Leasing a car can be a financially smart decision in certain circumstances. But all leases are not created equal, and the lease details found in the fine print of the contract are often the difference between a good deal and a poor one.
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Here are four details to note before signing a car lease contract:
What Is the Drive-off Cost?
Many people focus on the monthly payment of leasing a car but neglect how much they must pay to drive the car off the lot. Typically, this cost is lowered by the amount of any trade-in down payment that you make. Those two figures combined “reduce your monthly payments by paying off some of the cost of the car right up front,” writes Peter Valdes-Dapena on CNNMoney. “If you’d rather not pay so much up front, you can ask to have your down payment reduced and pay slightly higher monthly payments, instead.”
How Many Miles Are You Allowed per Year?
The typical mileage limit is 12,000 miles a year, but you need to verify the limit stated in your contract and note the per-mile charge for going over the limit. “Each mile can cost you an extra fifteen to thirty cents a mile, which means driving the car for just an additional 3,000 miles would cost between $450-$900 depending on the rate specified within the contract,” says Edmunds.com spokesperson Pamela Morris.
If you think you will go significantly under or over the limit, you should negotiate before you sign on the dotted line. Customers who drive less than the limit can often negotiate a lower monthly payment in exchange for a lower annual limit. Those who expect to go over can often purchase additional miles at the time of the lease at a significantly lower rate than the overage charges.
Is There an Early Return Penalty?
While most people plan to keep their car for the entire lease period, sometimes unexpected things happen and you may need to return your leased car before the contract is up. Check the terms for returning the car early, and note any penalties that you would incur.
In some cases, you may be required to make all outstanding payments, and pay additional penalties on top of any other fees, but should also ask before signing if the dealership would be open to other options, such as your finding someone else to take over the lease or exchanging your vehicle for another leased car from the dealership. If so, be sure to get these provisions included in the contract.
How Much Is the Payoff Amount?
On the other hand, you may unexpectedly decide that you want to purchase the car at the end of the lease or before the lease is over. Different dealerships calculate the payoff amount differently, and you should be clear about how this will be calculated before signing the lease. Some companies will also make you pay the early termination fee, and others may keep your security deposit. Make sure that you are clear on the policy for calculating an early payoff even if you do not expect to go this route.