What is a Lease?
Before we go any further, let us take a moment to look at what, exactly, a lease is, how it works, and what sets it apart from other ways to “buy” a car. A Jeep lease is an option available to you if you are interested in a new vehicle and is a way for you to drive a new vehicle for a couple of years and then return it to the dealership. You do not actually buy the Jeep when you lease it––instead, you pay for the depreciation that will occur on the vehicle while you drive it. In some ways, it is much like renting a vehicle for an extended period of time.
Depending on the terms of a Jeep lease that you agree to, you may be able to buy the Jeep at the end of the lease if you decide you like it and want it, but that is not required. At the end of the term, you can return the vehicle and lease another new Jeep to enjoy for a few more years. For many people, this is a great way to experience a brand-new model without committing to the expenses of long-term ownership. And since you are paying off the depreciation, rather than paying for the entire vehicle, lease payments are typically lower each month than paying a loan.
Since a Jeep lease is distinct from buying a new vehicle in some very specific ways, there are terms and concepts related to the process that are unique to a lease compared to buying a vehicle, even with a loan. While you do not need to memorize every term you might encounter, we suggest becoming familiar with the most important ones so that you will understand everything you see on a lease agreement. Some of the key Jeep lease terms that you should know include:
- Sale Price – This is the price of the Jeep you are looking at if you were to buy it new, right now. The amount you will pay on your lease is greatly influenced by this, so keep it in mind and try to get it as low as possible.
- Residual Value – This is what the Jeep will be worth at the end of your lease, based on predicted depreciation of the vehicle over the lease term. The difference between the Sale Price and the Residual Value is, essentially, what you are paying during the lease.
- Residual Percentage – You might see the Residual Value represented as a Percentage instead; a higher percentage is good for you because it means less depreciation, which means you pay less on the lease.
- Money Factor – When looking at a lease, the Money Factor is similar to the interest you would pay on a loan – but they are not directly identical. Just know that the lower the Money Factor on a lease, the less you are paying, just like interest.
- Allotted Miles – This is the number of miles you are allowed to drive on the leased vehicle each year or over the lifetime of the lease. There may be charges if you go over the Allotted Miles, so keep this in mind when looking at a Jeep lease.
- Disposition Fee – This is a fee, or charge, that you have to pay at the end of the lease, which covers the costs of cleaning and servicing the vehicle to get it ready for sale as a used model. You can avoid this fee if you buy the Jeep at the end of the lease, and you might be able to negotiate it away if you lease another vehicle from your dealership at the end of your current lease.
- GAP Coverage – GAP Coverage is a type of insurance that you can get on a lease to protect you in case of a collision or other loss of your vehicle. Insurance will only pay the estimated, depreciated value on a vehicle––and if you owe more than that on a lease, then you can end up paying for a vehicle you no longer have if it is wiped out in a collision. GAP Coverage protects you from that and makes up the difference.
Is a Jeep Lease Right for Me?
There are many factors that come into play when deciding if a Jeep lease is right for you, or if you would be better off buying a vehicle. If you value ownership and want to have the same Jeep for many years, then buying a vehicle––even with a loan to help with financing––is probably your best choice. On the other hand, if you do not care about ownership and simply want to enjoy a brand-new model for a few years and then get another one, then a lease is probably perfect for you.
Keep in mind all of the terms and conditions that apply to an auto lease, which you will not deal with when buying a vehicle. For example, a Jeep lease will include allotted miles that you are allowed to drive each year––if you know you are going to put more miles than that on your vehicle, then that might mean a lease is not right for you. You are also expected to return the Jeep at the end of the lease in excellent condition, and you will need to pay for any wear and tear you cause. Remember, also, that you are not free to make aftermarket additions to the vehicle when it is on a lease––so if you want a Jeep you can modify for some serious off-roading, then you are better off buying one rather than going with a lease.