A good reason to lease a vehicle, is for a chance to drive a newer, and better model car for less than the cost to purchase. However, drivers who decide to lease a car sometime forget to read the fine print before signing a contract. According to Phillip Reed of Edmonds.com, people make a lot of mistakes when setting up their car leases, and it can cost them a lot of money. Here are five 5 mistakes to avoid.
Do Not Pay More Than $2000 in advance.
Many dealers advertise a low monthly payment, but consumers sometimes do not realize that they must pay several thousands of dollars to get that low monthly payment. That money is usually used to pay for the lease in advance, however, prepaying could be a problem in the case the car is wrecked or stolen.
The insurance company will reimburse the dealer for the value of the car, but the money paid upfront would not be refunded. For this reason, Reed suggests that consumers should not pay more than about $2,000 in advance. “In many cases, it makes sense to put nothing down,” he says.
Obvious negative is that the monthly payment is would be higher. One way to offset the higher lease payment is to take extra cash and put it in the interest bearing account instead.
Ask for GAP
According to David Jacobson CEO of CU Xpress Lease in Hauppauge, the value of any new leased car drops significantly after it’s driven off the lot. If a leased car is 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. Therefore, the driver would likely have to pay the balance out of pocket unless he has gap insurance.
Any consumers should ask if the contract includes this specialty gap insurance coverage 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.”
Check the Miles
According to Jacobson, many car dealers are able to advertise low monthly payments due to mileage restrictions.
Its not unusual to have a driving maximum of 7,500 miles to 15,000 miles per year. If a driver exceeds those limits, they could be charged an additional 10 cents to 30 cents per mile at the end of the lease.
To avoid paying extra fees consumers should know their driving habits to decide if the low mileage lease is appropriate for them. The drawback of course the higher mileage limit equals higher lease rate.
Excessive Wear and Tear Will Cost You
Any scratch bigger than a credit is considered excessive wear and tear. Most leasing companies offer free inspection before the lease terminates. By fixing the damage consumer will avoid the car dealer assessing the value to the damage. According Barbara Terry, if the car is significantly damaged, drivers can expect a bill for repairs at “full market price.”
Some car dealers offer excessive wear and tear protection. It could paid two way upfront or in the lease. The drawback is increase in the lease rate.
Check the Warranty
Drivers who lease cars for longer who lease their vehicles for longer than 3 years, could end up paying extra money in maintenance. Always check the warranty period, which averages 3 years, or 36,000 miles. Usually that’s the turning point of a vehicle, according to Reed.
If you do decide to keep the car longer than the warranty. Decide if purchasing an extended warranty makes sense for you.
Also, financially it might be better to buy it than to lease.
Note if you extend the lease, check your policy because some policies don’t include extra miles.