Leasing can be a smart move for a lot of people. However, you have to be careful to make sure you’re one of them before you sign a lease contract.
The most attractive aspect of leasing is the ability it affords you to drive a nicer car than you’d otherwise be capable of affording.
But you have to be careful to get into the lease the right way to derive the fullest benefit. Toward that end, here are five mistakes to avoid when leasing a car.
One of the ways leasing companies protect their investment is by ensuring you keep the mileage within reason on the car. This enables the car to bring a better price when it’s liquidated to retrieve the rest of their capital.
Typical leases on mainstream cars run 12,000 miles per year. Luxury cars tend to cap you at 10,000 and some specialty cars like exotic sports cars will try to limit you to as few as 6,000 miles annually. If you go over, you’ll be expected to pay as much as $.30 per mile, which can easily add up to thousands of dollars if you exceed the mileage cap significantly.
Take some time to calculate the number of miles you drive each day. If you currently have a car, this will be easy to do. Just take the mileage you’ve put on the car and divide it by the number of years you’ve driven the car. That will give you a rough idea of how many miles you drive each month.
Paying Too Much
While most people tend to gravitate toward advertised lease specials because they look so good, you can in fact negotiate your own lease deal. In other words, while most lease deals do represent great values, you don’t have to go along with the ad when they do not.
It’s important to understand the leasing company buys the car from the dealer based upon the deal you accept — then rents it back to you. If you negotiate a better purchase price, a lower interest rate, or a lower drive-off fee — with no increase in the monthly payment or the length of the lease, that’s money you’ll save in the long run.
So, look those advertised specials over carefully. If they’re based on the MSRP, push for a better purchase price. Ask about the interest rate attached to the deal. Negotiate it down if it’s higher than you deserve because you have a high credit score.
The lower you can get those numbers, the less your monthly payment will be.
Overlooking Gap Insurance
Leasing companies expect to be paid the full value of the agreement you sign. If the car is destroyed and your standard insurance only pays a portion of what is owed, the lessor will be looking to you to make up the difference out of pocket.
Gap insurance will cover the difference between your outstanding balance and the perceived value of the car. If something happens to it early on, this could save you tens of thousands of dollars.
“I’m only going to be driving this car for a few years and it’s under warranty, why bother paying to maintain it?”
That attitude could be very costly when it’s time to turn the car in.
A thorough inspection is conducted when you return a leased vehicle. You’ll be expected to pay to make things right when there is evidence of neglect. This can be something as simple as worn tires, or a severe as neglecting all of the required services during your lease period.
Your awareness of these mistakes to avoid when leasing a car will help you derive the greatest advantage from the experience. There are many benefits to be had — as long as you do it the right way. It pays to go in with your eyes wide open.