10 Things You May Not Know About Car Leasing

By: Contributor

Use These Tips To Get the Best Lease Deal and Avoid Unnecessary Costs

1. Beware the extended service contract

In most cases you won’t get your value back. You do not need to get one. Dealerships make their money from service and charge more.

2. No-haggle pricing is for suckers

No-haggle pricing is not to the buyer’s benefit. You are agreeing to set a price that works fully to the benefit of the dealership. Make sure to haggle as much as you can.

3. Paying too much upfront

The money you pay upfront just goes toward the lease, have a larger monthly payment and put the down payment you were going to make into an interest-bearing account or use it for the lease payments. If the car is wrecked or stolen the reimbursement goes to the finance company not the buyer, which is results in them getting your down payment and you missing out on the big money you just put down. If you absolutely have to put money down, put down no more then $2,000.

4. Not Getting Gap Insurance

The value of any new car drops significantly after it’s driven off the lot — and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, New York, which originates and services car leases for credit unions.
New car values drop dramatically after it is driven off the lot. If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that sum may not cover the remaining amount due on the lease. Gap insurance prevents you from having to come out of pocket.

5. Understanding Miles You Need

Low prices leases usually come with low miles. Leasers need to know approximately how many miles they need to drive per year and then purchase a lease that reflects that. The more miles the higher the price, however it is much better than paying overage costs of .10 per mile or more.

6. Leasing too long

Once a car warranty expires you need to buy an extended maintenance contract. Buying this coverage for a leased car just does not make sense. You should never lease a car longer then the bumper to bumper warranty (typically 36,000 miles). If you want the car than longer than that, you should just buy it.

7. You forgot about the fees

Dealers try to put in all sorts of fees that can be tied to paying money if you do not lease another car from them or vice versa. You can negotiate these fees and they should be fully explained before you agree to any of them. Save yourself the surprise of an extra $1,000 to $5,000 when you sign the lease agreement.

8. You thought leasing would save you money

Leasing new cars constantly removes the benefit of owning a car outright and not having any payments. A lease payment Is still a payment but you never actually own anything.

9. Leasing affects your credit score

Lease payments affect your credit just like purchasing a car. Late payments or missed payments have the same effect on your credit.

10. Exit options

Returning a leased vehicle early has the effect on your credit just like defaulting a car loan. You can however use sites like Swapalease to sublet your car to someone looking to take over a lease.
If you are considering buying out a lease, look at the value of the car versus what it will cost you and only buy if the value exceeds the buyout price. Also remember you can negotiate that buyout price, so make sure to not accept the initial buyout price.

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