There are numerous advantages to leasing an automobile. For individuals who will only be in Japan for a limited period of time, leasing a car allows them to pay for only what they require. Owning a car and dealing with the challenges of finding a new home for your unwanted car might be avoided if your stay is limited. Leasing a car is an excellent method to avoid taking out a loan or making a significant down payment.

What Is a Car Lease? 

Car leasing is a contract between the leasing company and the user for a fixed period at an agreed price, covering financing, taxes, insurance and maintenance in a package. Its concept is a separation of ownership and use. 

Finance lease

The Lease fee includes car cost, taxes, and insurance but exclude maintenance. The user is responsible for any and all car maintenance at their own expense.  

Maintenance lease

The Lease fee includes all the costs of the car, taxes, insurance, and maintenance. 

Benefits of Leasing a Car

1)  It is easier for those leasing a car to afford a high-end model as the price is calculated by taking the estimated residual value (how much the car can be sold for) of a car at the end of a lease contract and subtracting it from the current value of the car. The person leasing will pay the difference.  

2)  Depending on the leasing company, you will be able to lease your desired model of car from a variety of domestic and imported carmakers. If you would prefer to lease a second-hand car, you can ask a person in charge at the leasing company whether or not they are able to provide such a service.  

3)  As leasing companies have large fleets of cars to choose from, you can take advantage of some vehicle discounts they may offer. 

4)  Depending on the price of the car, you can lease a car without a down payment. You may only have to pay a monthly leasing fee. You can also lower your monthly payments by using a payment method where you pay extra during the months in which you receive a salary bonus. Monthly leasing fees are calculated as:  

 (Current car cost + Miscellaneous expenses - Residual value) ÷ Leasing period = Leasing fee 

5)  You can also include car insurance into the leasing fee. 

Your Options After the Contract’s Termination 

You can choose from the following options once an “open-end” lease contract has ended. 

 

1)  Switch to a new car 

The car under the current lease will be designated as a trade-in car. The residual value and the actual trade-in price will be offset, easing your financial burden for your next lease contract for a new car. 

 

2)  Extend your contract 

You can extend your contract with the new leasing price calculated based on the car’s residual value. 

 

3)  Return  

Upon returning the car, you will pay the leasing company the difference in a car’s residual value between the start and end of the contract. 

 

4)  Purchase 

You can purchase the car for the price agreed upon at the outset of the lease contract. Expenses for a name change, automobile tax, income tax, etc. will be your responsibility. 

Open-end Contract 

This type of contract requires that you not only pay the monthly lease fees, but also the difference in price between the cars estimated used resale value calculated at the start of the contract and the estimated used resale value at the end of the contract. In the event that the estimated resale value is more than was estimated at the start of the contract, you will receive the difference. 

Closed-end Contract 

This type of contract requires that you only pay the agreed upon monthly lease fees, based on the estimated used resale value calculated at the start of the contract. If at the end of the contract, the estimated used resale value changes, you do not need to pay the difference. 

＊Regardless of contract type, any damages to the car not considered wear and tear from normal use will need to be paid for at the end of the contract as well. 

Frequently Asked Questions

Q: What is a merit of a car lease?  

A: Leasing companies possess a great number of cars, and as a result are able to scale their prices, which is something that private dealerships are unable to provide. Lease rates will be calculated by deducting the estimated residual value of the car at the end of the contract from the current price of the car. As a result, your monthly payments will be lower. Lease rates normally include the annual road tax. 

 

Q: How is the residual value of a car calculated? 

A: It will be decided by estimating the price of the car after the lease contract has finished as well as a monthly estimate of the mileage during the contract period. Generally, cars that are popular will have higher residual prices than others. 

 

Q: What kinds of expenses are included in the lease rate? 

A: Included in the lease rate is the car price, accessories, registration fees, acquisition fees, mandatory insurance (initial payment), weight tax (initial payment) and automobile tax (for a lease period). You can also include an optional insurance plan. 

 

Q: What is a difference of terms between lease and loan? 

A: Lease means to pay to borrow a car and loan means to borrow money for purchasing a car. 

 

Q: Is it possible to lease a used car? 

A: Normally in principle, only new cars are leased. However, it may be possible to lease a used car. Please ask a person in charge at the leasing company about whether or not they are able to lease a used car. 

 

Q: Can you choose the car color and included accessories? 

A: Yes, you can usually select freely. 

What is the difference between leasing a car and renting a car? 

A rental car is for temporary use and can be picked up at a rental car company. A leased car is for long-term use (normally 3-5 years) and has a wider selection to choose from. In regard to the actual use of the car, there will be no difference between both options. 

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What is a difference between leasing and purchasing a car?

Here is an easy to follow comparison in the table below.

 

Q: What is the lease application procedure?

A: You must fill out an application form from a leasing company, filling it out with your name, address, desired car model, accessories, and a lease period. You must also submit your resident certificate and signature certificate issued by your embassy (or personal seal certificate issued by the municipal office). After the leasing company verifies your request, an order for your car will be placed and your car delivered upon start of the contract.

 

Q:  Is it possible to cancel the contract during the contract period?

A: In principle, you cannot cancel the lease contract during the contract period. If it is necessary to cancel the contract, you have to pay the remaining monthly lease fees and the leasing company will settle the residual value at the end of the contact.

 

Q:  What kind of procedures are required when you want to purchase the car upon the end of the contract?

A:  You will need an ownership name change. If you wish, the leasing company will perform all necessary procedures on your behalf. You will have to pay a separate charge for this service. There would be a case that you will have to pay the acquisition tax and the vehicle weight tax.

English-Speaking Car Dealers

There are several English-Speaking car dealers in Japan, please check here.