When you decide to lease a car, there are a number of things you need to consider. From the lease term to the mileage limits to the hidden fees, there is a lot to unpack.
But before we get into the nitty gritty of specific lease questions, you need to ask yourself first: Is leasing a car a good idea? If any of the following apply to you, a car lease might be perfect for you.
- You don’t drive a lot, and don’t want to be bothered with repairs and maintenance.
- You want a new car every few years.
- You don’t want to deal with selling the car.
- You want to maximize tax deductions (you will be using it as a business car).
Leasing a car is also great if you want to ensure you get the lowest monthly payments and want to put less money down to drive off. So if leasing a car sounds like a good solution for you, let’s talk about what questions you need to ask before you lease a car.
How Long is the Car Lease?
One of the biggest questions you need to ask about your car lease is the length of term. There are usually three options you have to choose from: short term (less than one year), 2-3 years, or long term (4 or more years). And there are advantages and disadvantages to all of these.
Short term leasing
Short term leasing of less than one year is not always an option. But it can be a good solution for you if you need a car quickly but don’t want to be tied down to anything or make a long term commitment. Certain dealers will offer leases of 3, 6, 9, or 12 months. But with these terms, the payments will be much higher than with other longer lease terms. That is because depreciation occurs most aggressively in the first year of a car’s life.
2-3 year leasing
Two years is typically the shortest period that a dealer will offer. The monthly payments will be lower than a short term lease, but still will not be very low. Again, the largest amount of depreciation occurs in the first year, so the dealer needs to account for this. A three year lease will provide you with lower monthly payments than a two year lease, which is why a 3 year lease is the most popular lease term.
When leasing, you want to be sure that the car’s warranty will be active for the entire length of your lease. If the warranty expires, you will be on the hook for whatever repairs are necessary. A typical car warranty will last at least 60,000 miles, which will extend the entire length of the three year lease.
Long term leasing
Four years is typically the longest that you can lease a car for, but you may find a rare five year lease here and there. The monthly payments will be lower the longer your lease term is, so if prioritizing low payments is your main goal, a longer lease might be the best option for you. But be sure that the warranty will cover for the length of your lease.
Deciding which lease term is right for you
There are pros and cons to each lease term, so consider the following when deciding which term is best for you.
- What monthly payments are you comfortable making? Remember, the shorter the lease, the higher the monthly payments.
- Will you be leasing a business car? If the car will be used for business, you may find deals on 2-3 year leases that are lower than personal use leases.
- Are you comfortable making a commitment? If you don’t want to commit to anything long term but need a car now, short term leasing might be right for you.
There’s a lot to consider, but most people will find that a standard 3 year lease will provide them a balance of lower monthly payments, sufficient warranty coverage, and the ability to get a new car in the not-too-distant future.
How Many Miles Does The Lease of the Car Include And What Happens When I Go Over?
Mileage limits are another major factor of a lease. Car leases always have a limit to the amount of miles that you can put on the car per year, typically 10,000 or 12,000 miles per year. If your mileage limit is 12,000, that’s only 1,000 miles per month. That equates to 250 miles per week, so if your commute is 25 miles one way, a car lease with this mileage restriction will not work for you.
So what happens when you go over your mileage limits? Each lease will spell out a per-mile fee for which you are responsible. These fees are not meant to be penalties per say, but are meant to make up for the higher depreciation that is accruing because of the extra miles. Lower priced cars tend to have a fee of $.15 per mile, mid priced cars tend to have a fee of $.20 per mile, and high end or luxury cars tend to have a fee of $.25 to $.30 per mile. This should be spelled out in your car lease contract and is usually non-negotiable, so be sure that you are comfortable with the mileage limitations.
If you do go over your mileage limits, you have a few options.
Consider a lease pull ahead
This is when dealers get you back in the showroom before your lease term is over. There are a number of reasons a dealership may offer this. They may want to make sure several of the same cars aren’t hitting the auction block at the same time, or maybe there is a strong demand for the current car you are leasing. But whatever the reason is, they may waive all fees if you sign a lease on a new car.
Buy your leased car
If you like your current car and know that the excess mileage fees are going to add up to a lot, you should consider a car lease purchase. Auto Approve can help you finance your car lease purchase and keep you in the car you love. This way you will not be responsible for any overage fees or excess wear and tear fees, and can instead keep your car for the foreseeable future, or sell it.
Try to reduce your mileage and pay the fees
If it looks like you are going to exceed your mileage limit on your car lease, you can try to minimize the damage and cut back on driving as much as possible.
- Try carpooling when possible
- Rent a car for vacations or long drives
- Use public transportation
- Consolidate your trips as much as possible
Try to incorporate some of these tips into your driving life; little changes can add up over time. If you can anticipate how many miles you will be over your lease agreement, you can begin saving for those fees.
What Other Fees Does The Car Lease Have?
When comparing car lease deals, you want to consider what fees you will be charged. These will vary from dealer to dealer, but commonly include the following.
- The Acquisition Fee. This is meant to cover the dealer's paperwork and related costs for the beginning of your lease. It can also be called a bank fee or administrative fee. It can be anywhere for $400 to $800.
- The Disposition Fee. This is meant to cover the expenses of returning your car at the end of the lease. It pays for the car to be cleaned and for any minor repairs that the car may need. It usually runs about $350.
- The Wear and Tear Fees. Check the fine print about what you may be charged for wear and tear. Slight wear is expected and factored into your monthly payments, but they will outline in your lease agreement anything that they think is excessive. Check to see what your financial responsibility will be.
Some of these fees are negotiable, while some are not. It never hurts to try to get some of these fees waived, or at least try to haggle them down.
If leasing a car is right for you, be sure to ask these questions before you sign on the dotted line.
Leasing a car is a great option for many people and has become increasingly popular over the last decade or so. But be sure to do your research and ask the right questions before you agree to anything.
One of the best parts of leasing is that if you love your car, you can always purchase it at the end of your lease term. That’s where Auto Approve comes in. Just enter some information about you and your car, and we can get you quotes for your car lease purchase in no time! So if you love your car lease and aren’t ready to say goodbye, get started with Auto Approve today!
