According to recent research, car leases make up approximately one-third of the new car market. Apart from that, the average price of a new vehicle is around $36,000 and the average car payment accounts for $554 per month for the duration of sixty months.
This monthly payment is normally calculated after paying $6,000 down. It is a well-known fact that leasing is the cheapest way to get a new vehicle.
This is generally due to the fact that the majority of people live on a monthly budget. Thus, they look at things that they can afford to pay per month.
Leasing gives people a chance to drive a new car without paying $554 per month as it happens with loans.
Car leases allow people to lower their monthly payments. Based on research, the average lease payment is $466. However, this can be also very expensive for most people.
People make a lot of mistakes when leasing a vehicle, therefore, we have created a list of the most common things to avoid.
1. Leasing A Car For Too Long
In most cases, the car lease duration is three years, however, it can be even longer. People leasing a car for too long might encounter paying extra money in maintenance.
You need to make sure that your lease period matches the car’s warranty period. The average warranty period is three years or 36,000 miles.
If you decide to keep the car for a longer period of time you will have to consider the extended warranty.
Otherwise, you will get exposed to repair and maintenance costs for a car that you even do not own while at the same time making monthly payments.
Leasing specialists say that if you actually want to drive a leased car for longer than the warranty period then it will probably be wise to buy it.
2. Not Acquiring Gap Insurance
You should not avoid gap insurance when driving a leased vehicle. The word gap means the difference in what you still have to pay and the actual value of the car. To make it more clear, consider the following example.
Imagine that your lease contract gives you a chance to buy the car for $20,000 when the lease expires. This is called the car’s residual value.
In the case that the insurance company claims that the market value of the vehicle at the end of a lease is only $10,000 you will have to pay the remaining $10,000 yourself to cover this gap.
However, if you have gap insurance, it will not be the case for you. Thus, when you lease a car, make sure that gap insurance is included in the contract and if not, it is advised to pay extra money to get it or look for a vehicle that already has it.
3. Not Knowing How Many Miles You Will Put On The Vehicle
In most f cases, cars that have restrictions on the number of miles you are allowed to drive per year involve low lease monthly payments. Leasing contracts normally allow an annual mileage of 10,000-15,000.
If this limit is exceeded, the leasing company will charge you 30 cents on every mile over the limit at the end of the lease agreement.
If you are strongly convinced that you will exceed that limit, you should ask for an increase but it will also increase your monthly payment.
4. Making A High Upfront Payment
Leasing involves making an upfront payment. Vehicles with low monthly payments normally require paying several thousand dollars upfront in order to get the deal.
However, it can be also the case that a car gets stolen or crashed within the first few months.
If this occurs, an insurance company will reimburse the value of the car to the leasing company but the upfront payment that you have made would probably be lost. Therefore, you will lose a lot of money and will be out of a car.
Thus, it is recommended to pay as little money as possible or even avoid any upfront payments.
As an option, you can deposit the prepayment cash into an interest-bearing account instead of an upfront payment. This money can be used to help you make monthly lease payments.
5. Poor Maintenance Of The Car Or No Maintenance At All
If you damage a vehicle beyond allowed wear and tear, you will get exposed to additional costs when the time to return a car comes. Be sure that if the damage is excessive a leasing company will definitely charge you for that.
Even though the definition of normal use differs from dealer to dealer do not expect that your inspector will be lenient on you.
When you return a car, it will be assessed for things such as scratches on the wheels and body, damage to the windshield and windows, exessive use of tires and strains.
You need to make sure that you are aware of the lease end condition before leasing a car.
Most dealers will provide you with guidelines that state the type of damage that is not acceptable and will involve extra cost.
Keep in mind that if the vehicle is seriously damaged, a leasing company might request you pay the full market price for repairs.