The 5 Biggest Mistakes People Make When Leasing A Car
When signing a lease agreement, you are financing the vehicle for a specific period. After the lease is up, you can purchase the car or hand it over to the dealer. A car lease is an incredibly useful option for people who are not interested in keeping vehicles for long. The text highlights five mistakes that people make when leasing a car.
Not Signing Up for Gap Insurance Cover
Gap insurance cover protects the client from paying out of pocket in case the sum assured is less than the loss incurred during compensation. Insurance companies usually pay the cost of the car at the time of the loss. This poses a problem for the lessee when the rate of depreciation and interest paid when financing the car is less than the amount owed at the time of the loss or claim. You should ask if the contract includes this form of insurance coverage before signing the contract.
Paying Large Sums of Money Upfront
Most people are attracted to the low monthly payments advertised on lease agreements. However, most dealerships charge large sums of money up front to pay off a significant part of the car lease. Paying up large amounts early on is not advisable. In case the vehicle is stolen or involved in an accident within the first few months of the lease agreement, the insurance company reimburses the lessor and not the lessee. You should compare several ICL car leasing deals and sign up for a lease contract that charges low upfront costs.
Lease contracts limit users as to the number of miles they can cover in a year. Generally, mileage is capped from 10,000-15000 miles; an additional charge applies if the motorist exceeds this limit. The monthly payments usually increase to reflect the higher limit. Some leasing companies require clients to make advance payments to cater for the overcharge. The charges vary from one company to another and add up pretty fast if you are always on the road. You should assess your driving habits carefully to ensure the limits are feasible. You can ask your dealer to increase the mileage if you think you are going to exceed this limit. If you make a prepayment, ensure a clause is included in the lease for the reimbursement of unused miles.
Being Reckless with the Car
Leasing a vehicle is more involving than buying one. This is because you are required to return the car in the same condition as the time you purchased it, i.e., keep the vehicle free of scratches, fabric stains, dents, dings, cigarette burns and other elements that may cause wear and tear. The leasing company may make a few exceptions, e.g., if the scratch is small, no penalty applies. However, if the vehicle has excessive damage, additional charges apply. The leasing company may send a bill of repairs at the market price if the car is damaged significantly.
Focusing on the Monthly Payment
The rule of the thumb is to focus on the total cost of the vehicle instead of your monthly spend. If you are using a loan to service the lease payments, estimate your spending limit to determine the kind of car you want to purchase. Take your monthly payment, run it on the loan calculator based on the terms of the loan and subtract the estimated fees and taxes to determine your spending limit.