Leasing has many benefits, but there are also some issues that can make you unhappy. These problems have been a problem in the past and have made leasing unpopular. It is important to be able to identify a good deal. Here are some tips to help you do that.
You should look for high residual value
Many potential lessees don’t realize that the car’s cost to lease is heavily determined by its residual value. This is the value of your car at the end the lease. It basically means the price the dealership will be willing to sell it for when you return it.
Be aware of Mileage Fees and Tricky Down Payments as well as Undisclosed Sales tax and Lease Return Fees
Leasing has a bad reputation for many consumers. Leasing is a complex subject that many consumers don’t understand. This makes it easy for them to be skeptical of leasing.
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- Do not get discouraged by mileage
Many leases stipulate that drivers can only drive 10k-12k miles each year. Most people find this problematic as a 12-kilo mile per year lease only allows for 1,000 miles per month. Your monthly commute will be approximately 650 miles if you drive 15 miles each way to work and 15 to home. Add weekend trips to the grocery store and other errands. You’re now dangerously close to your monthly limit. You’re driving on vacation?
Overage can be very expensive. Leasing companies may charge $0.50 per mile. This is $500 for 1,000 miles and $5,000 for 10,000 miles. Make sure that your mileage usage matches your lease.
- Avoid falling for down payment scams
- There are some fees when you lease a vehicle.
- A security deposit is usually based on your monthly payments and sometimes waived
- Any “cap cost reductions”, such as rebates, or money down, are subject to sales tax
- A cash-out-of pocket down payment
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One trick you should be aware of: Some dealers will claim that your down payment amounts to $2,000. This may seem to imply that you are writing a check worth $2,000. However, you will actually be writing a check that is much more once you have paid your taxes and security deposit. Don’t negotiate your down payment – instead, negotiate your cash out of your pocket.
- Is sales taxes in your quoted payment?
Your lease payments will be subject to sales tax, but it is only due at the time they are collected. You could receive a $500 monthly lease payment from the dealer. However, you might end up receiving a $550 per month bill (assuming that 10% sales tax applies). The dealer didn’t include sales taxes in the payment.
When you receive a quote for a lease payment from a dealer make sure that it includes sales tax. It’s a smart idea to double-check the dealer’s estimate if you aren’t sure of the sales tax rate.
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- Learn about lease return fees
Although lease return fees aren’t as common as once they were, there are still some leasing companies that will charge you a fee for returning your vehicle at the end. These fees may be negotiable so it is important to understand what they are.
It is also a good idea that you are familiar with what a typical damage inspection looks. The leasing company will inspect your vehicle with a fine-toothed brush to determine if there is damage they can charge you for. It’s important to understand what constitutes normal wear and tear and what doesn’t. Also, ask for a sample of damage inspection reports.