Avoiding Leasing Pitfalls: 7 Mistakes to Watch Out for When Leasing a New Car
Now that the holidays are over, do you need a new car? Thinking about leasing?
Well, you’ve come to the right place. No matter what your financial situation is – whether you are doing well or struggling – leasing a car can be a great idea if you make sure to do it right.
There are a lot of pitfalls you can end up in if you aren’t careful when leasing a new car. To help you avoid said pitfalls, here are five common mistakes to avoid when getting a lease!
7 Mistakes to Avoid When Leasing a Car
Paying Large Upfront Costs
While you start on your leasing journey, make sure you’re keeping the total cost of the lease in mind. You might be drawn in by low monthly payments, but you need to dig deeper.
Most low monthly payments mean you have to pay a large sum upfront – you are, in fact, paying a portion of the lease up front to enable those low monthly payments. The worst part is, while the dealership will get their money back, if something happens to your leased car, you won’t get back your initial upfront costs.
To avoid this, it’s recommended that you don’t pay more than $2,000. Your monthly payments might be higher, but it’ll protect you from handing over a large sum of your money to someone else.
Not Checking the Miles You Drive Prior to Getting a Lease
A lot of low payments depend on low-mileage driven in the year. Most leases have limits (10,000-15,000 a year) and if you’ve gone over that limit when you turn your car back in, you’ll get charged accordingly (sometimes 10-30 cents per mile you’ve gone over).
That can be a huge chunk of change at the end of your lease term! You can avoid this if you sit down and track how much you drive a month/year. If it exceeds the mileage limits, you may want to consider your other options.
You might think when you are going to lease a car that it is similar to renting an apartment: ie. you don’t get to negotiate the price. But this would be a great mistake on your part!
Your lease price is negotiable. The purchase price of your lease is called the capitalized cost and the lower you get this number, the lower your monthly payments will be. You can also negotiate your interest rate as well as the mileage cap. Don’t sleep on that negotiation!
Not Doing Your Research
Researching, overall, is super important. If you aren’t using all the tools available to you, you could be making a big mistake.
You need to take advantage of all that the internet has to offer and shop around. Different dealerships will have different deals and offerings. If you want a lease with a higher mileage cap as well as a lower cap cost, you’re going to need to check as many options as possible.
There are even online options where you can lease cars such as TRUECar. As you take notes from this article and the others you’re reading to prep, you should also keep your eyes open for deals.
Not Getting Gap Insurance on Your Lease
Gap insurance is insurance that can be added to lease contracts that will help protect you from losing money if something should happen to your car.
As you know, most cars lose a huge portion of their value the minute they drive off the lot. This can cause issues for you if something happens to your car. If you owe more on the car than an insurance company thinks the car is worth, that could mean you still have to pay on a car you are no longer able to drive.
Gap insurance would cover that extra amount. If you’re going over a lease and it isn’t part of the contract, consider looking for plans that have it included.
Not Doing Routine Maintenance
Once you have leased a new car, you need to make sure to maintain it.
A scratch smaller than a driver's license is generally considered “normal” wear and tear; but any damage or issues to the car outside of normal wear and tear that comes with driving will cost you when you turn the car in.
You should definitely be taking the car in for its maintenance and services, but you should also make sure you get a list of the guidelines for what your dealer considers “normal wear and tear.”
You can’t just assume they will be lenient. Remember, it’s better to do your research!
Leasing Your Car for Too Long
While leasing a car is a great option for a lot of people, you don’t want to do it for too long.
The longer you lease a car, the higher the chance you’ll end up paying more on maintenance. Most leases range from 1-4 years, but some can go longer. You definitely want to avoid that.
In part, you want to avoid long leases because lender warranties generally last only 3 years or 36k miles.
Ideally, your lease should be shorter than the warranty you have. If you want a longer lease, then it’s probably in your best interest to just buy a car.
Ready to Lease?
If after looking over all these potential pitfalls and doing your research, you still think a lease is a great option, then you should definitely go for it!
A lease can be a great way to have a new car every few years without paying too much and without all the “old car maintenance” expenses.
If you would like a lease but don’t think you have enough money to pay the upfront costs, don’t be too quick to give up on it!
If you have an existing car you own but you need a second car (for you or for one of your children who is finally old enough to get behind the wheel), you can always take out a title pawn on your current car.
How a Title Pawn Can Help
The title pawn you get based on your current car can go towards helping pay for the upfront costs of a new lease.
While you can’t take out a title pawn on a car you don’t own, it is an option for a car you own outright. Check out our website for more information!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.