A lease contract is stricter than a financing contract to purchase
a vehicle. If you think, for any reason, that you
might end your leasing contract early, DO NOT LEASE. This
is costly. Leasing companies don't like it when customers try
to 'get out' of a lease, so they punish you for doing so...in DOLLARS.
If you plan on ultimately owning the car,leasing
will cost you more. It is almost always more expensive to
lease the car and later exercise your purchase right than to buy the vehicle
from the start, using credit wisely.
Lemon Laws do not apply to leased vehicles in some states. Check your leasing company's reputation and your state's current lemon law.
Remember that sales tax may be added to advertised lease payments. The quoted lease payments usually don't include sales tax, and when sales tax is added, your monthly payments may be higher than you think. Most states tax your monthly payment, but some states reportedly tax the car's full value even though you are using only a portion of the car's value. Be sure you know (and get in writing) the amount of your monthly
payment, including any sales tax. This is especially important
if you live in Illinois or Texas.
Watch your numbers. Check for any additions, or 'junk
fees,' that the dealership may add to your lease contract. Examine
all the lease documents line by line. Know what the termination fees
are before you sign. The initial price of the vehicle is the biggest
factor in determining your payment, so always negotiate this first, before
you discuss trade-in value. Be alert. For example, if a dealer
offers to take $3,000 off the price of the $25,000 car you want to lease,
make sure that $3,000 is not added back in somewhere else, by lengthening
the term of the lease, or in "hidden" costs and fees.
Stick to your leasing limits! Don't go over
your pre-determined mileage. Extra miles can cost about 10-15 cents
per mile. For example, if you go over your limit even by 5000 miles,
you may have a mileage fee ranging from $500-750. This can really add
up!
Check with your insurance agent before you lease and figure this
into your costs. Most leasing companies require you to keep
auto insurance with higher, more expensive coverage. Any extra insurance
costs should be figured into your transportation budget and can be an additional
cost of leasing. A typical policy for a leased vehicle would include
$100,000 per person/$300,000 per occurrence liability coverage, $50,000 property
liability coverage and require that you have no higher than a $500 deductible.Remember,
the car belongs to the leasing company, and they want to protect their investment.
Keep good records. Document all oil changes, tune-ups,
inspections, etc. and make sure you do them on time or the leasing company
might charge extra for excess 'wear and tear.' To avoid
disputes and extra charges, have your leased vehicle detailed and photograph
it thoroughly before you turn it in. Then be present for your car inspection
and get a copy of the report.
Do not make large down payments on leases. In a purchase
contract, a down payment has value because it lowers your principal and therefore
lowers your monthly payment. But with a lease, you receive no advantage
and lessen the advantage leases offer:Less money upfront.
Get gap insurance if needed. This type of insurance
covers situations such as theft or wreck, when you end up owing more on the
lease than the car is worth. Standard insurance will cover up to the
car's value or even the replacement value, but if the lease amount you owe
is higher, standard insurance will not cover the difference. If you
have negotiated well and stick with a short lease, gap insurance may not
be necessary (see above). Many leasing companies include gap insurance
as part of the lease.
