lease money factor is like a car loan interest rate. Also referred to as the lease factor or the lease fee, the money factor is a financing charge applied to the lease.
During a lease, lessees are subject to a limit on the number of miles driven. Drivers who go over this number incur additional fees at the end of the lease term. Standard mileage limits are 10,000, 12,000, and 15,000 miles per year.
At the end of a lease, the residual value is the approximate worth of the vehicle when considering depreciation. You'll have the choice to buy the car for this amount when you turn it in. This sum is also called the buyout price.
Owning a car comes with various costs, so saving money wherever possible keeps extra cash in your bank account. One way to reduce your expenses month to month is obtaining a good car loan. Shift works with a network of trusted lenders who compete for your business, so you get the best deal on financing. Obtaining a loan through Shift is so convenient that nine out of 10 buyers choose us when financing. Got a low credit score? Don't worry. At Shift, we welcome cosigners. Shift's website has a large selection of fully inspected cars located across the country that are ready to go. The website is user-friendly, and you'll be able to find various makes and models to suit your needs and budget.
What documents do I need to lease a car?
Because a lease essentially allows you to borrow a vehicle, approval requirements are often more restrictive than when you buy one.
Unlike an auto loan, a lease application is simply approved or rejected, where terms can be flexible based on credit history. Here are some of the things you need to lease a car.
First, you'll need to bring a valid driver's license for the state where you'll register the vehicle.
Since, as the lessee, you obtain use of the leased vehicle for a temporary period, you'll need to have full coverage car insurance to cover any possible damage. Your auto insurance must run continuously throughout the term of the lease, ensuring the lessor's property remains protected. Before entering into a lease agreement, the lessor will require you to show the specific details of your policy before they give their approval.
If your car insurance policy doesn't offer vehicle replacement if it's stolen or totaled, you'll need to purchase gap insurance. Gap insurance covers the cost of vehicle replacement when a car sustains damages beyond repair, protecting the lessor's property during the lease agreement.
If you decide to trade in your current vehicle before signing a lease, you'll need to have its title and registry handy so that the lessor can perform the necessary paperwork.
Though not requirements to lease a car, the following three things can further smooth out the process.
Proof of income. Even if you already have a good credit score, two or more current pay stubs demonstrate your financial stability to the lessor. In some circumstances, this can result in you obtaining a lower rate.
Personal references. The lessor is trying to gauge your trustworthiness and reliability before approving you. Bringing along a list of personal references and your proof of residence paints a clearer picture of you as a person.
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Car lease approval requirements in summary
Though leasing a vehicle offers many attractive benefits, you'll have to meet several requirements before signing the papers.
The qualifications to lease a car prove you're a trustworthy customer that the lessor can count on making timely payments and returning it with normal wear.
When you decide leasing is the right option for you, taking the proper documents can ease the process by attesting to your finances, place of residence, and level of insurance coverage.
Once the lessor has a good idea of your financial and personal attributes, it increases your chances of being approved, allowing you to drive off in the vehicle you want.
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April 15, 2022
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