Leasing A Car: How To Do It, Mistakes To Avoid Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: On This Page
Thomas Barwick/Getty Images September 23, 2022 Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and debt management in his work. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. gives you a vehicle to drive for a fixed number of miles and months. It’s similar to renting an apartment instead of buying a house. There is less long-term commitment involved, but you still have to pay for it. The monthly cost of leasing a car is often lower than buying it with an . Drivers save an average of $127 per monthly payment, according to for the second quarter of 2022. However, there are downsides to be aware of. 6 mistakes to avoid when leasing a car
Leasing can lower your payments, but it can wind up being very costly if you don’t pay attention to the fine print. Avoid these five common mistakes if you decide to lease your next vehicle. 1 Paying too much money upfront
Car dealers advertise low monthly lease payments on new vehicles, but you may have to pay several thousand dollars upfront to get that affordable payment. That money covers a portion of the lease in advance. If the car is wrecked or stolen within the first few months, your would reimburse the leasing company for the value of the car, but the money you paid in advance likely would not be refunded to you. You’d be out of a car, and that upfront money you handed over to the leasing company would essentially disappear. It’s recommended you spend no more than about $2,000 upfront when you lease a car. In some cases, it may make sense to put nothing down and roll all of your fee costs into the monthly lease payment. If something happens to the vehicle before the end of the term, at least the leasing company doesn’t have a big chunk of your cash. 2 Not buying gap insurance
If you drive a leased car, you should pay for . The “gap” refers to the difference between what you still owe on your lease and the value of the car. Let’s say your contract states that at the end of the lease, you have the option of buying the car for $13,000. If you total the car before the lease expires, your insurance company will determine the current market value of the car and pay that amount to the dealership which owns the vehicle. If the insurance company says that the market value is only $9,000, you’ll probably have to pay $4,000 out of pocket to cover the difference between the lease contract’s residual value and the true market value — unless you have gap insurance. The gap coverage will cover the difference. Many leases include gap insurance. The dealer may offer to sell you gap insurance, but you may find a cheaper policy option with a traditional insurance company. Regardless, the coverage is well worth the small investment. 3 Underestimating how many miles you ll put on a car
To avoid extra charges, know your driving habits before leasing a car. Consider your daily commute and how often you take long trips. If you know that you’ll probably drive more miles than the agreement allows, you could ask for a higher mileage limit. However, that will probably increase your monthly payment, because additional miles will result in greater depreciation. It’s common for leasing contracts to have annual mileage limits of 10,000, 12,000 or 15,000 miles. If you exceed those mileage limits, you could be charged up to 30 cents per additional mile at the end of the lease. For example, if you exceed the mileage limit by 5,000 miles, you could end up owing an extra $1,500 — at 30 cents per mile — when you turn the car in at the end of the lease. 4 Not maintaining the car
If your car has damage that goes beyond normal wear and tear, you could be on the hook for additional fees when it’s time to return it to the dealer. If a car has a scratch but the mark is less than the width of the edge of a driver’s license or business card, many companies may consider it normal use and probably won’t charge a penalty. If the leasing company considers any damage excessive, it can charge additional fees. The definition of normal use can vary from dealer to dealer. Your lessor will inspect the car before you turn it in and look for dents and scrapes on the body and wheels, damage to the windshield and windows, excessive wear on the tires and tears or stains in the interior upholstery. Don’t assume that your inspector will be lenient. 5 Leasing a car for too long
Make sure that the lease period either matches or is shorter than the car’s warranty period. Warranties vary from manufacturer to manufacturer, but they typically last up to three years or 36,000 miles, whichever comes first. If you keep the car for longer than the warranty period, you may have to consider an extended warranty. Otherwise, you could be responsible for maintenance and repair costs for a car you don’t own while still making monthly lease payments. It’s probably better to buy the car if you’re planning to lease it for an extended period, says Barbara Terry, a Texas-based automobile expert and columnist. “If the driver owns the car, he’d have to pay for the car and pay for maintenance, but then he could continue to drive it for several years without having to worry about a required monthly lease payment,” Terry says. Use an to figure out whether leasing or buying a car will save you more money over the long haul.
