Leasing a car can be a good way to get a new car with a much cheaper monthly payment than you would if you bought the car. But to get the most benefit out of your leasing deal, you need to avoid these common mistakes that people make when leasing a car.
Paying Too Much Up Front
Most people looking to lease a car get focused on the monthly payment. But an important factor to keep in mind is how much you are required to pay up front. A low monthly payment seems nice, but if you have to pay $3,000 up front to get that, it’s the equivalent of an additional $90 a month on three-year lease.
Also, if you were to total the car early on in the lease or if it got stolen, your insurer would reimburse the leasing company for the value of the car and you most likely would be out the upfront money you spent.
Underestimating How Much You Drive
Car leases can be great deals, as long as you don’t drive your car a lot. Most leases allow only 10,000 to 12,000 miles a year, which isn’t very much for someone who has a substantial work commute or who travels out of town by car often. If you go over the miles allotted in your lease, the penalties can be very steep, as much as 10 to 15 cents per mile. If you routinely drive more than 10,000 miles a year, a lease may not be for you.
Leasing for Too Long
One of the biggest advantages of leasing is that you get a new car that will be under warranty the entire time you drive it. That’s why leases typically last only two or three years. You can find leases that go longer, but most experts would advise against it. If you lease longer than the car’s bumper-to-bumper warranty lasts, you could find yourself on the hook for repair costs while you are still paying for the lease.
Not Taking Care of the Car
Most people who lease a car don’t plan on buying it once the lease is done, which means they have to return it to the dealership or leasing company once the lease ends. If that is your plan, you have to keep the car in relatively good shape, but not all people do that.
It also means that you are required to make sure all scheduled maintenance, such as oil changes, is performed. Most lease contracts allow for penalties if the car is nor returned in reasonable shape. If your leased car has excessive scratches or door dings, tires with overly worn tread or windshield cracks, you could be faced with a big bill when you return the car.
Ending the Lease Early
One of the great things about leasing a car is that you don’t wind up stuck with a car long term that you don’t like and you don’t have to worry about selling it to get rid of it. But if you are going to enter into a lease, you have to be sure you can commit to the full term.
Leases come with steep early termination penalties that can run several hundred or even several thousand dollars. If you find out you can’t afford the payments or if your circumstances change, you are out of luck. There usually is no provision in lease contracts to end the lease early without paying a penalty.
Leasing a car can be a good decision that can allow you to afford a new car. However, if you don’t avoid these mistakes, it could wind up being a lot more costly than you expected.