Leasing a car is a desirable option for many people. You can drive the hottest, newest cars and pay only the fraction of the price of buying it. Some may believe it is throwing money away as you never finish paying off a car for good, but some people don’t mind this so much, and just look at it as another monthly expense. You do want to be careful though and avoid common mistakes. Here are just a few for which to watch:
Paying Too Much Upfront
Shop around carefully before leasing a vehicle. Don’t get sucked in by ads boasting really low monthly payments, but then requiring thousands of dollars upfront to qualify for that sweet deal. This money is usually used to pay a portion of the lease up front. But should the car get stolen or totaled within those first few months, you are unlikely to see any of that money. Many auto experts advise not paying any more than a couple of thousand dollars max to initiate a lease. Do your homework on this one. Search for car dealers with lease specials.
Not Purchasing Gap Insurance
Just like a car you purchase, the value of a leased car plummets the moment it gets driven off the lot. Should the car get stolen or totaled, the insurance company would pay out the value, but it may not cover what you owe under the terms of the lease. Gap insurance protects you in the event you would end up owing a balance. Without it, you would have to pay for that money out of pocket.
The low monthly payments used to lure you into the dealership have lots of conditions attached to them, namely very low mileage limits. Typically the lease allows for 12,000 to 15,000 miles a year, and you would incur an additional charge of 18 to 25 cents a mile for anything in excess of these limits. Doesn’t sound like much, but that can surely add up over a few years if your driving habits are such that this is an insufficient amount.
Think carefully about your driving habits and whether this amount would be sufficient. If you think it isn’t you can ask for a higher limit, though this would likely incur a higher monthly payment. But, in the long run this could end up being cheaper than paying overage fees.
Leasing Too Long
The average car lease is two to four years, though some have longer terms. You don’t want to lease too long as you could end up incurring lots of additional charges in maintenance. It is recommended you lease the car no longer than the life of the warranty. This is usually around a period of three years, and at this point, a car may start need various sorts of work. It is one thing to pay for a variety of costs and then be able to drive the car for years without having to pay for these things again. But, you don’t own this car, and you don’t want to invest all this money in something you have to give back. If you do take a longer lease, consider purchasing an extended warranty.