How to lease a car
A car lease is a way to “borrow” a car instead of buying a new or used car. It typically comes with a three-year or four-year contract and an in-depth , so there are many factors to consider before signing off on this long-term commitment. Choosing to lease instead of buying a car can be a great way to drive a newer car with the latest technology and features for less money per month. If you’re ready to lease a car, follow these steps: Do your research
When leasing a car, you have many options — almost all being within the most recent model years. You will want to narrow down the type and brand you are interested in first while factoring in how the price will fit into your budget. To choose the right set of wheels pay close attention to your driving habits and how the vehicle will fit into your lifestyle. Bankrate tip: When budgeting, prepare to pay a small amount of money before you drive off the lot to cover taxes and a range of fees. More than that, if you want to lock in lower monthly payments throughout the lease, you can consider putting additional money down. Visit dealers
Next, visit a few dealers and take some test drives. That will help you narrow down what exactly you are looking for. You may want to call ahead and get an idea of what is available, and whether test drives are currently allowed. Bankrate tip: When you visit dealer lots keep in mind that you may be met with higher prices. The has not left the leasing market undisturbed and while it still tends to be cheaper than buying, prepare for competition. Negotiate the terms of your lease
Pretty much everything is up for during the leasing process. And the negotiation phase is the only chance you will have to get the perks you want in writing. To be the best negotiator check current pricing on sites like Kelley Blue Book and remember to negotiate more than just price. Bankrate tip: A good lease deal is one that will leave you paying as little over the lifetime of the loan as possible — initial down payment included. If negotiation intimidates you, bring a trusted friend to handle the hard conversation. Compare offers
Take advantage of online resources and you have to get the best deal. There are many options available when it comes to leasing, so check out a few dealerships before signing off on your vehicle. Bankrate tip: When comparing lease offers look at the fine print and the vehicle itself. When test driving, pay attention to how the vehicle drives and if it will fit into your lifestyle. Maintain the car throughout your lease
Remember that you have to turn in the car at the end of the lease term. If it’s not in great condition, you might have to pay additional charges. Before leasing a car, ask about the guidelines on the lease-end condition. These guidelines specify the types of damage you would have to pay for before you return your car. Bankrate tip: If the car is significantly damaged, drivers can expect to be charged full market prices for repairs. At the , you’ll have a few options. You can either turn in your car to the dealer, purchase the car or lease a new car. Leasing a car vs buying a car
Consider your priorities when deciding if you want to . Reflect on how many miles you drive per year, if you drive a lot, leasing may get expensive. Consider the benefits and drawbacks of each approach. Pros of leasing Cons of leasing Because you are not paying the entire value of the car, you will usually have a lower monthly payment. At the end of the lease, the car is not yours. You will have to find a new car or buy out your leased vehicle. If driving a newer or high-end car is important to you, your monthly lease payments will be more affordable than making a big down payment to buy it. You also may have to pay a vehicle turn-in fee at the end of the lease if you don’t lease another car from the dealer. With a car lease, you are usually getting a new car. That can help save on ongoing maintenance costs. Most leases come with a mileage allowance — if you drive more than your allotment, you’ll pay hefty per-mile charges. Next steps
If leasing is right for you, do your homework and shop around to make sure that you get a lease that fits your driving habits and your budget. Pay close attention to your monthly costs and the terms and conditions. To calculate your monthly payment amount, the dealer will analyze the value of the new car versus its residual value. Like with any transaction involving financing, the higher your credit score, the lower your interest rate. Learn more
SHARE: Dan Miller is a former contributing writer for Bankrate. Dan covered loans, home equity and debt management in his work. Chelsea has been with Bankrate since early 2020. She is invested in helping students navigate the high costs of college and breaking down the complexities of student loans. Related Articles