More and more people are choosing to lease a car, rather than buy. Leasing offers customers the opportunity to drive a newer vehicle for less money and provides the flexibility of replacing the car with a newer model at the end of the leasing period. However, people can make mistakes when leasing, especially if they have not leased before; here are five common mistakes that car leasing customers should avoid.
1. Not maintaining the car
Any damage beyond the expected wear and tear of general use normally means there will be additional costs at the dealers when returning the car. Scratch marks of less than the size of a driver’s licence usually count within ‘normal wear and tear’, but anything above this size may be worth sorting out privately before returning the car to avoid extra fees. Different leasing companies have vastly different guidelines about what constitutes ‘normal wear’, so it is worth asking and obtaining a copy of the lease-end condition guidelines for your own peace of mind.
2. Underestimating the number of miles driven
Most lease companies can offer and advertise low monthly payments because these specific deals have extremely low mileage limits. Standard leases operate at 10,000 or 15,000 miles, and customers exceeding these limits will find themselves being charged anywhere between 6p and £1 per mile plus VAT. Ensure that you comfortably estimate the numbers of miles you will do throughout the lifetime of your lease, and build in a caveat of additional miles to ensure you don’t go over your limit.
3. Paying too much money upfront
Despite the attractive low monthly costs advertised by dealerships, most lease deals involve a hefty up-front payment of several thousand pounds. While that payment is usually put towards part of the car lease payments, this presents a real problem if the car is totalled or stolen in the first couple of months. While the insurer would cover the leasing company for the value of that car, the customer wouldn’t get such a good deal and would be unlikely to receive their upfront payment back – leaving them without a car, and several thousand pounds down. Paying less upfront many result in a higher monthly payment, but it removes the risk of losing the money.
4. Not taking gap insurance
Everyone knows that the value of a car drops significantly the moment it has been taken off the dealer’s car lot, and this is also true of leased cars. If your lease car gets totalled in an accident, or stolen, then the insurance company will pay the value of the car – this payment may not cover the customer’s total financial obligation for the entity of the lease, especially if the car has significantly depreciated in value. In this situation, the customer would be responsible for covering the shortfall. Gap insurance solves this problem and may save you huge sums of money.
5. Leasing for too long
Standard car leases run for between two and four years. Generally speaking, leasing for anything longer than this means you end up paying significantly more money on general maintenance. If you lease the car for longer than the warranty period (usually three years or 36,000 miles) then you’d have to consider paying for extended warranty, along with the additional costs that come at this point in a car’s life including replacement break disks and new tires – all for a vehicle you don’t own. If you expect to be in the same car for an extended period of time, it’s usually more cost efficient to buy one.