Leasing a car can make financial sense when you don’t have money upfront to pay for the full price of a vehicle and just don’t want to deal with the hassles of maintaining a used car.
When your lease ends, you are free to purchase the vehicle or trade it in for something else.
However, since you don’t actually own the vehicle and are essentially paying to rent it out, you need to make sure you’re aware of some of the drawbacks of leasing.
Racking up too many miles or returning the car in less than near-perfect condition could end up costing you in excessive fees and charges.
Here are some important do’s and don’ts when signing a car lease:
Do get a lease only for three years. Most dealerships will offer an option of three, four, and five-year leases but only the three-year lease will be covered by a full bumper-to-bumper warranty.
If you end up signing a four-year or five-year lease, you’ll have to buy an extended service contract and the car’s value might drop significantly with those extra years.
Don’t let the dealership talk you into buying extra services or add-ons you don’t really need.
Do your homework when it comes to buying an extended service contract (if you need one), and any additional items for that particular make or model.
Do search for rebates and special offers.
Some dealerships offer some attractive incentives and special offers, but they may not necessarily offer them to you if you are already determined to sign a lease.
Let the dealer talk you into leasing so that they can give you the best possible deal.
Remember that they are still trying to sell you a leasing package, so you have room to negotiate for a great deal.
Don’t overlook the cost of early termination.
While you do have the option to terminate your lease contract early, you will end up paying a significant amount in early termination fees – so much so that it can offset most of the benefits of leasing altogether.
Make sure you’re 100 percent sure you will be keeping this car for the next few years.
Do negotiate the rates.
The dealership may have some flexibility when it comes to financing your vehicle so don’t be afraid to negotiate!
If you have stellar credit, you’re already in a good position to get a great rate.
Make sure the dealership knows about your great credit history and do your best to secure the most affordable financing package.
Don’t wait until you get to the dealership to calculate your lease payments.
You can use online calculators like this Auto Lease Calculator from Edmunds.com to get a general idea of what your lease payments will be based on the sales price, the trade-in value of your vehicle, and the lease details.
Run the numbers beforehand so you have a general idea of what the range of payments will be for the car you’re interested in.