July 14, 2019
A new car averages around a price of $36,000, with the average monthly car payment of $554 a month for nearly six years, only if $6,000 is put down. This goes to show why leases make up almost a third of the new car market.
There are many people who budget monthly and live that way. To avoid that $554 payment each month, people can lease a new car instead. It does greatly decrease your monthly payments and costs, but if you are unaware of the lease agreement it can be costly, and it is always crucial to read all parts of the contract before signing. Here’s what you need to avoid when you lease a car, four common mistakes:
1. Paying too much money upfront
New cars are advertised by the car dealers as low monthly lease payments but you would most likely be stuck spending thousands (probably a couple thousand) right up front in order to get the payment. So what happens if something happens to the car, like it is stolen or is in an accident early in the lease, a few months in?
If the situation arises, the leasing company will be reimbursed for the value of the car by the insurance company, but your upfront advance is most likely not going to be given back to you. Although you gave a large amount in the first place for the car, you will no longer have one. This is the reason we recommend that the maximum upfront payment for your lease should be about $2,000 when leasing a vehicle. There are different situations, in some you might be able to put no money down and still get a good lease, meaning if all goes bad on the lease they can’t hold that large amount of your own money.
2. Underestimating how many miles you’ll put on the car
If you notice an ad for a low monthly payment lease, this could be because there is a low restriction on the number of miles you can drive the car each year in the lease agreement. It is normal that leasing contracts include annual mileage limits, ranging from 10,000 to 15,000 miles. If you drive over these mileage limits, each mile you drove over-the-limit could be charged up to 30 cents each at the end of the lease. If the mileage limit is exceeded by 5,000 miles, you can end up owing up to $1,500 if it is calculated at 30 cents per mile on a car you do not even drive or own anymore.
It is important to know what your driving habits are before leasing a car, as you can avoid extra charges this way. If you think or know that you are most likely going to drive over the limit that the agreement states, you can either ask to increase the mileage limit, but this will likely cause your monthly payment to increase.
3. Not maintaining the car
If the damage on your car goes much farther than the normal wear and tear of a car, then this might get you in some trouble and cause some additional fees when the time comes to return the car to the dealer.
Different dealers have different definitions of “normal.” Your car will be inspected by your lessor before your car is turned in and search the car for damages like scuffs, dents, and scrapes along the body along with the wheels, excessive wear on tires, any windshield or window damage, and also any stains or tears in the upholstery. All inspectors are different, do not assume yours will be lenient.
Before you lease a car, it is important to ask and be informed about the lease-end condition guidelines. The types of damage you will be responsible for before you return the car or pay will be laid out in these guidelines.
If there is significant damage to the car, the drivers will most likely be expected to pay the full market prices for all repairs to the car.
4. What happens if the lease is too long?
A normal lease length for cars is three years, however, some can go on longer. Although, those who have leased their cars for too long can pay extra money in maintenance in the long run. Make sure your lease period either is shorter or matches your car’s warranty period if you rent a car. Not all lenders are the same, warranties differ, but they will normally last either up to 36,000 miles or three years - whichever comes first.
If the car is kept for longer than the period of the warranty, you should think about getting your warranty extended. If not, you could end up liable for repair costs and maintenance costs for a car that you no longer own, along with still paying for monthly lease payments.
Opting to lease a car rather than buying one can be a good way to drive a new car with the latest features and technology for less cost for you each month. By conducting some research and looking around along with reading through your agreement, it is easy to find a lease that fits your needs and your budget.
If you’re still torn on whether to buy or lease, give us a call at (914) 922-1571. We’re happy to help you make the right decision!
