The idea of leasing a car is appealing for many drivers because the cost to lease a new and/or higher-end car model is often more affordable than the cost of a purchase. However, according to Bankrate, there are five common mistakes that drivers make when leasing a car that end up hurting their pocketbooks more than they anticipated.
1. Overpaying upfront
According to Philip Reed, senior consumer advice editor at auto research site Edmunds.com, lessees often put themselves at risk by paying too much upfront when leasing a car. One of the ways dealers lure customers is by advertising low monthly payments for leased vehicles, but they make up for those low rates by asking customers to pay thousands of dollars upfront as a down-payment on the lease.
Unfortunately, in the event of an accident, insurance companies typically reimburse the leasing company the value of the car, but the upfront payment is unlikely to be returned to the lessee. Reed recommends lessees pay no more than around $2,000 upfront and instead opt for larger monthly payments.
2. Not getting gap insurance
The value of any car depreciates significantly as soon as it is driven off the lot. However, if a leased car gets totaled or stolen, insurance will only cover the current value of the car, which will often fall well short of the total lease obligation the lessee owes. The solution to this potential problem is something called gap insurance, which covers the difference. Reed advises every lessee to make sure their lease contract includes gap insurance.
3. Overlooking mileage driven stipulations
Another way that leasing companies are able to offer low monthly rates is by including upper limits on the amount of mileage the car may be driven. If lessees are unaware or unmindful of these terms, they can end up getting charged up to 25 cents per mile for overage at the end of the term of the lease.
4. Not maintaining the car properly
Before returning a leased car, lessees have the opportunity to repair any damages to the vehicle themselves on their own dime. While this may seem like a hassle, returning the car with damages, even those considered “normal wear,” leaves the lessee vulnerable to any repair charges that are stipulated in the contract.
If you don’t ask what the lease-end-conditions are, be prepared to be charged full market price for any repairs and for the leasing company to go over the car with a fine-toothed comb looking for any opportunity to charge you for repairs.
5. Leasing for too long
Most car leases range from two to four years, but leasing a car beyond the car’s warranty period, typically three years and/or 36,000 miles, means that you can end up paying a number of extra expenses. In addition to purchasing an extended warrantee, you may end up having to pay for tires, brakes or other services on a car you don’t even own.