7 Smart Car Leasing Tips
If you are in the market for a new car, leasing is an option you may want to consider. With leasing, you typically can afford a better car as your monthly payments come in lower. You’re also limited to the number of miles you can drive in a year, so if you’re a frequent driver, this option may not be right for you.
Leasing a car works in the same way that you buy a car. The difference comes in the end, when you discuss your financing options with your dealer.
1. Do your research. Find the vehicle you like, identifying its model year, the make and model, and the trim level. Learn everything about its sticker price and obtain invoice pricing through a site such as Consumer Reports.
2. Let’s make a deal. You know what the new car is worth and just like buying a car you need to negotiate the purchase price. Don’t tell the dealer that you’re leasing, but negotiate as if you’re looking for the best deal. That’s because you are.
3. Factor these in. Once you get the lowest price, explain to the dealer that you plan to lease the car. There are different aspects of the lease deal you should negotiate including your down payment, your mileage limit and the purchase option price. You may not intend to buy the car later, but in case you do, then you know what the buy out amount is.
4. Keep it short. Most leases are for two to three years, some can go a bit longer. Avoid any lease that outlasts the new car warranty — you want the manufacturer to assume major repair costs during the lease term.
5. Watch out for fees. Familiarize yourself with the lease contract. There are certain hidden costs that can make your lease deal expensive including fees for excess wear and tear.
6. Buy extra miles, if needed. For some drivers, the prospect of going over their mileage limitation is a very real one. Typically, you’ll pay 20 cents per mile for each mile over your limit. That amount can add up. Consider buying your overage miles in advance, perhaps negotiating a lower rate up front.
7. Buy it back or not. You may not think about buying a leased car at the end of your lease term, but don’t automatically dismiss this option. Know its residual value and at the end of the lease term you may discover its worth far more or less than its agreed upon value.
Buy GAP insurance — guaranteed auto protection — that ensures your vehicle is paid off if it is in an accident or is stolen. GAP insurance may be included with your lease. If not, your auto insurer can sell you a policy.