More and more people are opting to lease a car instead of buying. Millennials in particular are choosing to lease more frequently than buy with more than 34% of them opting for a lease, according to a recent study by Edmunds. That same study said that the first half of 2016 had the highest number of new car leases on record. Leasing a car can often be a cost-effective alternative to buying a new car. But before you lease a car, here are some things you should know.
- Mileage limits. Most leases have limits on the number of miles you can drive per year. These limits often range from 9,000 to 15,000 miles. If you go over the limit, you could end up paying a hefty fee per mile.
- Cosmetic maintenance. Obviously, you’ll want to keep the car in good working order while you have it, but you’ll have to pay special attention to the appearance of the car as well. Generally, when the lease is up, the lessee will turn the car in. The dealer will then sell it as a pre-owned vehicle. In order to get the best price, the car has to look as good as it can.
- Down payments. You may be asked to pay money down up front for the car. But be forewarned that putting down a significant amount up front to get lower payments means that if the car is totaled or stolen, you’ll be out a lot of cash since the insurance company will reimburse the car dealer and not you. You’ll have no car and your available funds will be gone as well.
- Gap insurance. Since cars depreciate (meaning, they lose value) as soon as they are driven off the lot, the value of the car may be lower than what the insurance company will reimburse if the car is totaled or stolen. That means you’ll have to cover the difference if you don’t have gap insurance. Be sure to ask the dealer about gap insurance coverage.
- Warranties. Lease periods can vary anywhere from two to four years. Before you sign a lease deal, you’ll want to find out how long the warranty will last to be sure that the warranty goes as long as the lease does. If the warranty runs out, you’ll end up paying out of pocket for maintenance on a car you won’t own for much longer.
Leasing a car can be the right choice for someone looking for low monthly payments who is also willing to abide by the terms of the lease. If you have bad credit though, you may find yourself ineligible for a lease.
If you’re ready for a new car but your credit is keeping you from getting approved, CreditYes can help with our bad credit auto loan program! We can match you with a dealership in your area that will be with you ever step of the way. Our service is fast and free. Fill out our secure online application and get behind the wheel of your next car today!