If you’re thinking about leasing your next car, be sure to avoid making these common mistakes:
1. Forgetting to Negotiate
Never take the first offer. The dealer may tell you it’s that or nothing, but it’s simply not true. Focus first on the purchase price of the car, which is listed in the contract as the gross capitalized cost. Then, pay attention to the fine print in your contract. You’ll likely see a bevy of dealer fees factored into your overall payment, but some of these are not necessary. Figure out which ones can be discounted or eliminated altogether, which will help lower your overall monthly payment.
2. Negotiating on Payment Instead of Price
With leased cars, dealers often try to get you to focus on the monthly payment, rather than the gross capitalized cost. Even though you’re not buying the car, the agreed upon purchase price is what will ultimately determine your monthly payment, and you’re well within your right to negotiate. Do your research ahead of time, so you’re armed with facts about average sale price for that make and model in your area.
3. Paying Too Much Upfront
Don’t get fooled by ads for low monthly lease payments. Those usually come with a hefty down payment, which is used to pay a portion of the car lease in advance. That’s problematic if your car is wrecked or stolen in the first few months because you would be out the down payment money and a car. The rule of thumb is to put down no more than $2,000. In a lot of cases, it makes sense to put nothing down, unless you want to lower your monthly payment.
4. Underestimating Annual Mileage
Before you enter into a lease, you need to be realistic about how much you drive each year. Most low-monthly-payment lease advertisements come with very low annual mileage limits (usually around 10,000). You can negotiate a higher limit, but it will increase your monthly payment. And truthfully, if you drive more than 15,000 miles per year, a lease may not be a good choice for you. The reason? If you go over that amount, you could be charged anywhere from 10 to 20 cents per mile at the end of your lease, which could mean thousands of dollars out of pocket.
5. Forgetting GAP
Leased cars, just like purchased ones, lose value the moment they’re driven off the lot. If your car is totaled in an accident or stolen, your insurance company will pay for the value of the car and you could be stuck with the difference of what you agreed to pay over the term of the lease. GAP insurance will help cover this difference, so you don’t have to pay out of pocket. If your dealer doesn’t offer GAP as part of the contract, look elsewhere.
6. Not Maintaining the Car
Normal wear and tear is expected, but if you turn your leased car in with significant scratches or dents, you’ll be charged the full market price for the repairs. It’s important to understand how your lease defines “wear and tear.” Some lease servicers can be extremely picky, so be sure you know the expectations from the get-go. Then, when it’s time to turn in the car, find an affordable repair shop to take care of any big damage beforehand.