7 Signs Leasing Your Next Car Is the Wrong Move
When you’re in the market for a car, it can be tough deciding whether to buy or lease. When you lease, you’re essentially borrowing a vehicle for a set period of time — sometimes with a limited number of miles, too. When you buy, that car is yours, once you’ve paid it off.
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If you’re on the fence about leasing your next car, you might have good reason for it. Here are some signs that leasing is the wrong move, and you should buy instead.
The Mileage Limit Is Too Low
One of the biggest limitations with a car lease is that you can only drive it a certain number of miles. Car dealerships usually have this mileage limit to help them gauge what the resale value of the vehicle will be once you return it. Unfortunately, this doesn’t exactly help you.
According to Jan Glovac, co-founder of Wheel Front, you could be charged additional fees for any extra miles you drove when you return the car. This can also be stressful if you end up going over the limit.
Joe Giranda, director of sales and marketing at CFR Classic, added that many car lease agreements have mileage restrictions of around 10,000 to 15,000 miles per year. If you’re leasing a car and want to take multiple long road trips, you might not be able to without going above the limits.
But how do you determine how many miles you’re going to need in a year?
“Take your estimated or current mileage and add 25% — if that exceeds the allotted mileage in the lease, you will likely end up owing mileage fees at the end of the lease,” said Ezra Peterson, senior director of insurance at Way.
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Insurance Is Too High
When you get a car, you’re going to need to get insurance. But policies on leased vehicles tend to be pricier, especially when the vehicle itself is more expensive.
“Many leases require higher liability limits and are often a mechanism to make higher-value vehicles more affordable; however, insurance rates on more expensive cars, with increased coverage levels, can cause premiums to be 2-3 times what you’re paying now,” said Peterson.
Get insurance quotes before leasing or buying a car and compare your options to see which fits better into your budget.
The Numbers Don’t Add Up
Leasing might seem cheaper than buying a car, but you don’t get to own it after a few years. This can make leasing more expensive than buying a car in the long run.
If you’ve run the numbers and determined that leasing multiple vehicles over time is significantly more expensive than buying one, you might want to consider purchasing instead.
Keep in mind that you might be able to buy a car you’ve been leasing. There may be additional fees, but it’s something to consider if you’re already leasing a car and want to purchase it instead.
You Want a Sense of Ownership
Many people lease their vehicle because they don’t want to commit to anything long-term. But if you’re starting to feel like you want to own your vehicle, leasing probably isn’t the right move.
“If you’re looking to build equity or prefer the idea of owning your car outright after several years of payments,” said Giranda, “leasing won’t fulfill this desire, since you’re essentially renting the car for a set period.”
You’d Want To Make Modifications
If you’re a car enthusiast who wants to modify your vehicle, leasing probably isn’t the best idea.
“When you lease the car, you do not own that car. So customization is generally not allowed,” said Glovac.
Even something as simple as adding larger wheels could go against the contract. If you do make any modifications, you’ll typically need to revert them back to what they were before the lease term ends.
You Already Want To Get Out of the Lease
Another sign that leasing your next car is the wrong move? You’re already looking for loopholes that’ll let you get out of the lease early.
“There are ways to get out early of a lease early, but it can be quite costly, since you are obligated to meet the payments previously contractually committed,” said Renee Horne, chief marketing and customer experience officer at JPMorgan Chase & Co.
If you already have a lease, there are a few ways to get out of it. One of the best ways is to transfer your lease to someone else, said Glovac. “Remember to ask your leasing company before making the changes,” he added.
Most car leases also have an early termination clause, though you’ll usually still have to pay a fee. “If you are within your prorated miles and the vehicle is undamaged, this one-time expense can clear you of the obligations under the lease,” said Peterson.
You’re Not Prepared
Whether you’re leasing or financing a vehicle, it’s important to do your research and make sure you’re prepared for the responsibility and cost of having a vehicle.
“Asking the right questions upfront and understanding why they matter can save you some regrets down the road and maybe even save you some money in the process,” said Horne. “Make sure you ask about all costs, including upfront and drive-off costs, leasing specials, residual value, mileage limits, additional fees, lease duration and end-of-lease procedures to give you a clearer picture of your leasing options.”
If you do decide to lease a car, negotiate first.
“Learning to [negotiate] involves understanding where you have room to maneuver. Focus on negotiating the capitalized cost, which is the agreed-upon value of the car that can include things like taxes, title fees, license fees and other costs that directly impact monthly payments,” said Horne. “It’s important to thoroughly review the lease agreement and make sure everything looks accurate based on the terms you negotiated with the dealer.”
Be polite, professional and direct when negotiating. And keep in mind that the time of year — and how in-demand the particular vehicle you want is — can impact how willing the dealer is to work with you.
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This article originally appeared on GOBankingRates.com: 7 Signs Leasing Your Next Car Is the Wrong Move
