Car Lease

Length – Car leases require you to make payments for a certain length of time, which can range anywhere from 24 months to up to five years. Car leases may be hard to get out of — make sure you understand what happens if you want to terminate early. Some leasing companies will allow you to transfer the contract.

Number of Miles – Most car leases limit you to 12,000 miles per year. If you go over this, it can be fairly costly; somewhere in the neighborhood of 10 to 15 cents for every mile over your limit. Many finance companies allow car leases to be structured to allow for extra miles.

Wear and Tear – Auto manufacturers understand that it’s normal for a car to show some wear and tear after a couple years of driving. But only some — usually in an amount not to exceed $1,500. Don’t expect to drop off your car at the end of the new car lease with a fender missing without paying for it. You are expected to keep the car in a good driving condition.

End of the New Car Lease – Even though it may be a couple years away, you should learn what happens at the end of the new car lease. In many programs, you have the option of purchasing the car for an amount that is pre-determined in your new car lease contract and is based on the depreciated amount of the vehicle, also known as the residual value. The higher the residual value, the more a car is worth at the end of a new car lease and, coincidentally, the lower the monthly payments. A vehicle with a high residual value will make for a more attractive purchase, because chances are the car will be worth more money than you owe.