Car Lease: Do's and Don'ts

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November 9, 2016

A car lease may or may not be the right thing for you and depends on your situation, but if you find yourself embarking down that avenue there are a few things you should and shouldn't do.

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Things You Should Do

Your homework: Learn as much as possible about the process of leasing a car. Make sure you understand how the process works, what is expected of you, all of the costs, how the lease works and the terms of the lease. Lease contracts have multidimensional pricing and can be confusing and complicated. If you don't understand, make sure you ask questions until you do.

Know the price of the car, the MSRP and do the math: Know what the car you are leasing will cost if you decide to buy it. Using an online calculator for buying a car, you can quickly determine if leasing is cheaper or more cost effective than buying, and if you want to buy the car afterwards how much more it is going to cost you. Also, you want to be sure that all the math adds up. Make sure there are no hidden fees and add up the monthly payment yourself to make sure it adds up to what it is written in the contract.

Thoroughly read your contract: Make sure you read and understand the entire contract before signing it.

Be ready to keep the car the entire lease: It is never cheap or easy to opt out of your lease early. Make sure you have a stable situation that allows you to pay for the car during the lease process.

Things You Shouldn't Do

Lease a car without gap insurance: Gap insurance is cheap and protects you in case of early lease termination. Everyone who leases a car should get gap insurance.

Lease without all the information: If the dealer is reluctant or hesitant to tell you any numbers, in particular the money factor, the residual value, or the capitalized cost, you should be wary. You need all the information when leasing and if they are not willing to show you it before you sign simply don't sign.

Pay too much: Make sure you are not paying too much for the car you are leasing. If you are not willing to buy the car for the capitalized cost then you need to renegotiate the lease.

Take on an open end lease: An open-ended lease is based on the residual value, and if the actual value is less than the residual value at the end of the lease you are required to pay the difference.

Be afraid to negotiate: Know the price of the car and be willing to negotiate; lease prices are not pre-set or non-negotiable. You can negotiate the price, the finance rate, and the mileage limit. All dealers are within their rights to change those terms.

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