Leasing is a great option when you want to pay less for driving the latest models. But there are a lot of mistakes people new to leasing can make when they’re beginning to realise leasing is the right way to go. Here are some of the most common mistakes people make when leasing a car – and how you can avoid them!
Forgoing GAP insurance
“More insurance?” you may ask. “What’s more comprehensive than comprehensive car insurance?” Comprehensive car insurance simply means you have coverage for damage you cause and you may cause yourself, plus fire, theft and other extras. But car insurance has two kinds of payout – for agreed value or market value. Sometimes this does not cover your total lease obligation. That shortfall must come out of your pocket. Having GAP insurance protects against that.
Paying too much up front
We all know that leases have lower repayments than comparable car loans. Some more disreputable financiers tell customers to pay a deposit to force the repayments down even lower. This is a mistake. If your car is written off within the first few months, your insurance company will reimburse your financier and you will never see that deposit again. Instead, use the money for usual repayments or invest it in a term deposit.
Long-term leases are too long
People who lease cars for too long are often paying more money than they ought to. This leaves you on the hook for more servicing and replacement of key components – all for a car you don’t own! It makes sense to lease your car for the length of the manufacturer warranty, which ranges from 24 to 36 months. Any longer than that, it makes more sense to buy outright.
Underestimating your mileage
You shouldn’t calculate your average yearly mileage on the back of an envelope. You should estimate properly using a log book for at least three months and charting the trend to see how far you’re likely to drive in a year. This avoids end of lease fees when you go over your intended kilometres travelled – sometimes financiers calculate costs per kilometre, leaving you with a substantial extra bill!
Not maintaining the car properly
Normal wear and tear in a lease car is considered “fair use” by leasing companies and financiers. For example, scratches bigger than your average business card could leave you on the hook for the repair – at full market price. Don’t assume your financier will “let things slide” – maintain your car and hand it back as if you were selling to the fussiest of buyers. This might cost you some money, but it’s less than what you’ll pay when it gets back in your finance company’s hands.