The most significant advantage to leasing a car is the ability to drive more car for less money. Simply put, you can get a more expensive car than you’d be able to afford if you were to buy it when you lease. However, the other side of that is you will also have to give the car back at the end of the lease term.
With this in mind, it’s a good idea to familiarize yourself with these tactics for avoiding extra fees when you lease a car. After all, why pay even more for a car you’re not going to keep?
Negotiate the Purchase Price
Your monthly lease payment is based upon the difference between what the car is expected to be worth at the end of the lease and the purchase price of the car (not the MSRP). In other words, you can negotiate the price upon which the lease is based, even though you’ll be doing so on behalf of the leasing company, which will actually own the car. With that said, the better the price you negotiate, the lower your monthly payment will be.
Carry GAP Insurance
If the car is totaled and its value is less than the leasing company was expecting the car to be when you returned it, you could be on the hook for the difference — unless you got GAP insurance coverage to bridge the divide between the actual cash value of the car and its contracted residual price. Most leasing companies require this as part of the agreement — which is OK. Just check to make sure yours does before you take the car off the lot. Get the insurance if it doesn’t.
Minimize Your Drive-Off Costs
Those ads you see touting amazingly low monthly payments when you search “lease a car near me” typically require you to leave a rather significant chunk of cash behind to get things started. Most financial gurus say this is a bad idea. In fact, most advise leaving no more than $2,000 at the dealership to get the lease started.
Yes, this will make your monthly payment higher — though it will still be less than it would if you were financing a purchase. The idea is to minimize your exposure should something happen and the car is declared a total loss. In that instance, the leasing company will get made whole (it owns the car — remember?) and you’ll be left hanging. The car and the money you paid will be gone, plus you’ll be looking at coming up with more money to get another lease started.
Estimate Your Annual Mileage Carefully
One of the factors upon which the residual value of a leased car is based is the number of miles it is driven over the course of your lease term (which, by the way should always be shorter than — or coincide with — the warranty coverage on the car).
In most cases, you’ll have a choice between 10,000, 12,000 and sometimes 15,000 miles per year. You’ll be looking at anywhere between 15 and 25 cents per mile to compensate the leasing company for the additional value of the car your excessive driving consumed if you go over the amount for which you contracted. Getting this right beforehand helps you avoid those charges.
Maintain the Car Carefully
The condition in which the vehicle returns is the other factor affecting the residual value of the car. It will be inspected for excessive wear and tear when you turn it in. You’ll also be expected to have a matching set of tires on the car, with good tread left. If the car came with run flat tires, you’ll be expected replace them with run flats if they wear out. Scratches, dents and worn carpets will be counted against you. Long story short: If the car comes back looking shabby, you’ll be charged whatever it costs to put it right for sale.
Heeding these tips will help you avoid extra fees when you lease a car. Are there other of which you’re aware we didn’t cover here? Share them in the comments section below.