A car is oftentimes a necessity for survival in modern life. To get to grocery stores, school, or work, self-provided transportation is necessary, especially in rural and, often, suburban areas where public transit might be spotty or less consistent. But fronting a down payment and making hefty monthly payments thereafter for five, six, or even more years, can be intimidating or, for some, downright impossible.
It makes sense, then, for many people to consider leasing their vehicle. A lease is, in essence, like renting a car for an extended time. To lease a car, you put down a small down payment (very small – less than the typical 20% down payment you’d make when purchasing a vehicle) and then make monthly payments (again, typically less than those you’d make when purchasing) for the term of the lease agreement. When the lease expires, you can choose to either return to the car or negotiate to purchase it from the dealer.
But if you’ve never leased before, how can you be sure you’re getting the best deal? What fine print should you look for? What questions should you ask? Read on to find out.
Do Your Research
When you start the lease researching process, don’t set out to definitively end up in a particular car. Make a list of all the cars that fall in your price range and meet your needs, be it a compact, sedan, truck, SUV, or van. Shopping around for a lease, just as you shop around for a purchase, will always pay off in the long run. It helps you find the best deal, and gives you ammunition for negotiating when you finally find the car you want.
Whether you are leasing or buying, test drives are a must. Test driving a car that you’re going to be spending the next several years in will maximize your comfort. You want to make sure that:
- The seats are supportive and comfortable for trips long and short.
- The gauges and displays are easy and convenient for you to read.
- The navigation is easy to reach and operate.
- You like the quality and can effectively use the sound system.
- The ride is comfortable and what you expect.
You don’t want to sign a lease because it seems like – or even actually is – a good deal without test driving the car first. There’s nothing worse than being stuck with a car that you don’t like, especially because there is often a penalty for turning your car in before the lease expires.
Shop Around & Compare Lease Specials
Just as when you are purchasing a car, you should shop around for your lease. Different dealerships may run different incentives, and price shopping will give you ammunition to negotiate with your salesperson. It will also give you the confidence to walk away from a bad deal, knowing that there are better options out there – even if it’s not necessarily the car of your dreams. When you shop around, don’t just pay attention to the price (which includes not only the down payment, but the length of payments and amount of monthly payments) to make sure that you are not only able to meet the monthly obligation, but that you’re also not overpaying throughout the life of the lease.
Be Mindful of Car Lease Mileage
Perhaps more important than the financial aspect of the lease is the lease mileage. Leases generally dictate how many miles can be driven, on average, during each year of the lease. Alternatively, the lease may state how many total miles can be driven over the life of the lease. If you go over the miles on the lease, you will be slapped with hefty penalties. If you find an attractive lease, but are nervous about the mileage, consider purchasing extra mileage up front. Many times, if you don’t use all the extra miles you buy, you can be reimbursed for them. Ultimately, be cognizant of the lease mileage will help you save money and get the most from your lease.
Car Lease-End Details & Process
Make sure the terms of the lease are clear and fair. Note any fees and penalties for turning in your car early. Often these can be subverted if you are trading in your car for an upgrade or better lease through the same dealership. But if you think you might turn the car in before the lease expires, you may want to negotiate that upfront, to avoid penalties.
Obtain GAP Insurance
GAP insurance stands for Guaranteed Auto Protection insurance and is useful to have on a leased car. GAP insurance covers the difference between the actual cash value of the car and the amount remaining on the lease or loan. It essentially ensures that whatever amount you owe on the lease will be paid in the event that the car is stolen or totalled, for example. Many lease contracts will include GAP insurance. If they don’t, it’s certainly something that you can either purchase on your own or negotiate into the lease. Most experts recommend not leasing a car without GAP insurance.
Leasing a car is often a viable financial option for individuals or families who don’t want to or can’t provide a hefty down payment for a car purchase. Leasing the car will allow you to drive the new car you want without having to stretch your budget beyond reason. By entering into a long-term rental situation, you will have the transportation you need at the price you desire. If you follow these tips, you may even be in a position to purchase the car at the end of the lease or turn it in for another new car to follow!
Protect yourself by carefully reading the lease agreement on your own, with a friend or partner, and with the salesperson so that you fully understand your responsibilities and the dealership’s regulations. Then you can drive into the sunset in your brand new dream car.