For those looking for a new car, leasing can be a smart option to consider due to no down payment and lower maintenance costs. This makes leasing an appealing way to drive a new vehicle equipped with the latest safety, connectivity, and comfort features. But it’s important to understand how to lease a car smartly, as there are significant differences in leasing vs buying a car that can lead to costly but avoidable mistakes.
1. Paying the Price in Full
When purchasing a brand-new car, most people tend to negotiate the price to bring it down. The same approach should be taken when leasing a vehicle. Even if one is not planning to have the car for a long period, it’s important to negotiate the terms.
While reviewing the details of the lease agreement, focus on the bigger picture rather than just the monthly payment. Sometimes, dealerships charge the full sticker price of the car, which means that someone leasing the car may not save as much as they expected compared to purchasing the car outright. For instance, if one can manage to negotiate the price to $1,000, this can significantly impact the overall lease terms.
2. Paying a High Downpayment
It is quite common for some car dealers to ask for a higher upfront down payment so that they can guarantee the lowest payments to their customers. In most cases, the high down payment is used to settle a major portion of the car lease. But giving all that money to the dealer earlier does not always work in the favor of the person leasing the car. For example, if the car is damaged in an accident or stolen within the first couple of months of the lease, the leasing company will be reimbursed. But the person leasing will not get anything. This means the person will lose the car as well as the money they put in. This is why a top tip for leasing a car is paying a low down payment or not paying anything at all. This can make the monthly payments slightly higher, but one will not have to worry in case of any accidents or damage.
3. Undervaluing the Mileage
Underestimating the mileage is a common car lease error. Usually, when signing a lease contract, there are conditions that state how many miles a person can put on the car. In most cases, the mileage is generally between 12,000 and 15,000 miles per year. If this limit is exceeded, one has to pay an additional fee for every extra mile.
Most leasing companies tend to charge around 25 cents per extra mile. This can quickly add up to higher amounts if someone is on the road all the time. So, before agreeing to the terms of a lease, one must assess their driving limits. This process can ensure that the limits placed on leasing agreements are doable. The mileage limit can be increased if one thinks they might go over.
4. Keeping the Car Longer Than the Lease Period
Leasing a car is a short-term deal. But if one is signing a lease agreement that has a period of more than three years, it can cause a lot of problems. Most of the time, the agreements have a vehicle warranty that is valid only for a fixed number of miles. If the lease term is longer, there are higher chances of a person being liable for repairs and maintenance that the warranty may not cover after it expiration. But if a longer lease of four to five years has to be taken, it is recommended to get an extended warranty that can provide coverage for the extra costs. If there is no extended warranty, one may end up paying more for the leased car compared to the expenses involved in owning the car.
5. Overlooking the Fine Print
Before signing on the dotted line, it is important to read all the fine print carefully for understanding car lease terms. This is similar to precautions one needs to take while signing any other contract. Often dealers include certain details about the maintenance of the car that one must take care of during the period of lease. There might be a tiny scratch that might seem too important. But the dealer can impose a high penalty when the car is turned in, if such a clause is present in the fine print of the lease contract. One will end up paying more than they expected. So, it is crucial to know exactly what is written in the contract before finalizing the process.
6. Ignoring vehicle maintenance
To avoid lease penalties, it is important to maintain the car properly. This is usually a significant aspect of the lease agreement. In some cases, a leasing company can also require the maintenance to happen only at specific approved locations. If there are no regular oil checks and tire rotations happening, one can end up paying more than what was planned.
