What You Must Know About Auto Leasing

Leasing a car is one option car shoppers may want to consider when looking for a new car. With leasing, you never own the vehicle, rather you make monthly payments much like paying rent. At the end of lease term you return the vehicle or you can purchase it.

But is leasing as simple as that? Not really. In fact, there is enough "fine print" in the typical leasing contract which should cause car shoppers to look closely at what they are getting themselves into. To help you out, I've prepared a list of some things you should keep in mind when considering leasing:

Initial Costs - Leasing arrangements include a number of fees and other charges which can significantly add to what you pay for that vehicle. That $299 per month payment on your compact luxury sedan sounds like a good deal, but you must factor in your first and last month payments, registration fees, taxes, security deposit and what is known as capital cost reduction charges to establish your real costs. Yes, you may need to come up with thousands of dollars first before the dealer hands the keys to the car you will be renting.

Terminate Early - What if you don't like the car? Can you get rid of it before the lease expires? Yes, you can...for a price. Early termination fees will apply which means you could be on the hook for those payments still owed. You may be able to get around this problem by leasing a new vehicle through the same manufacturer or finding someone to take over your lease payments. Check your contract for details!

Mileage Restrictions - This part of the leasing agreement needs to be understood, otherwise buyers could be stuck with some heavy end of lease charges. Those limits restrict your driving to 10 to 15 thousand miles per year which means that if you drive in excess, you'll pay a mileage charge for every mile over that limit. You can avoid this problem in two ways: ask for a higher mileage limit which will cost you more each month, or stop driving your car as much in order to keep yourself within those limits.

Excess Wear - You won't be returning your car in mint condition, but anything beyond reasonable wear and tear could cost you. That means you may need to replace tires, fix dents, replace a cracked tail light or windshield or handle other maintenance issues in advance. Read your contract to find out how your lessor defines "excess wear."

Just as you would if you owned the car, your leased vehicle needs to be insured, kept registered, taxes paid and maintained. But you'll also be covered by whatever warranties and guarantees are offered for new car buyers, so before having work done familiarize yourself with the warranty.

Should you choose to buy the car at end of lease term, that price was already established when you leased the vehicle. Compare that price with the KBB book value: you may end up paying too much for a car that has significantly depreciated over the years.

Matthew C. Keegan is a freelance writer who resides in North Carolina. Matt is a contributing writer for Andy's Auto Sport an aftermarket supplier of quality parts including body kits and fenders.