Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage thresholds.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those thresholds, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll very likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would very likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to comeback it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They very likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it motionless on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to lumps,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “utter market price.”
Leasing for too long
Most car-lease terms range from two to four years, however some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s very likely better to buy it, says Terry.
“If the driver wields the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.
Leasing a Car – five Dumb Car Leasing Mistakes to Avoid
Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage boundaries.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those boundaries, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll most likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would very likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to come back it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They most likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it immobile on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to chunks,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “utter market price.”
Leasing for too long
Most car-lease terms range from two to four years, tho’ some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s very likely better to buy it, says Terry.
“If the driver wields the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.
Leasing a Car – five Dumb Car Leasing Mistakes to Avoid
Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage thresholds.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those thresholds, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll most likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would most likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to comeback it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They very likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it immobile on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to chunks,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “utter market price.”
Leasing for too long
Most car-lease terms range from two to four years, tho’ some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s most likely better to buy it, says Terry.
“If the driver possesses the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.
Leasing a Car – five Dumb Car Leasing Mistakes to Avoid
Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage boundaries.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those boundaries, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll very likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would very likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to come back it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They most likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it motionless on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to chunks,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “total market price.”
Leasing for too long
Most car-lease terms range from two to four years, however some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s most likely better to buy it, says Terry.
“If the driver possesses the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.
Leasing a Car – five Dumb Car Leasing Mistakes to Avoid
Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage thresholds.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those thresholds, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll very likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would very likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to comeback it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They very likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it motionless on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to chunks,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “utter market price.”
Leasing for too long
Most car-lease terms range from two to four years, tho’ some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s most likely better to buy it, says Terry.
“If the driver wields the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.
Leasing a Car – five Dumb Car Leasing Mistakes to Avoid
Leasing a car – five dumb car leasing mistakes to avoid
People who lease a car usually do so because it permits them to drive a newer vehicle for less money than it would cost to buy one.
But many drivers make the mistake of not reading the fine print before signing a contract, says Philip Reed, senior consumer advice editor at Edmunds.com.
“People make a lot of mistakes when setting up their car leases, and it can cost them a lot of money,” he says. Here are five common car-leasing mistakes that consumers should avoid.
Paying too much money upfront
Car dealers advertise low monthly lease payments on fresh autos, but consumers usually are asked to pay several thousand dollars at the beginning of the term to get the low payments, says Reed.
That money is generally used to pay a portion of the car lease in advance. “But prepaying is a problem if the car is wrecked or stolen in the very first few months,” says Reed.
If that were to happen, the insurance company would reimburse the leasing company for the value of the car, but the money the customer paid upfront would likely not be refunded, he says. As a result, the consumer wouldn’t have a car, after having paid a lot of money upfront.
Reed suggests that consumers not pay more than about $Two,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
If you pay less in advance, your monthly payment would be higher. But you could take the “prepayment” cash and put it in an interest-bearing account instead.
You could use that money to help make the monthly lease payments, says Reed. And if something happens to the vehicle before the end of the term, at least the leasing company wouldn’t have a big chunk of your money.
Use this calculator to determine whether buying or leasing a car is cheaper for you
Leaving behind gap insurance
The value of any fresh car drops significantly after it’s driven off the lot – and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, Fresh York, which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the consumer’s total obligation under the terms of the lease, he says.
The driver would likely have to pay the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn’t, the customer should consider looking for a car with a lease plan that does.
“There is exposure without gap insurance,” he says, “so I would not lease a car without it.”
Don’t get ambushed by a bad credit score at the dealership. Check your credit score and credit report very first at myBankrate for free.
Underestimating miles you’ve driven
According to Jacobson, many leasing companies are able to advertise low monthly payments because they have low mileage boundaries.
It’s common for leasing contracts to have a driving maximum of Ten,000 miles to 15,000 miles per year, he says. If consumers exceed those thresholds, they could be charged an extra ten cents to thirty cents per mile at the end of the lease.
“You could wind up owing a lot of money for miles when it’s time to turn in the car,” Jacobson says. The driver could owe big bucks on a car he is no longer driving.
To avoid this extra fee, consumers should know their driving habits before signing the contract, says Jacobson. If they know they’ll most likely drive more miles than the agreement permits, they could ask for a higher limit.
Still, there’s a drawback: The monthly lease payment would most likely go up with a mileage increase, he says.
Not maintaining the car
If the car has harm that goes beyond normal wear and rip, the driver could be on the hook for extra fees when it’s time to come back it to the dealer, says Jacobson.
Generally, if a car has a scrape but the mark is less than the size of a driver’s license or business card, many companies will consider it normal use. They most likely won’t charge a penalty, says Jacobson.
Jacobson says that if there’s harm to the car, the customer will have a chance to have it immobilized on his own dime before turning it in. Otherwise, the leasing company will assess a value to the harm.
In terms of “normal wear,” the definition can vary, and drivers shouldn’t assume that their own lease servicers will be lenient. “Some will nitpick the car to lumps,” says Jacobson. “Before getting the vehicle, consumers should ask what the lease-end-condition guidelines are.”
Barbara Terry, an automobile columnist and author of the book “How Athletes Roll,” says if the car is significantly bruised, drivers can expect a bill for repairs at “utter market price.”
Leasing for too long
Most car-lease terms range from two to four years, however some can go longer, says Reed. However, drivers who lease cars for too long could end up paying extra money in maintenance.
Reed recommends that consumers not lease cars for longer than the warranty period, which averages three years, or 36,000 miles. “That’s a turning point in the car’s life, when it goes out of the bumper-to-bumper warranty,” says Reed.
“If you keep the car longer, you’d have to consider getting an extended warranty at an extra cost, plus you may need to pay for fresh tires and brakes – all for a car that you don’t own,” he says.
If a consumer plans to be in the same car for a long time, it’s most likely better to buy it, says Terry.
“If the driver possesses the car, he’d have to pay for the car and pay for maintenance, but then he could proceed to drive it for several years without having to worry about a required monthly lease payment,” she says.
Comparing car loans? Check interest rates now at Bankrate.