How to Lease a Car—and the Mistakes to Avoid
Car leasing is at an all-time high. According to statistics, the worldwide car leasing market will be worth $131.10 billion in 2029. Many people prefer leasing cars to buy because it’s affordable. They are also able to drive new cars, cars they couldn’t afford if they were buying.
But leasing can be hard for first-timers—people with little knowledge of how the process works. They may either walk away with a great deal or pay more than they should have. Thinking about leasing? Here are the top 4 mistakes to avoid.
1. Ignoring Car Maintenance
Just because you’ll eventually return the leased car to the dealership doesn’t mean you should ignore basic maintenance. Scratches and dents on the car may cause you to pay more at the end of the lease term. There’s normal wear and tear the dealer won’t charge you for, but they won’t overlook everything. Also, what’s considered normal varies by dealer.
Check the damages/wear and tear clause to know what the dealer considers excessive damage. Take good care of the car and do not assume the dealer will be lenient. Dealers thoroughly check vehicles at the end of the lease term for any significant damages and pass the repair costs to lessees.
2. Not Asking About a Trade-In
When leasing a car, you typically make a downpayment and monthly payments. But did you know it’s also possible to trade in with a lease car and make a few bucks? Trading in a leased car is a good option if there’s equity in the car. If the vehicle has become popular and appreciated due to demand, there will be positive equity in it. If the value of the leased vehicle exceeds the buyout amount, you will make money when trading in.
Check the value of the car before signing the lease agreement. Negotiate the lease price before introducing a discussion about a trade-in. Also, find out how a trade-in will affect the lease terms and decide if it’s a good deal for you.
Honestly, it’s often better to sell your old car rather than trading it in, but in some cases, it may come down to your needs and the urgency of getting into a newer car.
3. Leasing for a Longer Period
A standard car lease lasts two to three years. This ensures that when the lease expires, the car is still in good condition and has very few issues. Manufacturers normally give warranties for new cars, which is why you should lease a new vehicle. Most of the warranties last up to five years—or 60,000 miles.
Do not keep the car past the warranty period or you may have to pay for a warranty extension. You’ll also have to pay for its maintenance and repairs. This means you’ll spend more money on top of the monthly lease payments. Finance experts recommend buying the car instead of extending the lease period.
4. Not Getting Gap Insurance
A car’s value starts depreciating the moment you drive it off the dealer’s lot—it doesn’t matter whether you buy it or lease it. To protect yourself from any eventuality, such as the car getting totaled or badly damaged, you need Gap insurance.
Gap insurance pays the difference between the vehicle’s true market value and its depreciated value. For instance, if the car will be worth $15,000 at the end of the lease term, your insurance company will determine its current value and pay the dealership the difference. You’ll not need to pay huge sums of money to cater for the loss.