When you lease there are often restrictions on mileage. If you put a lot of miles on a vehicle each year, you will need to negotiate an open-end lease because in most cases the maximum mileage allowed is $15,000. If you put extra miles on the vehicle, you pay a penalty of approximately 15 cents per mile. If you are leasing a luxury car, the penalty can be as much as 25 cents per mile. That means that if you go over the limit by $10,000 miles, you will pay a penalty of between $1500 and $2500 and going over 10,000 miles in a five year term is very easy to do.
Insurance on Leases
Insurance companies usually charge higher premiums for leased vehicles. If you have a clean driving abstract, are an experienced driver, have a permanent residence and are a mature person, the extra fee is very little, or none at all. However, if your driving abstract has accidents and speeding tickets on it or if you are a young driver, the premium will be a lot higher when you lease.
Buyer Beware!
When you lease, you pay for the most desirable years of a vehicle’s life. You pay the difference between the purchase price paid and the salvage price at the end of the lease agreement. When the dealer enters the salvage price on your leasing contract, it affects the amount of your monthly payment. So, if you are leasing a vehicle, choose one that will hold its value well. Avoid all vehicles that will depreciate rapidly.
Less than honest dealership practices are known to occur. Some dealers will try to put depreciation values back onto you by recording a very low residual value for the vehicle at the end of the leasing term. If you feel this is happening, don’t sign the contract.
Also be aware of all fine print and clauses in the contract. Some dealerships will enter steep charges for such things as “excessive wear,” or add an atrocious price on excess mileage. Be sure to read your contract with an eagle eye several times before signing. Don’t let sales personnel pressure you into it before you feel comfortable with the terms and conditions of the lease. If the salesperson says something like, “There was another person in this morning that is very interested in leasing this vehicle,” let it be known that you are going to read the contract thoroughly and that if this other person wants the vehicle that bad, they certainly have the option of signing the lease. This is an old sales scam to get a person to sign immediately.